Buy APL Apollo Tubes; target of Rs 1630: Axis Securities

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Axis Securities report on APL Apollo Tubes

The company has Vision 2025 where it targets Revenue/EBITDA to grow 2x/2.5x over FY23 by FY26. The management has given sales volume guidance of 2.8- 3MT, 3.6-4.0MT, and 4.6-5.0MT for FY24/25/26. It has planned Capex for a 5Mtpa expansion of ~Rs 6 Bn, out of which Rs 1.8 Bn was spent in Q1FY24, and the remaining will be spent over the next 3-4 quarters. FY24 capex will be Rs 4.3 Bn. The vision is to grow to 10MT capacity by FY30. Capex of Rs 2,000 Cr to start from Dec’25, post the 1st 5 mtpa expansion phase stabilises.

Outlook

We increase our sales volume estimates and EBITDA for FY25 by 4%/3% and roll forward our valuation at 32x PE of Jun’25 EPS (From Mar’25E). We maintain our BUY rating on the stock. We raise our P/E from 31x to 32x on a good demand outlook. Post the recent rally, the stock is currently trading at a consensus 12M forward P/E of 39x which looks stretched.

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APL Apollo Tubes - 08 -08 - 2023 - axis