Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

APL Apollo Tubes - Journey from a semi-commodity player to a branded one - HDFC Securities

Posted On: 2021-09-13 12:39:46 (Time Zone: UTC)


Mr. Anuj Upadhyay, Institutional Research Analyst, HDFC Securities

APL Apollo Tubes (APL) is India's leading structural steel tube manufacturer with a capacity of 2.6 million tonne per annum (mtpa) and a pan-India presence. APL's market share enhanced from 27% in FY16 to 50% in FY21, led by a strong distribution network, branding, offering of customized & innovative products and capacity enhancement. APL's strategy to focus on rural areas and tier 2/3 cities paid off well during the reverse migration last year. With 24% CAGR in both revenue and PAT over FY11-21, it has emerged as one of the pioneers in the segment, much ahead of competitors. Going ahead, we expect APL to post revenue/PAT CAGRs of 20%/34% over FY21-24E, led by an increased mix of value-added products (75% in FY25 vs 57% in FY21), capacity expansion, improved margins, and enhanced government spending on infra. APL's valuation has sharply rerated on market share gains, debt reduction, robust growth visibility, and margin expansion. It is trading close to the average multiple of building material stocks as 75% of its product mix caters to this segment. We expect it continue to trade at such premium multiple and initiate coverage on APL with a BUY rating at a TP of INR2,226/share (35x FY24E EPS).

Pioneer in structural steel segment: APL has reported a strong 24% CAGR topline and earnings growth over the past decade, led by customised product offerings, adoption of latest technologies, capacity expansion, vast distribution network, brand building, and a strong balance sheet. This has led to superiority over peers in the space and has helped it enhance market share to 50% (in FY21) vs 27% in FY16. Furthermore, with an increasing share of value-added products, the company has managed to garner a premium value for its products.

Building a strong brand: APL has successfully captured the mindshare of fabricators and architects, making its steel tubes as their first choice for applications. Along with innovative products and offerings, APL has aggressively focused on creating a strong brand image through large-scale print and TV commercials, sponsorships of mega sports events and roping in of celebrities as brand ambassadors. These efforts have allowed it to successfully creep into the rural areas, which are yielding strong results.

Far ahead of peers: Having a 50% market share, adopting the latest technologies and withholding a strong brand image, APL stands much ahead of its competitors. Its pan-India distribution network (2x of its nearest peer), enhanced capacity (3x of the nearest peer) and broad array of product offerings (3x more SKUs) have helped it gain 5x market share vs peers. 40% of its products literally face zero competition, which allows it to command premium value and higher margins. Using advanced technology, it has managed to offer customised products in a much shorter duration than peers, placing it much ahead of them; we believe it would continue to stay ahead, going forward.

Initiate with a BUY: We expect APL's revenue/PAT to grow at CAGRs 20%/34% over FY21-24E, led by healthy volume growth, margin expansion, reduced working capital, and reduced debt. We thereby initiate coverage with a BUY rating and a TP of INR2,226/share (based on 35x FY24E EPS). The multiple of 35x is based on the APL's superior performance, operational efficiency and strong positive outlook going ahead.

Shares of APL Apollo Tubes Limited was last trading in BSE at Rs. 1866.4 as compared to the previous close of Rs. 1879.4. The total number of shares traded during the day was 18019 in over 2278 trades.

The stock hit an intraday high of Rs. 1908.7 and intraday low of 1834. The net turnover during the day was Rs. 33576353.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.


Other Headlines:

Automobile Sector - Monthly Quick View - Aug'21 - Mixed Performance across Segments - Reliance Securities

Axis Securities initiating coverage on ICICI Securities

Company Update - Minda Corporation - Q1FY22 - ICICI Direct

Quant Pick - PVR Ltd - ICICI Direct

Quant Pick - ONGC - ICICI Direct

Peak in the headline wholesale inflation is behind us - WPI August 2021 - Acuité Ratings

Sansera Engineering - IPO - Strong Outlook with Steady Cash Flow - Reliance Securities

Nazara Technologies Ltd - Upbeat in medium-term, Uncertain over Long-term - YES Securities

IPO Review - Sansera Engineering Ltd - ICICI Direct

Overall index is still 0.3% lower than the pre-pandemic levels - IIP July 2021

YES SECURITIES on Monthly General Insurance & Mutual Funds Data

India urban logistics spaces expected to cross 7 million sq. ft by 2022: JLL

Neogen Chemicals - Breaking into the next orbit with a bang - HDFC Securities

Gladiator Stocks - Bharti Airtel Ltd - ICICI Direct

Gladiator Stocks - V-Guard - ICICI Direct

Balkrishna Industries - Industry export growth accelerates - ICICI Securities

HDFC Life Insurance - Exide Life Acquisition - Maintain ADD - YES Securities

Gladiator Stocks - Grindwell Norton - ICICI Direct

Gladiator Stocks - Godrej Properties - ICICI Direct

Monthly Auto Volumes - August 2021 - ICICI Direct

Stock Tales - Easy Trip Planners - ICICI Direct

IPO Review - Vijaya Diagnostic Centre Ltd - ICICI Direct

AU Small Finance Bank - Attrition at top level remains key challenge; business momentum sustained in Jul/Aug'21 - ICICI Securities

Gladiator Stocks - State Bank of India - ICICI Direct

Gladiator Stocks - PNC Infratech - ICICI Direct

Vijaya Diagnostic Centre Ltd - IPO Note - YES Securities

Consumer Durables Sector - Lockdown mars performance yet again - Institutional Research Desk at HDFC Securities

75% of the employees today want to be in office at least once a week as compared to 52% in October 2020: JLL

Gladiator Stocks - Safari Industries - ICICI Direct

Gladiator Stocks - Interglobe Aviation - ICICI Direct

IPO Review - Ami Organics Ltd - ICICI Direct

Q1FY22 GDP - 31st Aug 2021 - Acuité Ratings & Research

Avanti Feeds - Higher input prices hurt margins - ICICI Securities

Company Update - Restructuring - Aarti Industries - ICICI Direct

Q1FY22 Company Update - MM Forgings - ICICI Direct

Company Update - Arvind Fashions - ICICI Direct

Zomato - Can margins and multiples surprise? - ICICI Securities

Ujjivan Small Finance Bank - Top management change and lumpy provisioning concern to weigh on valuation in near term - ICICI Securities

Bharat Dynamics - Guided missile systems to drive orderbook and profit growth - ICICI Securities

Economy - Continued accommodation necessary despite inflationary risks: MPC minutes - ICICI Securities

InterGlobe Aviation - Annual report analysis: Liquidity management remains the mainstay in anticipation of traffic recovery - ICICI Securities

General insurance - Health remains dominant growth driver; Strong all-round performance by Bajaj Allianz - ICICI Securities

Earnings Wrap Q1FY22: Resilient earnings, limited impact of second Covid wave - ICICI Direct

Fine Organic Industries Results Review - In-line performance - HDFC Securities

Power Plus Sector Update - July witnessed strong ~10% generation growth - HDFC Securities

Information Technology Sector Update - 'Hit Refresh' - HDFC Securities

Maintain ADD on JK Cement - Healthy performance - HDFC Securities

Maintain BUY on Star Cement - Margin recovers on pricing gain - HDFC Securities

Maintain BUY on Sadbhav Engineering - Long road to recovery - HDFC Securities

Poonawalla Fincorp - Business transformation on cards; a turnaround play - ICICI Securities


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020