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Motilal Oswal Report
The incremental capacity from upcoming plants and debottlenecking, along with the addition of high-margin products from the Raipur unit, should result in strong volume growth and margin expansion for APL Apollo Tubes Ltd. going ahead.
We project a revenue/Ebitda/profit after tax compound annual growth rate of 25%/43%/50% over FY23–25.
We value the stock at 33 times September 25E earnings per share to arrive at a target price of Rs 1,930. We maintain our 'Buy' rating on the stock.
We visited the recently commissioned Raipur plant of APL Apollo Tubes and interacted with some of the key personnel.
The inception of the Raipur plant dates back to FY21, initiated by APL Apollo Building Products Pvt. Ltd., a wholly owned subsidiary of APL Apollo Tubes, located in Village Simga, Baloda bazar district in Chhattisgarh (almost 60 Km from Raipur Airport). Key aspects of this plant are:
It is the largest plant for the company with an installed capacity of 1.2 million tonnes per annum and scope to further expand by 0.1 mtpa through debottlenecking.
It is strategically located in close proximity to raw material suppliers; additionally, this strategic location enables the company to serve multiple regions efficiently, given its Central position in India.
The Raipur plant will manufacture only value-added products, which will drive up the overall margin profile for the company. Additionally, these plants will be manufacturing products, marking the first production of its kind in both India and the world.
The plant was recently commissioned and the production volume is rapidly increasing, with the target of achieving a quarterly run rate of 0.18-0.2 mtpa by Q4 FY24.
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