Key Highlights of the 1QFY25 Result
Highest ever quarterly sales; Long term growth remains intact
APL Apollo Tubes (APAT) during the quarter reported 9.4%/-0.2% YoY increase in Net sales/PAT at Rs 4,974 cr and Rs 193 cr respectively. The company achieved its highest ever quarterly sales volume of 7,21,000 tonnes in 1QFY25 with EBITDA and PAT increasing 8%/13% QoQ. The demand environment for the structural steel tubes industry was tough, impacted by general elections and ongoing slowdown in retail spending.
Volume Guidance: For FY25, the company has maintained its sales volume guidance of 3.2 million tonnes on the back of stronger 2HFY25. It expects ~20%- 25% YoY sales volume growth for FY26 and 5 million tonnes for FY27. It is adding 3 new plants at Siliguri, Gorakhpur and Ahmedabad (capex incurred Rs 200 cr – Rs 250 cr; residual capex of Rs 500 cr).
Raipur Plant: The overall capacity utilization of Raipur plant stood at 61% in 1QFY25 vs 55% in 4QFY24 (Heavy structural segment – 58%; Roofing sheets – 89%; Super light structural – 52% and coated thicker sheet – 48%). The company expects to clock ~70% of overall capacity utilization at its Raipur plant in FY25.
Dubai plant: Dubai plant has 4 lines. Two lines got commissioned in FY24 and two lines were commissioned in last few weeks. With the total current capacity of 300,000 tonnes, the overall capacity utilization for Dubai plant stood at 30% in 1QFY25. The company expects its utilization levels to improve significantly over the next few quarters since the two new mills just got commissioned.
Primary vs Secondary Raw Material price gap: The price gap between the primary and secondary raw material price has reduced from Rs 15,000/t to Rs 4,000/t – Rs 5,000/t. This will aid to drive higher volumes and improve the overall profitability of the company.
Maintain BUY- Target Rs 1,669/-
We believe the valuation still looks attractive for long-term investors on back of (a) Large growth drivers such as Railways, Airports and Solar, (b) Increase in Value-added products, (c) Higher exports and (d) Increasing HRC capacity, narrowing the price gap between patra and primary HRC. At the current price of Rs 1,350.0, the stock is currently trading at a P/E of 37.2x/25.9x of its FY25E/FY26E EPS of Rs 36.3/Rs 52.1 respectively. We value the stock at P/E of 32x FY26 EPS of Rs 52.1 to arrive at our TP of Rs 1,669, thus providing an upside potential of 23.6%.
Leave a Reply