Buy Apollo Pipes Ltd For Target Rs.2,142 - Yes Securities
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On strong growth trajectory!
Our view
On the back of strong growth from real‐estate segment, Apollo Pipes Ltd reported healthy volume growth of 18%y/y & 40%q/q, which was above our expectations. The growth in volumes was driven by strong contribution from CPVC & HDPE pipes. Building materials & Agri segment contributed 50% each to total revenue, wherein building materials reported 30% volume & 50% value growth.
Company’s operational margins were largely in‐line with our estimates at 12.5% in Q2FY22. During the quarter company commenced commercial operations of Raipur plant which should enable them to enhance their presence in Central and Eastern region. Going ahead, these new capacities will boost company’s top‐line growth.
Result Highlights
Company’s volumes came in at 14,518 MTPA, reporting a growth of 18%y/y & 40% q/q. Volumes were above our estimates of 12,690 MTPA for the quarter.
Revenue for the quarter grew by 69%y/y & 51% q/q to Rs2,082 Mn & above our estimates of Rs1,764 Mn. Realizations for the quarter came in at Rs143/kg Vs Rs132/Kg & Rs101/kg in Q1FY22/Q2FY21 respectively.
EBITDA for the quarter stood at Rs260 Mn, reporting a growth of 67% y/y & 49% q/q. Operating margins came in at 12.5% in Q2FY22 Vs 12.7%/12.6% in Q1FY22/Q2FY21 respectively. Margins were in‐line with our estimates.
Net profit stood at Rs141Mn in Q2FY22, registering a growth of 47% y/y & 60% q/q. Net profit margins came in at 6.8% Vs 6.4% in previous quarter and 7.7% in Q2FY21.
Valuation
We reckon Apollo Pipes Ltd to report Volume/Revenue/EBITDA/PAT growth of 31%/27%/25%/31% respectively over FY21‐FY24E. Currently the stock is trading at 22x on FY24E EPS of Rs76.5. We continue to value the company at 28x on FY24E EPS arriving at a target price of Rs2,142‐ implying an upside of 28%. Hence, we maintain our “BUY” rating on the stock.
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