Buy Apollo Pipes; target of Rs 757: YES Securities

YES Securities' research report on Apollo Pipes

Apollo pipes registered higher quarterly volumes of 18,685Te (2-year CAGR 20%), a growth of 13%YoY & 4%QoQ on account of healthy demand from plumbing segment. The ASP came in at Rs135/Kg as compared to Rs150/Rs131 in Q4FY22/Q3FY23 respectively. With better product mix & no impact of inventory gain/loss, company’s EBITDA/Kg stood at Rs16 in Q4FY23 Vs Rs17/Rs9 in Q4FY22/Q3FY23 respectively, hence EBITDA margins came in at 11.7% as against 11.5%/6.8% in Q4FY22/Q3FY23 respectively. Management has guided for a stellar revenue growth of 35%CAGR over coming 4- years, which will be driven by 28-30% volume growth & 4-5% value growth. Company is focused on expanding their market share across India & hence they are planning a capex of Rs500Bn, wherein Rs1Bn will be for brownfield expansion of 25,000Te (by Q4FY24) & Rs4Bn will be for greenfield expansion in West, South & East for settingup 125,000Te capacity which will come-up in staggered manner. The capex will be funded via Rs2.60Bn equity infusion & balance via internal accruals.

Outlook

We continue to value the company at P/E(x) of 30x on FY25E EPS of Rs25.2, arriving at a target price of Rs757. Hence, we maintain our BUY rating on the stock.

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