Top Conviction Ideas : Buy APL Apollo tubes Ltd for Target Rs. 1,950 - Axis Securities Ltd
* Leading the structural steel tube demand growth story in India: Although Q1FY26 results were sluggish, APL Apollo is well placed for recovery towards H2FY26. Q1FY26 EBITDA/t at Rs 4,683/t missed the consensus by 6%, down 4% QoQ, but up 12% YoY, as the lower sales volume led to negative operating leverage and one-time notional expense of Rs 100/t related to ESOPs, which increased the employee costs in the quarter. But we see APL Apollo tubes in the longer term as the leader in the space, and it will be the beneficiary of India’s infrastructure push.
* Growth likely to pick up in H2FY26: Management foresees growth to pick up from H2FY26 as government projects will pick up post monsoon, leading to the buying power of channel partners (dealers). Exports to Dubai started recovering in Jul’25, and are likely to pick up in H2FY26. Rate cuts could also lead to higher retail demand (independent housing). The company’s strategy is to focus on EBITDA/t rather than pushing volumes in the market..
* Strategy to penetrate new markets – capacity expansion: The company targets to expand its current capacity from 4.5 MTPA to 6.8 MTPA by FY28. The expansion will help it cater to the virgin East Indian market and high-margin international markets
* Outlook & Valuation: The company’s vision is to expand its capacity to 10 MTPA by FY30, providing a growth tailwind in the longer term. Our TP of Rs 1,950/share is based on the Mar’27 EPS using a 1-year forward P/E target of 35x.
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