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Buy APL Apollo Tubes: target of Rs 915: Sharekhan

Sharekhan is bullish on APL Apollo Tubes has recommended buy rating on the stock with a target price of Rs 915 in its research report dated December 16, 2020.

December 17, 2020 / 01:40 PM IST
 
 
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Sharekhan's research report on APL Apollo Tubes


APL Apollo Tubes Limited (APL) is well placed to further gain market share (50% in H1FY2021) led by strong volume growth outlook for its subsidiary, Apollo Tricoat, pick-up in construction activities, and new product launches (recently launched Apollo Mechanical). We do not see any material impact on margin from recent steel price hikes as APL’s business model is that of converter and the increase in steel price is a pass through to customers. Management has guided for margin expansion to Rs. 4,000/tonne (from Rs. 3,500/tonne in Q2FY21) and further to Rs. 5,000/tonne in the next 2-3 years. Consistent volume growth of 15% annually, potential margin expansion (target to increase VAP share to 50% by Q4FY21, 65% in FY22E, and 70-75% in FY23E), RoE of 23-25%, and target to become debt free in FY2021 would re-rate APL.




Outlook


We maintain our Buy rating on APL with a revised PT of Rs. 915 (rollover of valuation multiple to FY2023E EPS and factoring in the stock split). At the CMP, the stock is trading at 24.5x its FY2022E EPS and 19x its FY2023E EPS.


For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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first published: Dec 17, 2020 01:40 pm

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