Buy Apollo Pipes Ltd for the Target Rs. 620 by Choice Institutional Equities
Double-digit volume growth for FY27E is intact
We maintain our BUY rating on Apollo Pipes (APOLP) with a revised target price of INR 620/share (INR 350/share earlier) considering an ambitious 5-year plan targeting INR 50 Bn revenue by FY31E at 35% CAGR, backed by 3 operational plants, a new South India plant and allied product expansion. We continue to be positive on APOLP due to:
1) We expect a robust 15% volume CAGR over FY26–29E, driven by strong industry demand, higher infrastructure spending by state and central governments, healthy real estate project completions and continued market share gains from unorganised players in the pipes business.
2) EBITDA margin improvement of 464 bps over FY26–29E driven by
a) Operating leverage benefit owing to strong volume growth
b) Margin improvement in Kisan Mouldings asset owing to initiatives by APOLP
c) Improving contribution from higher-margin products, such as CPVC.
On the basis of our assumption of 15% volume CAGR, 3% growth in realisation and EBITDA margin improvement of 464 bps over FY26–29E, we forecast APOLP EPS to expand at a CAGR of 61.6%. ROCE is anticipated to reach 13.0% by end of FY29E vs 1.1% in FY26.
We assign a PE multiple of 35.0x on FY28E Core EPS, which we believe is conservative and arrive at TP of INR 620/share for APOLP. Higher volatility in PVC resin prices and slowdown in infra spends by the government are risks to our BUY rating.
Q4FY26 Review: Saw better volume growth YoY/QoQ
* Volumes came in at 31.3 KT (up 20.7% YoY and 23.6% QoQ), which is an encouraging improvement (vs CIE estimates of 32.3 KT). Price realisation came in at INR 1,10,636/ton, down 8.6% YoY (because of lower PVC price) and up 13.6% QoQ
* Revenue/EBITDA/PAT came in at INR 3,470 Mn (up 10.2% YoY and 40.4% QoQ) / INR 180 Mn (down 25.0% YoY and up 50.1% QoQ) / INR 15 Mn (down 85.0% YoY). PAT expanded from losses after tax of 35 Mn in 3QFY26) — vs CIE estimate of INR 3,460/226/53 Mn, respectively
* EBITDA per ton came in at INR 5,750/MT (down 37.8% YoY and up 21.5% QoQ) due to inventory write-downs, aggressive pricing and fixed cost from new business verticals
* APOLP has recommended a final dividend of INR 0.70/share for FY26
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