Buy Apollo Pipes Ltd for the Target Rs. 620 by Choice Institutional Equities
Key Conference Call Highlights
Operations:
* Industry size: INR 500–600 Bn; growing at 7–8% annually
* Demand was weak throughout FY26 from both, private real estate and government infrastructure
* Government infrastructure spending pickup not yet visible on the ground despite policy statements
* Construction/Plumbing: 60–65% of revenue; Agriculture + Government infrastructure: 35%
* Consolidated EBITDA declined 30% YoY due to inventory write-downs, aggressive pricing, and fixed costs from new business verticals
* Standalone volume crossed 1 lakh ton milestone, APOLP Pipes +7% YoY; Kisan Mouldings flat YoY
* Working capital cycle increased from 35 days in FY25 to ~46 days in FY26, mainly driven by inventory days rising from 70 in FY25 to 80 in FY26
* Finished goods write-down; clearance of dead/unsold inventory to create headroom for volume ramp-up
* APOLP standalone: INR 9,000–10,000/ton EBITDA; gradual improvement expected
* Kisan Mouldings: Barely EBITDA positive. But, in the near-term, target is INR 5,000–6,000/ton, eventually INR 10,000/ton, as scale improves
* CPVC: grew 10% in FY26; targeting +20% Growth in FY27 (aided by Lubrizol tie-up)
* Water tanks: Growing at 20–30%
* Window profiles: Ramping up; currently ~1.5% of revenue; targeting 4–5% contribution in FY27E
PVC Price Dynamics:
* FY26 was a "roller coaster:" PVC fell 15% in the 8 months, then rallied 75% in the 4 months, then fell 25% in the last 2 months
* Current PVC price: INR ~84/kg (settled); Reliance Delhi landing INR 84– 85/kg; local trade market INR ~79/kg
* Near-term outlook: Stable with +/- 4–5% range, no strong bullish or bearish view
* Anti-dumping duty exemption on Chinese PVC imports expires on June 30; some import surge likely in next 15–30 days but channel expected to be cautious
Q1FY27 Guidance:
* Q1FY27E Revenue target: INR ~4,000 Mn, expecting ~15% QoQ growth (vs. Q4 FY26 INR 3,500 Mn)
* Volume growth expected to be in double digits
* NSR expected to be relatively stable (+/- INR 2–4/kg variation)
* April tracking on plan despite post-heavy March destocking; May and June pickup visible
* Channel inventory currently below normal, favourable for volume offtake
Growth Plan:
* Market share target: ~5% from current ~2.5% in the 3–4 years
* Revenue target: INR 50 Bn by FY31 at 35% revenue CAGR
* Current capacity: 3 plants at INR 30 Bn revenue potential (North India, West India, Varanasi)
* New South India plant: INR 10 Bn capacity; land acquisition to begin in ~1 year; plant commission by FY28E end (18-month build timeline)
* Allied products (windows, water tanks, bath fittings): INR 10 Bn revenue contribution targeted
* Kisan Mouldings: Capacity capable of INR 4–5 Bn revenue; brownfield expansion of INR 500–600 Mn planned to reach INR 10 Bn capacity in the next 3–4 years
Capex:
* FY26 capex: INR 1,500 Mn spent
* FY27E capex guidance: INR ~1,000 Mn (Kisan capacity expansion to INR 10 Bn + brownfield expansions in existing plants)
Strategic Developments:
* Sanjay Gupta (Group Chairman) joined the board — group network leverage now active (dealers, distribution)
* Amitabh Bachchan contract renewed as the brand ambassador; supports further brand recognition
* Kisan Mouldings merger with APOLP Pipes confirmed — timelines to be announced in upcoming investor call.
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