APL Apollo Tubes - Navigating Market Challenges: Motilal Oswal

Motilal Oswal Report

APL Apollo Tubes Ltd. is likely to witness near-term pain on account of an unfavorable demand scenario. Although, we believe it will bounce back strongly after the general elections aided by the resumption of infrastructure spending and restocking of inventory by the dealers.

On a longer term, we believe APL Apollo Tubes would sustain its earnings momentum on the back of:

1. growing demand across segments,

2. increased product penetration with a robust distribution network,

3. rapid capacity expansion,

4. an increase in the share of -added-product, thus driving margins, and

5. its market leadership.

We expect APL Apollo to report a revenue/Ebitda/profit after tax compound annual growth rate of 27%/36%/44% over FY24-26. Considering the weak sales volume in H2 FY24 and the muted demand outlook in the near term, we cut our FY24E earnings per share by 5%.

Consequently, we reduce our FY25/FY26 EPS estimates marginally by 4% each. We the stock at 32 times FY26E EPS to arrive at our target price of Rs 1,800. Reiterate Buy.

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