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IDBI Capital Report
APL Apollo Tubes Ltd.'s Q2FY24 profitability was inline with our expectation. Ebitda/tonne increased by 25% YoY to Rs 4,822, its volume grew by 11.9% YoY to 675,000 tonnes. Ebitda/tonne over Rs5,000 is likely to be sustainable over the longer term in our view.
APL Apollo targets 400-500 kilo tonne of volumes from Raipur plant in FY24 which should aid margin improvement (mainly in H2 FY24). Overall, APL has lowered its volume guidance to 2.8 million tonnes (earlier guidance 2.8-3.0 million tonnes).
It continues to target four million tonnes in FY25. We expect capex intensity to decline hereon which should lead to stronger payouts hereon.
Broadly, we maintain our FY24-25 forecasts. We continue to value the stock at a price-to-earnings ratio of 35 times FY25E and derive a target price of Rs 1,577.
However, given the recent rise in stock price, we downgrade the stock to a 'Hold'.
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