Few prominent insights on the business going forward from the recent concall by the management : –
Looking to expand the total capacity to almost 2X of their current capacity of 1.36Lakhs MT in 3-4 Years. ( Majority towards value added products – CPVC , HDPE , Bath fittings and Tank Storage). Funded by Internal accruals + Equity Infusion.
Intends to make presence in untapped markets – South , West and East. (400cr Capex in these 3 region) – They already back tested the product acceptance from some pilot batches in terms of demand, hence confident of growing well in these regions.
They are looking to grow their market share by competing more against the unorganised and organised players below them.
Industry is growing at 10℅ CAGR and hence long runaway for growth.
My opinion – Given their past record , the business direction seems good, the valuation might seem little stretched here optically but mind you one has to factor in ROIIC here (Major capex in value added) which would be high than their present ROCE and the longevity of industry growth(10-11℅ CAGR). Given all of this, Apollo pipes could grow at 25℅ over next 3-4 years.
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