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Stellar growth in Q4FY22, momentum to continue!

Our view and valuation

Company reported a strong topline growth of 42%YoY & 29.7%QoQ on account of robust volume growth of 27%YoY & 31.7%QoQ which was largely driven by healthy growth in value‐added products. We believe, Apollo Pipes Ltd to maintain their growth momentum on account of sturdy demand from real estate & expected revival in rural segment coupled with company’s focus on expanding their regional presence in South, West & east along with strengthening their position in North. Hence, we expect strong volume growth of 27%CAGR over FY22‐FY24. Moreover, company is committed to grow their CPVC, HDPE & value‐added products of fittings at faster pace along with enhancing the contribution of Non‐agri portfolio from 50% of revenue in FY22 to 60%‐ 65% going ahead. Owing to which EBITDA/kg is likely to expand to Rs19.5 by FY24E from Rs17.3 in FY22. To cater the robust growth, Apollo Pipes Ltd will ramp‐up their existing capacities & incur capex of Rs400‐500Mn annually to add capacities which will largely be for value‐added products & the same will be funded via internal accruals.

We expect Apollo Pipes Ltd to deliver stellar Revenue/EBITDA/PAT growth of 32%/35%/50% respectively over FY22‐FY24E & EBITDA margins to come in at 12%/12.6% in FY23E/FY24E respectively. ROE/ROCE is also likely to improve from 12.3%/17.1% in FY22 to 19.2%/25.6% by FY24E. At CMP, the company is trading at 28.8x/19x on FY23E/FY24E EPS of Rs19.5/29.3 respectively & We continue to value the company at 28x on FY24E EPS and maintaining our target price of Rs820. Therefore, we retain our BUY rating on the stock.

Result Highlights

Volumes for the quarter came in at 16,490, a growth of 27%YoY & 32%QoQ. (18% above our estimates)

Revenue stood at Rs2,475Mn (16% above estimates), reporting a mammoth growth of 42%YoY & 30%QoQ. ASP came in at Rs150/kg Vs Rs152/Rs134 in Q3FY22/Q4FY21 respectively (against our est of Rs152/Kg)

EBITDA came in at Rs284Mn (27% above est), registering a 5%YoY growth & 31% sequential growth. EBITDA/Kg stood at Rs17 as compared to Rs21/Rs17 in Q4FY21/Q3FY22 respectively (8% above est).   

Net profit for Q4FY22 stood at Rs156Mn, a decline of 6%YoY but a 37% sequential growth. PAT margins came in at 6.3% in Q4FY22 Vs 9.6%/6% in Q4FY21/Q3FY22 respectively.

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