APL Apollo- Tubes For Every Reason

May 03, 2016 - 07:18:45 PM

About the company

 

APL Apollo Tubes, a manufacturer of steel pipes and tubes, was established in 1986 in Sikandarabad (Uttar Pradesh).It initially catered to the steel industry, but over a period expanded its product range to cater to various sectors including infrastructure, agriculture, engineering, oil & gas, automobiles and construction.

The company currently has five plants in India

• Two in Uttar Pradesh- E Coil Galvanizing Facility, Pre Galvanized Tubes and Pre Galvanized Hollow Sections RW Black, Hot Dipped Galvanized, Pre Galvanized Tubes and Hollow Sections
• One in Karnataka- Coil Galvanizing facility, ERW Black, Hot Dipped Galvanized, Pre Galvanized Tubes and Hollow Sections.
• One in Tamil Nadu - ERW Black, Hot Dipped Galvanized, Pre Galvanized Tubes and Hollow Sections One in Maharashtra- ERW Black, Hot Dipped Galvanized API certified Line Pipes These plants have aggregate capacity of over 8,00,000 tpa. It manufactures more than 300 variants of tubes (0.5” to 14” outer diameter) through these plants.

Product Details

• MS Black: This product comes in a size range of 21.3-335 mm and it is used for Water & Sewage treatment, Conveyors, Automobiles & Construction.
• Galvanized Tubes: Its size ranges from 21-273 mm and it is used for Over and underground piping, Agriculture, General Engineering.
• Pre-Galvanized Tubes: Its size ranges from 19-127 mm and it is used for Fencing, Cabling and Ducting, Green House Structures, Electric Conduit, Pipes.
• Hollow Sections: This product size ranges from 15X15 – 250 X 250 mm to 15X10 – 300 X 200 mm and it is used for Transportation systems, Mining Process Engineering & Construction.

APL Apollo is in a list of top Multibagger stocks in dynamic levels.

APL Apollo share price has touched a 52 week high of Rs. 855 on 25-Apr -2016 and a 52 week low of Rs. 370 on 29-Jun-2015.

Client Base

• Power & Gas: BHEL, HP, IGL, Gujarat Gas, BP, Suzlon, MRPL, NTPC, Cairn Energy.
• Infrastructure: Metro – Delhi, Mumbai, Bengaluru, Hyderabad, Kolkata, Kochi & Jaipur, L&T, Gammon, Afcons, B L Kashyap, CPWD, Indian Railways, GMR, Engineers India, MHADA
• Water: Netafim, Jain Irrigation, UP Jal Board.
• Corporates: Adani, Reliance, Ashok Leyland, Tata, DLF, SAIL.

New Initiatives

The company laid the foundation for introducing Colour Coated Pipes as a product in India for the first ever time. We believe that colour coated pipes will find wide acceptance in India in the foreseeable future given the twin benefits of looking aesthetically pleasing as well performing the important function of prevention of rusting in pipes. The other key innovation that has been patented is the door frame – both single and double door frames. This product replaces wood which has been the traditional material of use in normal door frames. The advantages that the steel door frame provides are manifold; it is far cheaper than wood, it does not wear out like wood and it has a good resale value.

Government Initiative

The Government of India’s initiative to promote low cost housing is a big driver for this product as the cost differential with a wooden door frame ensures that the economically weaker sections of the society can profit from this innovation.

Financials

Financials the company has shown robust growth over the years. The company sales has increased from Rs. 2568 crore to Rs. 3013.78 crore for FY 2015, which corresponds to a growth of more than 20%.

Absolute EBITDA increased from Rs.166.6 crore to about Rs. 186.2 crore which corresponds to a 6.2% EBITDA margin. This margin percentage is less than last year on back of inventory carrying loss, which has impacted margins. The net profit of the company stands at Rs.63.8 crore which was 8% higher than Rs. 59 crore last year.

Conclusion

In spite of the strain in the industry, the Company has managed to maintain its volume growth. The volume registered for the year was 709,600 tonnes, which is a 22% jump over the previous year number of 572,000 tonnes. The spurt in volume was primarily driven by demand in black and square pipes. This was also complemented by a strong performance from the export markets, where demand from Europe and more recently Australia have given them good visibility in the world markets.

The key reason for this growth has been their single minded focus on their products, strong distribution network, innovation and tight financial discipline. We expect the momentum in demand to continue and we hope that their will continue to grow their top line by 25% while also focusing on the margins.

As per our estimate, the stock at CMP of 810 is trading at P/E of 23.50, The Debt Equity ratio is 0.92 with interest coverage ratio of 2.80 the return on equity is 13.50%. On the basis of above factors we recommend a buy in APL Apollo for long term with a target of Rs.1000.