Shares of the steel pipe maker APL Apollo Tubes Ltd., which have doubled in value this year, could rise another 50 percent, according to brokerage Emkay Research.
The broking firm initiated coverage with a ‘Buy' rating on the stock and set a target price at Rs 2,812, implying a potential upside of 52 percent over Friday's close.
It also expects that the steel tube maker to double its profits and improve its return on capital employed to 30.5 percent from 20.6 percent by March 2020, the research note to client said.
APL Apollo Tubes is the number one steel pipe maker, with 13 percent domestic market share. We are confident that this would rise to 17 percent By March 2020.Emkay Research Report
The company has managed to grow revenues faster than the sector due to its core strategy of focusing on innovation, branding/distribution and capacity expansion, Emkay said.
“The company has presence in all sectors, that are growing at a higher pace than the general economy,” Emkay said, adding that it expects outperformance to sustain on robust earnings performance and return profile expansion.
Besides, Emkay expects its revenue, earnings before interest, tax, depreciation and amortisation and earnings per share to grow at compounded annual growth rates of 17 percent, 23 percent and 31 percent, respectively, over the three financial years till March 2020.
It also said that the company's valuation is attractive despite the share price run-up in the past one year.
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