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Apollo Pipes is a top 10 piping solution provider in India, headquartered in Delhi, with over three decades of experience. The company operates eight manufacturing facilities across various states, including Uttar Pradesh, Gujarat, Karnataka, Chhattisgarh, Maharashtra, Dadra and Nagar Haveli, and Madhya Pradesh, with a total capacity of 216,000 tons. Apollo Pipes offers an extensive product range of over 2,600 varieties, including cPVC, uPVC, PVC-O pipes, fittings, and water storage tanks, catering to sectors such as agriculture, water management, construction, infrastructure, and telecom ducting. Its strong distribution network includes over 1,000 channel partners, reinforcing its brand presence in the domestic market. Investment Thesis and Strategies

Established position in domestic PVC Pipes industry: Apollo pipes has established itself has a key player in the domestic PVC pipes market, Leveraging its strong brand recognition and diverse product offerings. To Support ambitious growth and meet he rising demand, Apollo has doubled the capacity in last 4 years from 84,000MT in FY20 to 1,56,000MT in FY24. This expansion was spread across its existing facilities in Dadri, Ahmedabad, Bangalore, and Raipur, enabling the company to better serve its customers with a more extensive production footprint. Going ahead, APL Apollo plans to further ramp up its production capacity to around ~200,000 MTPA by FY26E, driven by the planned manufacturing capacity at Varanasi of 30,000MT and it will on track by 4QFY25. This upcoming facility is expected to not only bolster the company's overall production capabilities but also optimize its logistics and supply chain efficiency, given its strategic location.

Acquisition of Kisan Moulding: Apollo Pipes has acquired a majority stake 53.57% in Kisan moulding. one of the leading pipe brands in West India, for an investment of Rs118 crore, This Acquisition will provide strong footprint in West India with a capacity of 60,000MT and potential revenue of Rs750 crore in three years. Apollo aims to further solidify its position in West India and accelerate its expansion plans in this high-demand market. Kisan’s EBITDA turned positive in 1QFY25 post the acquisition by Apollo Pipes as had focused on the project and OEM business, which was not profitable. Now, the company has shifted its focus to fittings segment, driving its improved financial performance. Apollo is now targeting a top line of Rs 4.5 to 5bn from Kisan, with an EBITDAM of 7-8%. The company expects this to grow further, reaching a top line of Rs 6 to 6.5 billion in FY26 and Rs 7.5 to 8 billion in FY27, with margins improving to 10-12%.

Apollo is Confident of achieving 25+% volume growth Going forward: Apollo is confident of achieving over 25% volume growth in the next 2-3 years, driven by robust demand in the real estate, agriculture, and water management sectors. Over the past four years, the company has doubled its capacity from 84,000 MT in FY20 to 216,000 MT in FY24. Looking ahead, Apollo plans to expand capacity further to 286,000 MT through brownfield and greenfield projects, including Kisan Moulding. With a strategic focus on the water management and construction segments, Apollo aims to increase its dealer and distributor network from 900 in FY24 to 1,100 (including Kisan) and expand its SKU base from 1,600 to 2,500 over the medium to long term. These initiatives are expected to drive over 25% volume growth in the next 3-4 years, with a targeted top-line of Rs25 billion by FY27E. The increased capacity and a better product mix are also anticipated to improve margins to around 12- 13%, compared to 9.7% in FY24.

View and valuation We initiate coverage on Apollo Pipes Ltd with an Outperform rating, driven by several key factors: (1) pan-India capacity expansion in the piping segment from 156,000 MT to 286,000 MT over the next 2-3 years, (2) entry into the West Indian market through the acquisition of a majority stake in Kisan Moulding for Rs1.18 billion, adding 60,000 MT of capacity, (3) margin improvement through a focus on value-added products such as O-PVC and PVC windows, and (4) increased penetration supported by higher investments in advertising activities. We expect Apollo Pipes' revenue, EBITDA, and APAT to grow at a CAGR of 26%, 30%, and 31% over FY23-27E. Assigning a 32x multiple on FY27E EPS, we arrive at a target price of ?759 with an Outperform rating.

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