Buy APL Apollo Tubes Ltd For Target Rs. 2,325 By Geojit Financial Services Ltd
Pricing power supports revenue; Volume declines
APL Apollo Tubes (APAT) is a leading manufacturer of structural steel tubes, with an annual production capacity of 5mn tonne. APL Apollo operates a vast 3-tier distribution network with over 800+ distributors In Q1FY27, its sales mix comprised Apollo structural tubes (~64%), Apollo Z (~32%) and Apollo Galv (~4%), catering to a diverse range of customers and applications.
* Consolidated revenue from operations increased 8.5% YoY in Q1FY27 to Rs. 5,607cr, driven by improved pricing power.
* Sales volume decreased to 745,000 tonness in Q1FY27 from 794,000 tonnes in Q1FY26 due to disrupted operations in the UAE, reduced sales in the SG Premium brand and energy crisis in India.
* EBITDA rose 10.6% YoY to Rs. 411cr and EBITDA margin grew 10bps YoY to 7.3%, driven by strategic price hikes of products, leveraging the robust brand positioning and higher realisation. * Reported profit after tax (PAT) grew 10.9% YoY to Rs. 263cr owing to growth in the topline.
Outlook & Valuation
The company remains optimistic about its growth prospects as it expects sales volumes to improve in Q2FY27 and anticipates a much stronger performance in H2FY27, as macroeconomic conditions and demand are expected to stabilise, particularly in construction and export markets. The company’s aggressive capacity expansion plans are expected to be operational over the next 2.5 years, along with debottlenecking initiatives that are projected to increase the total capacity to 8 million tonnes. By FY28, management expects earnings visibility to improve as the share of value-added products increases, reducing sensitivity to steel price fluctuations. Additional growth is expected from new product launches and emerging opportunities in solar-related applications and roofing products. Therefore, we retain our BUY rating on the stock, with a revised target price of Rs. 2,325, based on 37x FY28E adjusted earnings per share (EPS).
Key concall highlights
* The management has guided to 15-20% sales volume growth in FY27, driven by increased contribution from roofing and value-added products, recovery in the UAE operations, strategic use of the SG Premium brand and expanded production capacity.
* The company expects 20% EBITDA growth in FY27 driven by volume recovery, higher EBITDA/tonne from pricing and mix, and capacity-led growth in value-added products. Segmental EBITDA guidance: Rs. 6,000-Rs. 7,000 per tonne for Apollo branded and roofing products; around Rs. 500 per tonne for SG Premium.
* APL Apollo is planning to add 2.0 million tonnes of new plant capacity through Gorakhpur (0.2 million tonnes), Siliguri (0.3 million tonnes), New Malur (1.0 million tonnes) and the proposed Maharashtra/North Karnataka plant (0.5 million tonnes).
* Additionally, the company expects to add 1.0 million tonne through debottlenecking across existing facilities, taking the total capacity to 8.0 million tonnes over the next 2.5 years.
* APL Apollo’s value-added product share is expected to rise to 75-80% from ~65%, driven by capacity expansion, focus on PEB, roofing, solar and large-format tubes. This mix shift is a part of management’s broader de-commoditisation strategy aimed at reducing earnings sensitivity to steel-price volatility and improving margin resilience.
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SEBI Registration Number: INH200000345
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