APL Apollo remains committed to its capital expenditure plan to augment its capacity from 4.5 mt currently to 6.8 mt by FY28 at an estimated outlay of Rs 15 billion to be incurred equally over three years. In the near term, optimal utilisation at Raipur and Dubai plants is likely to support volume growth while the company primarily focuses on margin sustenance and expansion.
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Systematix Report
We alter our FY26E/FY27E Ebitda estimates of APL Apollo Tubes Ltd. by +3%/+7% based on moderately higher Ebitea/tonne assumption and introduce FY28 estimates assuming 12% YoY growth and Rs 5,000/t Ebitda.
We expect adjusted profit after tax to deliver 13%/24%/23% revenue/Ebitda/PAT CAGR over FY25-FY28E.
The management reiterated its primary focus on margin expansion as it simultaneously targets volume growth through-
improving utilisation rates enabling operating leverage, and
aggressive pricing strategies in a smaller general structures segment (SG premium) to compete in the Patra pipe segment, and
selling other general structures at a premium, leveraging its market share.
The Ebitda/t growth outlook is solidified by this quarter's performance, witnessing a steep drop in HRC prices, which have likely bottomed out and have safeguard duties in place to prevent further decline.
We value APAT 25x H1 FY28E EV/Ebitda with a revised target price of Rs 1,959/share (Rs 1,718/share earlier). Maintain Hold.
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