Company 2021
7 Septembername
hfy
APL Apollo Tubes
Initiating Coverage | Sector: Others
The New Normal
Sumant Kumar - Research Analyst
(Sumant.Kumar@motilaloswal.com)
Research Analyst: Yusuf Inamdar
(Yusuf.Inamdar@motilaloswal.com) |
Darshit Shah
(Darshit.Shah@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
10 December 2010
1
 Motilal Oswal Financial Services
APL Apollo Tubes: The new normal!
01
Page #3
02
Page #5
Summary
Company overview
03
Page #8
04
Page #120
Industry behemoth
Lion’s share in Structural Steel Tubes
05
Page #15
06
Page #19
Tricoat to complement
profitability growth
Domestic Structural Steel Tubes
industry on the cusp
07
Page #24
08
Page #25
SWOT Analysis
Expect EBITDA to grow at 26% CAGR
over FY21-24E
09
Page #29
10
Page #33
Valuation and view
Financials and valuations
 Motilal Oswal Financial Services
APL Apollo Tubes
BSE Sensex
58,297
S&P CNX
17,378
APL Apollo Tubes
Initiating Coverage | Sector: Midcaps
CMP: INR1,702
TP: INR2,065 (+21%)
Buy
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
APL Apollo Tubes (APAT) is the largest manufacturer of Structural Steel Tubes in India,
which finds applications in residential and commercial buildings, warehouses,
factories, Agriculture, and other Infrastructure works. It enjoys ~50% market share in
India, and operates through a network of 10 plants, over 800 distributors, more than
1,500 SKUs, and 200,000 fabricators serving over 50,000 retailers.
APAT IN
166
212.6 / 2.9
1850 / 460
-10/12/203
421
63.1
The new normal!
Financial Snapshot (INR b)
Y/E Mar
2022E 2023E 2024E
Sales
108.9 129.3 148.1
EBITDA
9.1
11.4 13.6
Adj. PAT
5.7
7.3
8.9
EBITDA (%)
8.3
8.8
9.2
EPS (INR)
41.3
53.2 64.8
EPS Gr. (%)
58.2
28.8 21.9
BV/Sh. (INR)
170.9 221.0 282.4
Ratios
Net D/E
0.0
-0.1
-0.3
RoE (%)
28.1
27.1 25.8
RoCE (%)
25.9
26.6 26.1
Payout (%)
6.5
5.6
5.4
Valuations
P/E (x)
41.2
32.0 26.3
EV/EBITDA
26.0
20.3 16.5
(x)
Div Yield (%)
0.2
0.2
0.2
FCF Yield (%)
0.6
2.3
3.1
Shareholding pattern (%)
As On
Jun-21 Mar-21 Jun-20
Promoter
36.9
37.0
38.4
DII
9.4
10.0
15.5
FII
25.7
24.2
0.0
Others
28.0
28.8
46.1
APAT’s diversified product portfolio and pan-India presence helps in mitigating
concentration risk. Higher sweating of assets (capacity utilization at 63%) will lead
to kicking-in of operating leverage and better profitability. Robust distribution
network, along with warehouses, higher retail network, and SKUs are expected to
improve last-mile connectivity.
The company is the fifth largest player globally and leader in the domestic
market, with an aggregate capacity at 2.6MMT. Steady capacity addition, increase
in penetration, and gains from unorganized players are expected to improve
market share from current levels (~50%).
The merger with Apollo Tricoat Tubes’ (Tricoat) is margin and RoE accretive and is
expected to create value for shareholders. Common ad spends and distribution
network, along with other synergy benefits, is expected to benefit APAT in the
medium-to-long term. Tricoat’s EBITDA/MT is 1.7-1.9x higher than blended
EBITDA/MT, and is expected to further increase revenue share of VAP, improve
overall margin, and further de-commoditize the business.
Marginal increase in domestic steel consumption is expected to have a profound
impact on domestic volumes of Structural Steel Tubes, thereby benefitting APAT
significantly. Warehousing, modular housing, modernization of rural, semi-urban
as well as urban houses, urban Infrastructure, and urban Real Estate are some of
the major growth drivers for the Structural Steel Tubes industry.
We estimate 20%/35% revenue/PAT CAGR over FY21-24E, led by increasing
EBITDA/MT and higher sweating of assets. We value the stock at 35x Sep’23E EPS
to arrive at our TP of INR2,065. We initiate coverage with a Buy rating.
Diversified product portfolio and presence to drive growth
APAT operates across four major product categories – Apollo Structures, Apollo
Z, Apollo Galv, and Apollo Tricoat, which helps in mitigating concentration risk
and increases product offerings. It has a strong presence in South and North
India (~58% of revenue). Penetration levels are expected to improve, with a
shift in the management’s focus towards improving rural sales by adding
distributors and warehouses to its existing network. Robust distribution
network, along with warehouses, higher retail presence, and SKUs, are expected
to improve last-mile connectivity. The recent merger of Tricoat into APAT is
expected to improve sales volume due to newer cross-selling opportunities and
higher consolidated ad spends, which is likely to improve its brand presence and
image. Currently, APAT operates at ~63% utilization levels. Higher sweating of
assets is expected to lead to kicking-in of operating leverage and improve
margin and profitability.
7 September 2021
3
 Motilal Oswal Financial Services
APL Apollo Tubes
Moderate utilization levels leaves room for expansion
APAT is the fifth-largest Structural Steel Tubes player globally and enjoys leadership
in the domestic market (pegged at 4MMT). Steady capacity addition and timely
inorganic acquisitions have led to increase in capacity to 2.6MMT, with its
corresponding market share surging to ~50% (as on FY21). Thus, APAT has capacity
in place to cater to demand as current capacity utilization stands at 63%. In contrast,
the cumulative market share of the next five domestic Structural Tubes players
stands at ~38%. APAT is expected to gain market share from unorganized players
through higher rural penetration and increased branding activities (ad spends grew
at 14% CAGR over FY15-21 to INR235m).
Tricoat’s merger to drive the next leg of growth
In Mar’21, APAT merged its subsidiaries (Tricoat and Shri Lakshmi Metal Udyog)
under the APL Apollo brand. Tricoat’s acquisition and subsequent merger are part of
the management's efforts to enhance its portfolio of value-added products. It is
adding capacity to meet increasing demand, and sees an huge opportunity in
Chaukhat, Plank, and Signature segments due to the diversified application of
products and replacement demand. The same is expected to support overall
portfolio growth. Several synergy benefits such as cost-saving efficiencies (due to
60-70% overlapping in the distributor network), higher cross-selling opportunities,
increased size, and stronger Balance Sheet are expected to complement growth in
the medium-to-long-term. Tricoat’s EBITDA/MT stood at INR7,072 (in FY21), 1.9x
higher v/s that for APAT (excluding Tricoat), and is expected to boost APAT’s
profitability. Increasing share of VAP products is likely to de-commoditize the overall
business, thereby reducing the impact from fluctuations in steel prices.
Huge opportunity in Structural Steel Tubes to drive sales
Consumption of Structural Steel Tubes in India stands at 4% (as a percentage of
domestic steel consumption), significantly lower than the global average
consumption of 9%. Domestic steel consumption is expected to double over the
next 10 years on the back of greater government focus on Infrastructure, increased
urbanization, and corresponding rise in demand for office space (commercial
structures). Marginal increase in steel consumption in India is expected to lead to a
huge rise in domestic volumes of Structural Tubes. Warehousing (253m sq. ft. as of
CY20), modular housing (market size to touch USD19.3b by CY24), modernization of
houses in rural and semi-urban regions, urban Infrastructure (spending on airports is
pegged at INR190b over the next three years), and urban Real Estate (1,816 projects
launched during FY21) are some of the major growth drivers for the Structural Steel
Tubes industry in India. APAT with its lion’s share (~50%) in the domestic market is
best placed to gain from the increased consumption of Structural Steel Tubes.
Initiate coverage with a Buy rating
We expect strong volume growth and improved profitability due to: a) higher
demand across product segments, b) launch of new products under the parent
company and newly merged entity: Tricoat, c) robust distribution network, leading
to increase in market share, along with increased cross-selling opportunity from the
merger, and d) increase in the share of VAP is driving margin and profitability. We
expect APAT to deliver 20%/26%/35% consolidated revenue/EBITDA/PAT CAGR to
~INR148b/INR13.6b/INR9b and generate strong cumulative CFO/FCF of
INR31.3b/INR20.8b over FY21-24E. It is expected to turn net cash positive (~INR4b)
by FY23E. APAT’s peers (in the Building Material space) trade at an average FY23E
forward P/E of 36x. We value the stock at 35x Sep’23E EPS and arrive at our TP of
INR2,065. The stock should fetch similar valuation as its peers in the Building
Material space, due to its leadership and low-cost position in the Structural Tubes
business, strong return ratio profile, and lower working capital days. We initiate
coverage on APAT with a
Buy
rating.
7 September 2021
4
 Motilal Oswal Financial Services
APL Apollo Tubes
Company overview
About APAT
Incorporated in CY86, APAT is the largest manufacturer of Structural Steel Tubes
in India, which finds applications in residential and commercial buildings,
warehouses, factories, Agriculture, and other Infrastructure works.
It enjoys ~50% market share in India, and operates through a network of 10
plants, serving over 50,000 retailers and 0.2m fabricators through its network of
over 800+ distributors. It has more than 1,500+ SKUs.
APAT has a strong presence in rural India, which contributes ~55% to its revenue
mix. Through gradual expansion and several inorganic acquisitions, its market
share increased to ~50%, with capacity at 2.6MMT. Currently, it consumes
~2%/10% of India’s total steel/HR coils (hot-rolled). The management aims to
equalize its revenue flow from rural and urban areas.
It is focused on: a) streamlining its distribution and retail network for last-mile
penetration, b) launching new products to improve its product basket, and c)
further improve market share.
Exhibit 1: Product-wise revenue composition
Apollo Structures
13%
18%
13%
20%
Apollo Z
10%
21%
Apollo Galv
4%
7%
23%
Apollo Tricoat
5%
8%
7%
22%
58%
Others
3%
16%
5%
20%
55%
FY21
69%
67%
69%
66%
FY16
FY17
FY18
FY19
FY20
Source: Company, MOFSL
Exhibit 2: Product-wise volume composition
Apollo Structures
13%
18%
13%
20%
Apollo Z
10%
21%
Apollo Galv
7%
21%
Apollo Tricoat
7%
6%
21%
14%
4%
19%
69%
67%
69%
72%
67%
62%
FY16
FY17
FY18
FY19
FY20
FY21
Source: Company, MOFSL
7 September 2021
5
 Motilal Oswal Financial Services
APL Apollo Tubes
Exhibit 3: Product-wise EBITDA composition
Apollo Structures
19%
30%
51%
FY16
17%
32%
Apollo Z
15%
37%
Apollo Galv
10%
39%
Apollo Tricoat
13%
8%
35%
43%
FY20
24%
6%
31%
39%
FY21
50%
FY17
48%
FY18
51%
FY19
Source: Company, MOFSL
Exhibit 4: APAT has over 800+ distributors catering to ~85% of revenue
Source: Company, MOFSL
7 September 2021
6
 Motilal Oswal Financial Services
APL Apollo Tubes
Exhibit 5: Business structure
Particulars
Heavy
Structures
4,646
5%
48,903
449
7%
4,722
95,000
6%
Light
Structures
10,667
13%
50,078
1,000
15%
4,718
2,13,000
13%
General
Structures
31,752
37%
44,533
1,181
17%
1,657
7,13,000
43%
Rustproof
Structures
16,056
19%
54,612
1,994
29%
6,728
2,94,000
18%
Rustproof
sheets
1,217
1%
52,898
104
2%
4,720
23,000
1%
Agri/
Industrial
3,927
5%
55,305
426
6%
6,040
71,000
4%
Home
improvement
13,885
16%
60,108
1,640
24%
7,072
2,31,000
14%
Apollo Structural
Apollo Z
Apollo Galv
Apollo Tricoat
Revenue (INR m)
Revenue share
NSR/MT (INR)
EBITDA (INR m)
EBITDA share
EBITDA/MT (INR)
Volume (MT)
Volume share
FY16-21
Revenue CAGR
EBITDA CAGR
EBITDA/MT CAGR
Volume CAGR
FY21-24E
Revenue CAGR
EBITDA CAGR
EBITDA/MT CAGR
Volume CAGR
Applications
14%
17%
4%
13%
49%
56%
6%
47%
5%
1%
-5%
6%
16%
19%
5%
13%
NA
NA
NA
NA
-6%
-4%
6%
-9%
NA
NA
NA
NA
22%
25%
4%
20%
23%
25%
3%
21%
15%
22%
7%
14%
21%
25%
5%
19%
55%
62%
5%
53%
21%
25%
4%
19%
Galvanized
structures
Greenhouse
structures
Plumbing
Fire-fighting
24%
29%
6%
22%
Doorframes
Staircase steps
Furniture
Plank
Designer tubes
Fencing
Electrical
conduits
Structural, piling, sheds, handrails,
Galvanized Structural Steel
gates, fencing
Tubes for coastal markets
Balcony grills, staircase, light structures
Structures for metros, airports,
stadiums, stations, etc.
Heavy equipment
Key sectors
Residential buildings and independent
Residential buildings and
homes
independent homes
Commercial buildings, warehouses, and
Commercial buildings,
warehouses, and factories
factories
Infrastructure
Industrial and agriculture
Commercial
buildings
Industrial and
agriculture
Residential
buildings and
independent
homes
Commercial
buildings
Source: Company, MOFSL
Exhibit 6: Plant locations
Plant
Sikandarabad (three units)
Hosur
Raipur
Murbad
Malur (Tricoat)
Hyderabad
Bengaluru
Dujana (Tricoat)
Total
State
Uttar Pradesh
Tamil Nadu
Chhattisgarh
Maharashtra
Karnataka
Telangana
Karnataka
Uttar Pradesh
Capacity ('000MT)
700
550
350
350
250
200
100
100
2,600
Source: Company, MOFSL
7 September 2021
7
 Motilal Oswal Financial Services
APL Apollo Tubes
Industry behemoth
Diversified presence and product portfolio to drive overall growth
APAT operates across four product categories in the Structural Steel Tubes space,
which helps in mitigating concentration risk and increase product offerings.
It operates at ~63% utilization levels. Higher sweating of assets is expected to lead to
kicking in of operating leverage and improve profitability.
Robust distribution network, along with warehouses, retail presence, and SKUs, is
expected to improve last-mile connectivity.
Strong and diversified product portfolio
APAT’s product portfolio comprises of four major product types: Apollo
Structures, which constitutes ~63% of total revenue, followed by Apollo
Z/Apollo Galv/Apollo Tricoat at 19%/4%/14% (as on FY21).
Revenue from the above four product categories is further sub-divided into
seven different product segments. APAT’s diversified product portfolio mitigates
revenue concentration risk from one single product alone.
APAT was the first company in India to utilize Direct Forming Technology. This
latest global technology is used for manufacturing hollow sections (both square
and rectangular) and universal hollow steel tubes. It allows the buyers to
customize their steel tubes according to design.
It has been continuously innovating and launching new products to its existing
basket. It has a diversified portfolio (over 1,000 products) and provides tailor-
made solutions to its customers. This has acted as a key growth driver.
Among new launches, door and window frames have been performing well. The
doorframe replaces traditional wooden ones, resulting in a cost saving of 30%,
with a similar finish. The management expects these products to gain a sizeable
chunk of the revenue mix and help improve overall margin as these products
generate higher EBITDA/MT as compared to conventional products.
Exhibit 7: APAT’s product portfolio
Product category
Apollo Structural
Structural Steel construction material: residential, commercial,
Infrastructure
Apollo Z
Galvanized Structural Steel construction material: residential,
commercial, Infrastructure
Apollo Galv
Galvanized Steel Tubes: residential, commercial, Agri, Industrial
Apollo Tricoat
Home improvement products
Brand names
Fabritech, Build, DFT, Column,
Fire Ready, Agri
Coast Guard
Green, Bheem, Z+
Plank, Signature, Elegant,
Chaukhat
Source: Estimates, MOFSL
Steady capacity additions
As part of its long-term strategy, the management has been continuously adding
capacity through several greenfield and brownfield expansions. Over the last 10
years, cumulative capacity increased to 2.6MMTPA in FY21 from 274KMTPA in
FY10 (23% CAGR over FY10-21). During this period, it maintained average annual
capex run-rate at INR1.5b, while keeping leverage ratios under check.
7 September 2021
8
 Motilal Oswal Financial Services
APL Apollo Tubes
Currently, APAT operates at 63% capacity utilization levels. The management’s
focus is on sweating assets and improving utilization levels, while being cost
efficient as compared to its peers.
Historically, steady expansion and higher sweating of assets has led to
significant market share gains. Utilization is expected to increase to 68% from
~63% over FY21-24E. With a steady rise in utilization levels and lower capex
outflow, APAT is expected to generate strong cash flows and gain market share.
Exhibit 8: Expect volumes to grow at 18% CAGR over FY21-24E
91%
74%
51%
38%
60%
40%
59%
APL Apollo Sales Volume ('000MT)
77%
72%
Utilization rate
77%
68%
72%
65% 69%
63% 64% 65% 63% 61%
Source: Company, MOFSL
Exhibit 9: Capacity additions over the years
Capacities ('000MT)
Source: Company, MOFSL
Inorganic acquisition in line with its long-term expansion plans
In FY19, it completed the acquisition of Taurus Value Steel & Pipes’ production
unit in Hyderabad, a subsidiary of Shankara Building Products. With this
acquisition, APAT added 200,000MTPA to capacity and a manufacturing unit in
South India. This facility has established lines for high-margin products, namely
GI (Galvanized Iron) and GP (Galvanized tubes).
In Jun’19, it acquired controlling stake in Tricoat (50.86%). The two acquisitions
increased the total number of plants to 10 and total capacity to 2.5MMTPA.
The doorframes launched by Tricoat witnessed instant success, leading to
complete booking of capacities within a few months of its launch.
Both acquisitions, apart from augmenting capacities, also added several value
added products to APAT’s portfolio. These two acquisitions are believed to
increase share of value added products, which in turn is expected to improve
margin and improve cash flows.
7 September 2021
9
 Motilal Oswal Financial Services
APL Apollo Tubes
Exhibit 10: Acquisitions undertaken by APAT over the years
Year
FY08
FY12
FY17
FY19
FY21
Major events/milestones
Acquisition of Apollo Metallex Pvt and SLMUL
Acquisition of Lloyds Line Pipes, Morbad, near Mumbai
Acquisition of Blue Ocean Projects Pvt
Completed acquisition of manufacturing facility of Taurus Value Steel unit in Hyderabad,
a subsidiary of Shankara Building Products
APAT acquired 50.6% stake in Tricoat through its wholly-owned subsidiary SLMUL
Announced merger of subsidiary/step-down subsidiary SLMUL/Tricoat into APAT
Source: Company, MOFSL
Robust distribution network
APAT has been continuously increasing its distribution, retail, warehouse, and
fabricator network to improve its presence and reach. Steady capacity additions
and increase in distribution numbers led to market share gains, better brand
presence, and higher sales.
Currently, APAT has over 800+ distributors, 50,000 retailers, 0.2m fabricators,
over 1,500+ SKUs, and 29 warehouses spread across 300 towns and cities. This
robust and diversified network has improved connectivity and last-mile
penetration.
As of FY21, ~85% of sales are recorded through its distribution network. Going
forward, the management’s focus is on capacity utilization, gaining market
share, branding, strengthening distribution, and improving margin. APAT enjoys
a location advantage because of its close-to-demand distribution-dealer- retailer
network, which reduces transportation costs.
Exhibit 11: Significant increase in the number of distributors
No of Distributors
26
150 175
125 150
100 100
5
4
3
1
15
19
No of Warehouses
26
26
27
29
29
29
29
200 275 300 375 600 625 650 790 800 800
Source: Company, MOFSL
Exhibit 12: Higher presence through diverse plant locations
No of Plants
11
10
10
2
2
2
3
4
5
5
5
5
6
6
7
7
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Source: Company, MOFSL
7 September 2021
10
 Motilal Oswal Financial Services
APL Apollo Tubes
Exhibit 13: Capacity-wise distribution
North
30%
28%
West
Central
South
20%
23%
Source: Company, MOFSL
Exhibit 14: Region-wise distribution split
North
626
30%
15%
35%
20%
FY17
651
30%
15%
35%
20%
FY18
South
791
30%
15%
35%
20%
FY19
East
West
800
30%
15%
35%
20%
FY20
800
30%
15%
35%
20%
FY21
Source: Company, MOFSL
7 September 2021
11
 Motilal Oswal Financial Services
APL Apollo Tubes
Lion’s share in Structural Steel Tubes
Timely expansion and acquisitions to benefit in the long run
APAT is the market leader in the domestic Structural Steel Tubes segment, which is
pegged ~4MMT, whereas aggregate capacity stands at 2.6MMT.
Steady capacity addition, increase in penetration, and gains from unorganized players
is expected to improve market share from current levels (~50%).
Largest Structural Steel Tubes manufacturer in India
The domestic Structural Steel Tubes market is pegged at 4MMT, 4% of overall
steel consumption (industry: 90MMT), and way lower than average global
consumption of ~9%.
Domestic production of ERW pipes stands ~10MMTPA. The sector is expected to
grow at 8-10% CAGR over the next few years. APL is the largest ERW pipe
manufacturer in India.
The ERW pipes segment, which was historically dominated by small unorganized
players, is losing market share to large organized players, like APAT, who are
able to meet increasing demand and are steadily adding capacities.
Several acquisitions, along with timely expansion, led to APAT becoming the
largest domestic Structural Steel Tubes player in India, in terms of capacity and
volumes. Going forward, we expect the Structural Steel Tubes industry to
consolidate further, and APAT is expected to benefit from this consolidation.
Global
9%
Europe
11%
LATAM
9%
Japan
8%
Middle East
8%
North America
India
Exhibit 15: Structural Steel Tube consumption significantly lower than global average
7%
4%
Global
Europe
LATAM
Japan
Middle East
North
America
India
Source: Company, MOFSL
Leadership in the domestic market
APAT dominates the domestic Structural Steel Tubes industry with ~50% market
share (as of FY21). In contrast, the cumulative market share of the next five
players stands at 38% (12pp lower than APAT).
Over FY15-21, market share (in volume terms) of APAT increased 38pp to
current levels (~50%). Sharp surge in market share was led by: a) timely product
portfolio expansion, b) steady capacity addition (by expansion/inorganic
acquisition), c) improvement in customer reach, with an expansion in its
distribution network, g) gain in market share from unorganized players, h)
higher addition of SKUs, i) product innovation, and j) providing options to
consumer by offering an alternate to traditional products.
APAT is expected to maintain its leadership position in the domestic Structural
Steel Tubes industry. Scope for an increase in utilization levels and increasing
use of Structural Steel Tubes is leading to an increase in industry size and is
expected to help APAT gain incremental market share.
12
7 September 2021
 Motilal Oswal Financial Services
APL Apollo Tubes
Exhibit 16: Substantial market share gains
APAT's market share
50%
31%
37%
40%
27%
12%
27%
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Source: Company, MOFSL
Exhibit 17: Dominates half of the domestic market
APL Apollo
Player 1
7%
7%
9%
9%
50%
Player 2
Player 3
Player 4
Others
18%
Source: Company, MOFSL
Exhibit 18: Competitive landscape of Structural Steel Tubes players in India
Tata Steel BSL
Surya Roshni
Hi-Tech Pipes
Sales volume
(MT)
NA
784,000
2,83,200
Capacities
(MT)
500,000
925,000
500,000
Products
Precision tubes, zinc
coated tubes
GI pipes, black pipes,
GP pipes
Application
Oil & Gas segment, Automobile, and
water pipeline projects in domestic
and export markets
Agriculture, Infrastructure, fire-
fighting, O&G, construction, among
others
Infrastructure, Telecom, Defense,
Power Distribution, Railways, Airport,
Real Estate, Automobile, and
Agriculture
Infrastructure, Telecom, Real Estate,
etc.
APAT’s presence
Apollo Structural,
Apollo Galv
Apollo Galv, Apollo Z
Apollo Structural,
Apollo Z, Apollo Galv
Apollo Structural,
Apollo Galv
Goodluck
Industries
NA
NA
Rama Steel Tubes
97,434
168,000
GI pipes, GP tubes,
rectangular and
hollow sections,
black tubes
Galvanized pipes,
square and
rectangular pipes,
fabricated steel
structures,
Transmission and
Telecom towers
ERW Galvanized steel Automobiles, Infrastructure, Real
tubes and pipes (in
Estate, and Furniture
black color), hollow
sections, swaged
poles
Apollo Structural,
Apollo Z, Apollo Galv
Source: Company, MOFSL
7 September 2021
13
 Motilal Oswal Financial Services
APL Apollo Tubes
Increased brand spends to improve brand recall
Increased focus on advertisements and sales promotion is clearly visible from
the 14% CAGR (to INR235m in FY21) in ad spends in the last six years.
In the last few years, the management has taken several branding and
marketing initiatives, through its association with sports and celebrities, to
maximize brand reach and visibility across a diverse domestic market.
Exhibit 19: Advertisement and sales promotion (INR m)
497
235
108
130
72
FY17
93
90
FY15
FY16
FY18
FY19
FY20
FY21
Source: Company, MOFSL
Increasing share of VAP to improve profitability
APAT’s share of VAP (EBITDA/MT over INR4,000) has increased to 59% from 40%
over FY16-21.
Except for ‘general Structural Steel Tubes’, all other products are classified as
VAP, as economies of scale and operational efficiency has increased EBITDA/MT
of all these products to over INR4,000.
Addition of Tricoat products (via the acquisition) to its existing product portfolio
is believed to be margin accretive as EBITDA/MT of Tricoat stood at INR7,072,
71% higher than that of blended EBITDA/MT of APAT.
Going forward, we expect the share of VAP to increase further (as a percentage
of revenue) over FY21-24E.
Exhibit 20: Increasing share of VAP to improve profitability
VAP (INRb)
Revenue share of VAP
59%
40%
43%
42%
44%
47%
16.8
FY16
16.9
FY17
22.4
FY18
34.3
FY19
40.6
FY20
53.2
FY21
Note: VAP – excluding General Structures.
Source: Company, MOFSL
7 September 2021
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 Motilal Oswal Financial Services
APL Apollo Tubes
Tricoat to complement profitability growth
Tricoat’s EBITDA/MT is significantly higher than that of APAT
Tricoat’s merger is margin and RoE accretive and is expected to create value for
shareholders.
Common ad spends and distribution network, coupled with other synergy benefits, is
expected to benefit APAT in the long run.
Tricoat’s EBITDA/MT, which is 1.7x higher than blended EBITDA/MT, is expected to
lead to higher profitability and improve overall revenue share of VAP.
Another feather in APAT’s cap
Mr. Saket Agarwal, owner of Tricoat (erstwhile Best Steel Logistics), was
previously the distributor for the Apollo Group in northern India.
In Oct’18, SLMUL, a wholly-owned subsidiary of APAT, acquired 8m shares and
subscribed to 4.3m warrants of APAT, thereby constituting ~40.4% (diluted
basis) of the shareholding of Tricoat (both shares and warrants were acquired at
INR125 per unit). The 4.3m warrants have been fully converted into an equal
number of equity shares.
Subsequently, by way of an open offer and market purchases (during the open
offer), SLMUL acquired ~10.2% stake in Tricoat in Jan’19 (at INR135 per share).
Another 5.86% was acquired from the open market. On a consolidated basis, as
of Jun’19, SLMUL owns ~56% stake in Tricoat.
The overall acquisition was completed at a cost of ~INR138m, and was funded
by the promoter group, thereby substantially reducing stress on its borrowings.
In Mar’21, APAT announced the merger of its step-down subsidiary Tricoat into
the former. The proposed amalgamation is expected to complete by Dec’21.
The acquisition, followed by the subsequent merger of Tricoat, is part of the
company's effort to enhance its portfolio of value-added products and adding
capacity to meet increasing demand.
Structure of the recent merger
The Board approved the merger of SLMUL and Tricoat with APAT. Tricoat’s
minority shareholders will receive one equity share in APAT for every share held.
This implies a 16% premium for the shareholders of Tricoat to its previous
closing price. This increases APAT’s share capital by 10.8%, but reduces
promoters’ shares to 33.44% from 37.03%. The expected date for closure of the
merger is CY21-end.
7 September 2021
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 Motilal Oswal Financial Services
APL Apollo Tubes
Exhibit 21: Structure of Tricoat’s merger
Source: Company, MOFSL
Rationale for the merger
Simplification of the group structure:
Tricoat, which was previously accounted
under SLMUL, will be directly merged into APAT, thereby aiding understanding
of the business and forecasting performance of the company.
Cost efficiencies:
Currently, close to 60-70% of Tricoat’s distributors overlap
with APAT. Post-merger, overlapping expenses, such as advertisement and sales
promotion, etc., can be merged into one and a uniform budget can be deployed.
Increased cross-selling opportunities:
Tricoat, whose majority of revenue
comes from retail sales, serves as a great opportunity for APAT to showcase its
product to its retail customer base and vice-versa.
Increased size:
With increased production, economies of scale are expected to
kick-in.
Stronger Balance Sheet:
The merger is believed to be EPS and RoE accretive,
thereby making its Balance Sheet strong. Tricoat’s high margin products are
expected to lift APAT’s profitability.
Innovative product launches
Tricoat operates across two product categories: Home Beautification and Door
Solutions. These two categories are further classified into Apollo Signature,
Elegant, Chaukhat, and Plank.
Chaukat
is the highest selling product and serves as a replacement to a wooden
doorframe. In FY20, post commencement of operations, Chaukat was an
instantaneous hit and managed to achieve 50,000MT in sales volume and
achieved 100% utilization in three months’ time. Post which, the company
expanded the capacity by 25,000MT to 75,000MT.
Signature
is its flagship product in the Home Beautification segment. It achieved
80-90% capacity utilization within 3-4 months in this segment. Post lockdown,
Tricoat saw a ramp-up in demand and the segment’s capacity was expanded to
125,000MT (from 85,000MT).
16
7 September 2021
 Motilal Oswal Financial Services
APL Apollo Tubes
The third product launched by the company was
‘Elegant’,
which finds
application in handrails and fencing. In FY21, Tricoat expanded capacity in this
segment to 125,000MT (from 25,000MT in FY20).
Another product launched by the company is ‘Plank’, a rectangular tube (with a
height-to-width ratio of 1:10) and is a replacement for wooden tiles. Plank finds
application in home applications like roofing, staircases, etc.
As of FY21, Tricoat managed to achieve sales volume of 231,000MT, while
operating at a capacity utilization of ~66% (aggregate capacity at 350,000MT).
On the back of increased demand across all product segments, capacity
utilization is expected to improve further.
Exhibit 22: Tricoat’s capacity pie-chart
25,000
75,000
1,25,000
Elegant
Signature
Chaukhat
Plank
1,25,000
Source: Company, MOFSL
Tricoat to push overall EBITDA/MT
EBITDA/MT of Tricoat stood at INR7,072 in FY21 v/s consolidated EBITDA/MT of
INR3,657 for APAT, excluding Tricoat.
All products of Tricoat are classified as VAP (as EBITDA/MT is higher than
INR4,000). Tricoat’s FY21 EBITDA/MT stood at INR7,072 (v/s consolidated
EBITDA/MT of INR4,143). This is due to a sharp rise in product demand across all
product segments, coupled with an improvement in operational efficiency.
We expect Tricoat’s volumes to grow at 22% CAGR over FY21-24E to 419KMTPA.
With an increase in volume share for Tricoat, overall EBITDA/MT is bound to
increase, leading to further improvement in operating margin and profitability.
Exhibit 24: …and EBITDA/MT to record 6% CAGR over the
same period
Apollo Tricoat - EBITDA/MT (INR)
11%
12%
12%
13%
EBITDA Margins
13%
Exhibit 23: Expect Tricoat’s revenue to grow at 24% CAGR
over FY21-24E…
Apollo Tricoat revenue (INRb)
123%
19.2
13.9
6.2
38%
24%
12%
FY24E
23.7
Growth YoY
26.5
6,589
FY20
7,072
FY21
8,181
FY22E
8,181
FY23E
8,345
FY24E
FY20
FY21
FY22E
FY23E
Source: Company, MOFSL
Source: Company, MOFSL
7 September 2021
17
 Motilal Oswal Financial Services
APL Apollo Tubes
Tricoat to tail ride on APAT’s distribution network
Tricoat is expected to benefit extensively from APAT’s distribution network.
APAT’s over 800+ distributors and 29 warehouses are expected to significantly
improve Tricoat’s product reach as majority of the latter’s sales are recorded
through the retail channel.
Also, Tricoat’s unique product portfolio increases APAT’s product basket and
helps improve profitability (as Tricoat’s products are considered VAP). Synergy
benefits are expected to kick-in along with an increase in operating leverage.
7 September 2021
18
 Motilal Oswal Financial Services
APL Apollo Tubes
Domestic Structural Steel Tubes industry on the cusp
Domestic demand drivers in place to drive growth
Domestic consumption of Structural Steel Tubes is significantly lower than global
counterparts. A marginal rise in domestic consumption is expected to benefit APAT
significantly.
Warehousing, modular housing, modernization of rural and semi-urban regions, urban
Infrastructure, and urban Real Estate are some of the major growth drivers for the
Structural Steel Tubes industry.
Domestic industry poised to grow
As mentioned above, the domestic Structural Steel Tubes industry is pegged at
4MMT, which is 4% of overall steel consumption in India, significantly lower
than the global average of ~9%.
Domestic steel consumption is expected to double over the next 10 years on the
back of greater government focus on Infrastructure, increased urbanization, and
corresponding rise in demand for office space (commercial structures).
With an increase in steel consumption, coupled with growing acceptance of
Structural Steel Tubes in residential, commercial, and Infrastructure
construction, the 4% figure is expected to rise to 10%. This would lead to a
multi-fold increase in the market size of the Structural Steel Tubes industry.
A faster shift to steel tubes from concrete tubes is expected to benefit domestic
players as the former have far better strength and ductility properties as
compared to concrete.
Exhibit 26: Structural Tubes share to rise to ~10% of steel
consumption in the next few years
Steel market
Structural steel tube market
227
Exhibit 25: Structural Steel Tubes consumption significantly
lower than the global average (as on CY19)
Global
Japan
India
Europe
Middle East
LATAM
North America
9%
11%
9%
8%
8%
7%
4%
90
4
22
2030E
Source: Industry data, Company, MOFSL
Global Europe LATAM
Japan
Middle North
East America
India
2019
Source: Industry data , Company, MOFSL
Exhibit 27: Sector-wise break-up of APAT’s customer base
50%
25%
20%
5%
Building material
housing
Building material
commercial
Infrastructure
Others (Industrial &
Agri)
Source: JLL, Company, MOFSL
7 September 2021
19
 Motilal Oswal Financial Services
APL Apollo Tubes
Exhibit 28: Global market expansion in Structural Steel Tubes
Source: Company, MOFSL
Exhibit 29: Market expansion in Indian Structural Steel Tubes
Source: Company, MOFSL
Major growth drivers for the domestic Structural Steel Tubes industry
Warehousing
According to industry reports, India’s total warehousing space stands ~253m sq-
ft (as of CY20), of which 140m sq-ft consists of Grade A and the rest by Grade B
warehouses.
Cost of logistics, as a percentage of GDP, is 13-14% in India, whereas for BRIC
countries it is ~11%, followed by US/Germany at 9.5%/8%. The cost of logistics is
significantly higher as compared to peer nations.
Increase in warehousing space is expected to significantly lower the cost of
logistics. Going forward, a surge in Grade A warehouses is expected to increase
warehousing space to 191m sq-ft from 140m sq-ft over CY20-23E. Logistics,
Engineering, Auto and Ancillaries, e-commerce, FMCG, Retail, Telecom, and
White Goods sectors were the biggest occupiers of warehouses and are
expected to remain the biggest demand drivers going forward.
APAT is directly in line to benefit from the surge in Grade A/B warehouses as
Structural Steel Tubes constitute a major chunk of the building cost.
7 September 2021
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 Motilal Oswal Financial Services
APL Apollo Tubes
Exhibit 30: Indian warehousing stock (m sq ft)
Grade A
Grade B
157
113
174
139
163
191 188
82
36
91
47
104
65
123
88
140
2016
2017
2018
2019
2020
2021
2022
2023
Source: JLL, Company, MOFSL
Exhibit 31: Use of Structural Steel Tubes in warehousing
Source: JLL, Company, MOFSL
Affordable Housing
Affordable houses, with lower and faster completion time, and prefabricated
homes are gaining traction in India.
Under the ‘Modular Housing’ concept, steel structures are constructed in-house
and assembled on site. This concept constitutes a significant portion of
Structural Steel Tubes demand in foreign markets.
The prefabricated housing market is expected to touch USD19.3b by CY24E
(4.6% CAGR over CY19-24E).
Going forward, this concept is expected to complement growth in the Structural
Steel Tubes industry, thereby benefitting market leaders like APAT.
Exhibit 32: Modular Building concept
Source: JLL, Company, MOFSL
7 September 2021
21
 Motilal Oswal Financial Services
APL Apollo Tubes
Urban Infrastructure
As part of its long-term ‘Urban Infrastructure’ plans, the Government of India
(GoI) plans to build 100 new Airports by CY24. It also plans to upgrade existing
Airports over the next three years at an investment of INR190b.
New Infrastructure projects, coupled with upgradation projects, is expected to
increase steel consumption, which in turn is expected to boost sales of
Structural Steel Tubes, as they find direct application in this segment.
Exhibit 33: Urban Infrastructure
Source: Company, MOFSL
Urban Real Estate
The number of skyscrapers has skyrocketed in the last decade, leading to
increased demand for steel and allied products. India’s vertical growth pushed
high-rises, or buildings with ground-plus-20 (G+20) floors or more, to record
highs in CY19. Of the 1,816 projects launched during the year across seven
major cities, over 52% were G+20 floors or more.
The GoI is looking at an upward revision in Floor Space Index (FSI) regulations
across all major cities. Such initiatives indirectly benefit domestic Structural
Steel Tube players in the medium-to-long-term.
Exhibit 34: Global use of Structural Steel Tubes – segment-wise break-up (%)
Residential
19%
23%
21%
37%
2013
Infrastructure
17%
22%
22%
39%
2018
Commercial
Others
16%
22%
22%
40%
2021
Source: JLL, Company, MOFSL
7 September 2021
22
 Motilal Oswal Financial Services
APL Apollo Tubes
SWOT Analysis
A leader with ~50%
market share helps
while negotiating
better terms with
suppliers/customers
Strong pan-India
presence v/s peers
helps in gaining
incremental market
share
Huge scope for
increasing
throughput without
capacity addition
Although the share of
VAP is high, adverse
changes in steel
prices can affect
profitability
Plants need to be
closer to the
consumption center
as higher lead
distance raises freight
cost, hampering
competitive pricing
Higher Infrastructure
spending (Airports,
Warehouses, residential
and commercial
projects) to benefit
APAT
Modular Housing,
Chaukat (steel
doorframes), etc. are
some pioneering
initiatives taken by the
management and offers
tremendous growth
potential
Slower acceptance and
pick-up in Structural
Steel Tubes could
hamper growth
Slower growth in steel,
Infrastructure, and
other allied industries
can reduce the pace of
growth
7 September 2021
23
 Motilal Oswal Financial Services
APL Apollo Tubes
Expect EBITDA to grow at 26% CAGR over FY21-24E
Surge in EBITDA/MT to drive overall profitability
Expect 20% revenue CAGR over FY21-24E
Exhibit 35: Rising revenue share from value-added products
Apollo Structures
10%
21%
7%
23%
Apollo Z
Apollo Galv
16%
5%
20%
55%
APAT clocked 25%/15% revenue CAGR over the last 10/5 years on the back of
strong demand, coupled with capacity expansion and inorganic growth
measures taken by the management.
Over FY11-21, revenue grew at 25% CAGR, whereas corresponding realization
grew at 1% CAGR. We expect 20% revenue CAGR over FY21-24E led by: a) higher
demand across key segments like Apollo Structures and Tricoat, resulting in
higher sweating of assets and thereby increasing throughput, b) diversified
presence across India to lead to addition in new customers and further increase
in market share, c) robust volume growth on innovative launches and diversified
product portfolio.
Volumes grew a robust 24% over FY11-21, led by increased penetration and
aggressive expansion. We expect a similar growth trajectory and 18% volume
CAGR over FY21-24E. Apollo Structures/Tricoat (62%/14% of overall volumes) is
expected to be major volume drivers for APAT and are expected to grow at
16%/22% volume CAGR over FY21-24E.
Apollo Tricoat
18%
5%
23%
52%
FY22E
18%
5%
22%
52%
FY23E
Others
18%
5%
22%
53%
FY24E
7%
22%
58%
69%
66%
FY18
FY19
FY20
FY21
Source: Company, MOFSL
Exhibit 36: Diversifying volume mix with the introduction of new products
Apollo Structures
10%
21%
7%
21%
6%
21%
Apollo Z
Apollo Galv
15%
4%
22%
59%
Apollo Tricoat
16%
5%
21%
58%
15%
4%
21%
59%
4%
19%
69%
72%
67%
62%
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
Source: Company, MOFSL
7 September 2021
24
 Motilal Oswal Financial Services
APL Apollo Tubes
Exhibit 37: Expect revenue to grow at 20% CAGR over FY21-24E
Revenue (INRb)
Blended realizations ('000 INR)
53.4
51.8
59.3
56.3
54.4
37.2
46.4
47.3
43.3
43.7
46.0
47.2
42.1
47.2
47.3
6.1
FY10
9.1
FY11
13.9
FY12
20.1
FY13
25.0
FY14
31.4
FY15
42.1
FY16
39.2
FY17
53.3
FY18
71.5
FY19
77.2
FY20
85.0
FY21
108.9
129.3
148.1
FY22E FY23E FY24E
Source: Company, MOFSL
Exhibit 38: Expect 18% revenue CAGR from Apollo
Structures over FY21-24E
Apollo Structures revenue (INRb)
39%
28%
26.3
-10%
29.2
36.7
46.9
-4%
45.1
4%
47.1
56.8
67.2
78.1
21%
18%
16%
Growth YoY
Exhibit 39: Expect Apollo Z to record 22% revenue CAGR
over FY21-24E
Apollo Z revenue (INRb)
43%
42%
16.7
3%
17.3
16%
3%
24.7
28.6
14%
32.8
Growth YoY
43%
8.0
6%
7.5
11.4
16.2
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 40: Expect Apollo Galv to record 19% revenue CAGR
over FY21-24E
Apollo Galv revenue (INRb)
Growth YoY
30%
6%
-9%
5.4
4.9
5.2
1%
3.9
-5%
-22%
5.3
5.0
5.1
6.3
7.0
24%
12%
Exhibit 41: Expect Apollo Tricoat to record 22% revenue
CAGR over FY21-24E
Apollo Tricoat revenue (INRb)
123%
19.2
13.9
6.2
38%
23.7
Growth YoY
26.5
24%
12%
Source: Company, MOFSL
Source: Company, MOFSL
Expect EBITDA/MT to grow at 6% CAGR over FY21-24E
In the last five years, APAT’s EBITDA/MT grew at 6% CAGR (to INR4,143) over
FY16-21, with corresponding EBITDA growth of 19%.
Currently, APAT dominates ~50% of the domestic Structural Steel Tubes market.
The management’s focus is now on increasing revenue share from value-added
products, which in-turn is expected to increase revenue share of VAP from
current levels of 59% (as of FY21-end).
We expect EBITDA/MT to grow at 6% CAGR over FY21-24E to INR4,996 on the
back of a growing share of VAP, kicking-in of operating leverage, cost control
7 September 2021
25
 Motilal Oswal Financial Services
APL Apollo Tubes
(freight, power, consumables, etc.), brand premium, and better negotiating
price with steel producers.
We expect the company to deliver 26% EBITDA CAGR over FY21-24E (to
INR13.6b).
Exhibit 42: Improvement in EBITDA/MT with an increase in volumes
Volume ('000 MT)
4.6
3.2
3.9
3.4
3.6
EBITDA/MT ('000 INR)
4.1
3.3
2.9
2.9
4.9
4.9
5.0
2.9
2.7
3.2
Source: Company, MOFSL
Exhibit 43: Expect EBITDA to grow at 26% CAGR over FY21-24E
9.9%
EBITDA (INRb)
8.3% 7.9%
8.5%
6.6%
5.8%
6.7%
7.0%
Margins
8.8% 9.2%
8.0% 8.3%
5.5%
6.2%
8.7%
0.5
0.9
1.2
1.6
1.6
1.8
2.8
3.3
3.7
3.9
4.8
6.8
9.1
11.4 13.6
Source: Company, MOFSL
PAT expected to grow at a CAGR of 35% over FY21-24E
Over the last 10/5 years, PAT grew at 24%/23% CAGR to INR3.6b in FY21. A
strong jump in EBITDA/MT, due to improvement in product mix and operating
leverage, will have a positive impact on profitability.
We expect the company to deliver 35% PAT CAGR to INR8.9b over FY21-24E.
Exhibit 44: Expect PAT to grow at 35% CAGR over FY21-24E
Adj. PAT (INRm)
97%
45%
14%
40%
-15%
8%
61% 51% 58%
21%
4%
-6%
29% 22%
Growth YoY
Source: Company, MOFSL
7 September 2021
26
 Motilal Oswal Financial Services
APL Apollo Tubes
Higher FCF on better operating performance and lower capex
Over the last five years, the annual run-rate in average FCF/capex outflow was
maintained INR2.1b/INR2.2b. Over FY21-24E, the average annual capex run-rate
is expected ~INR2b as most of its expansion plans are complete.
We expect APAT to generate an FCF of INR20.8b over FY21-24E, marking an
average annual run-rate of INR5.2b on the back of an increase in the share of
value-added products (leading to improvement in margin and profitability) and
prudent capital allocation, as majority of its capex plans are complete and the
focus is on further sweating of assets.
Improved cash flow is expected to be utilized for repayment of debt and to carry
out maintenance capex. We expect APAT to turn net cash positive by FY23E.
Exhibit 46: FCF to improve
FCF (INRm)
6,685
5,511
7,294
Exhibit 45: Net debt-to-equity
1.1
0.8
Net debt-to-equity (x)
0.9
0.8
0.6
0.1
0.0
0.9
3,175
(0.1)
261
3,215
961 1,316
1,344
(0.3)
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Source: Company, MOFSL
-1,495
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Source: Company, MOFSL
Return ratios
RoCE/RoE increased by 950bp/980bp to 20.8%/23.6% over FY15-21 due to
higher share of value-added products and improving operating leverage.
We expect a similar growth trajectory and expect APAT to record 530bp/210bp
expansion in RoCE/RoE to 26.1%/25.8% over FY21-24E.
Exhibit 47: Return ratios
24%
24%
21%
16%
14%
16%
14%
17%
13%
RoE
21%
RoCE
28%
24%
26%
21%
27%
27%
26%
26%
14%
11%
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
Source: Company, MOFSL
7 September 2021
27
 Motilal Oswal Financial Services
APL Apollo Tubes
Valuation and view
Initiate coverage with a Buy rating
APAT’s diversified product portfolio mitigates concentration risk. Higher sweating of
assets (capacity utilization at 63%) will lead to kicking in of operating leverage and
improved profitability.
Steady capacity addition, increase in penetration, and gains from unorganized players
is expected to improve market share from current levels (~50%).
Tricoat's EBITDA/MT, which is 1.7x higher than blended EBITDA/MT, is expected to
lead to higher profitability and an improvement in overall revenue share from VAP.
Marginal increase in domestic steel consumption is expected to have profound impact
on volumes of Structural Steel Tubes, thereby benefitting APAT significantly.
We estimate 20%/35% revenue/PAT CAGR over FY21-24E. We value the stock on a
price-to-earnings basis, assigning 35x Sept’23 EPS. Initiate Buy with a TP of INR2,065.
Expansion of its distribution and warehouse network will drive sales volume across
all product segments as the management’s focus shifts towards improving its rural
presence. Increasing rural penetration, with an expansion in distribution, and
product offerings will continue to drive overall growth.
Leadership position in the domestic market helps in negotiating RM prices as APAT
single-handedly consumes ~2% of total steel produced. This is expected to help
increase overall penetration (particularly in rural areas), leading to a further increase
in market share.
Tricoat’s higher EBITDA/MT is expected to increase revenue share from VAP, which
in turn is expected to improve margin and profitability. The merger also provides
APAT with increased cross-selling opportunities to Tricoat’s existing retail client
base. Common ad spends, distribution network, and synergy benefits are expected
to aid growth in volumes and profitability.
We expect strong volume growth and improved profitability due to: a) higher
demand across product segments, b) launch of new products under the parent
company and newly merged entity: Tricoat, c) robust distribution network, leading
to increase in market share, along with increased cross-selling opportunity from the
merger, and d) increase in the share of VAP is driving margin and profitability. We
expect APAT to deliver 20%/26%/35% consolidated revenue/EBITDA/PAT CAGR to
~INR148b/INR13.6b/INR9b and generate strong cumulative CFO/FCF of
INR31.3b/INR20.8b over FY21-24E. It is expected to turn net cash positive (~INR4b)
by FY23E. APAT’s peers (in the Building Material space) trade at an average FY23E
forward P/E of 36x. We value the stock at 35x Sep’23E EPS and arrive at our TP of
INR2,065. The stock should fetch similar valuation as its peers in the Building
Material space, due to its leadership and low-cost position in the Structural Tubes
business, strong return ratio profile, and lower working capital days. We initiate
coverage on APAT with a
Buy
rating.
Robust distribution network
Leadership position aids in procurement
Merger with Tricoat
Value APAT on a price-to-earnings basis at 35x Sept’23 EPS
7 September 2021
28
 Motilal Oswal Financial Services
APL Apollo Tubes
Exhibit 48: APAT’s one-year forward P/E (x)
P/E (x)
50
40
30
20
10
0
Avg (x)
Max (x)
Min (x)
+1SD
-1SD
40.0
24.8
35.7
6.3
6.0
15.6
Source: Company, MOFSL
Exhibit 49: APAT’s one-year forward EV/EBITDA (x)
EV/EBITDA (x)
25
20
15
10
5
0
Avg (x)
Max (x)
Min (x)
+1SD
-1SD
21.0
11.8
8.1
4.5
4.3
20.2
Source: MOFSL
Exhibit 50: Competitive landscape of Building Material players in India
M Cap
EV/EBITDA (x)
P/E (x)
RoE (x)
Revenue CAGR % EBITDA CAGR PAT CAGR %
Company name
(INRb) FY21 FY22E FY23E FY21 FY22E FY23E FY21 FY22E FY23E
FY21-23E
% FY21-23E
FY21-23E
Supreme Industries
272
20
22
20
27
33
30
36
24
23
11%
1%
-4%
Astral
425
50
55
45
80
85
67
24
23
24
23%
21%
25%
Prince Pipes & Fittings
74
12
23
18
21
38
29
24
17
19
14%
6%
7%
Kajaria Ceramics
188
NA
30
24
NA
49
38
NA
19
22
NA
NA
NA
Century Plyboards India 88
21
20
16
37
32
25
16
20
21
19%
27%
34%
Cera Sanitaryware
56
30
25
20
50
39
30
12
15
17
19%
29%
36%
APL Apollo Tubes
213
35
26
20
65
41
32
24
28
27
23%
29%
43%
Source: Bloomberg, MOFSL
7 September 2021
29
 Motilal Oswal Financial Services
APL Apollo Tubes
Bull and Bear Case
Bull Case
For the Apollo Structures, we have factored in higher sales/EBITDA CAGR of
20%/29% over FY21-24E v/s a base-case assumption of 18%/24%. We have
assumed higher Apollo Structure sales on the back of higher demand for
General Structure Tubes due to increased penetration in the rural areas.
For Apollo Z, we have factored in sales/EBITDA CAGR of 26%/33% over FY21-24E
v/s base case assumption of 24%/27%. We assume higher demand for rust-
proof structures supported by increasing warehousing demand.
For Apollo Galv, we have factored in sales/EBITDA CAGR of 23%/30% over FY21-
24E v/s base case assumption of 21%/25%. We assume higher demand for
galvanized tubes.
For Apollo Tricoat, we have factored in sales/EBITDA CAGR of 26%/34% over
FY21-24E v/s base case assumption of 24%/29%. We assume higher demand for
Chaukhat and Elegant, and increase EBITDA due to higher penetration and
cross-selling.
We value APAT at 37x Sept’23 EPS of INR74.8, arriving at a TP of INR2,460.
For the Apollo Structures, we have factored in lower sales/EBITDA CAGR of
16%/19% over FY21-24E v/s a base-case assumption of 18%/24%. We have
assumed slower shift towards structural tubes and slower industry growth rate.
For Apollo Z, we have factored in sales/EBITDA CAGR of 21%/22% over FY21-24E
v/s base case assumption of 24%/27%. We assume lower penetration of newly
launched products in this segment.
For Apollo Galv, we have factored in sales/EBITDA CAGR de-growth of 18%/18%
over FY21-24E v/s base case assumption of 21%/25%. We assume lower
demand for galvanized tubes, due to tepid growth in the residential and
commercial space.
For Apollo Tricoat, we have factored in sales/EBITDA CAGR of 21%/22% over
FY21-24E v/s base case assumption of 24%/29%. We assume lower sales for
Tricoat products despite newer cross-selling opportunities after merger with
APAT.
We value APAT at 33x Sept’23 EPS of INR55.5, arriving at a TP of INR1,711.
Bear Case
Exhibit 51: Scenario analysis – Bull and Bear case
Revenue (INR)
Growth YoY (%)
EBITDA (INRm)
EBITDA margin (%)
Adj. PAT (INRm)
Growth YoY (%)
EPS (INR)
Multiple (x)
TP (INR)
% Return
Bear
Base
Bull
FY21
FY22E
FY23E
FY24E
FY21
FY22E
FY23E
FY24E
FY21
FY22E
FY23E
FY24E
84,998 1,05,055 1,22,920 1,38,875 84,998 1,08,903 1,29,315 1,48,146 84,998 1,09,340 1,32,308 1,55,013
24
17
13
28
19
15
29
21
17
6,787
8,686
10,444 11,915 6,787
9,055
11,355 13,601 6,787
9,292
12,271 15,411
8.0
8.3
8.5
8.6
8.0
8.3
8.8
9.2
8.0
8.5
9.3
9.9
3,602
5,423
6,642
7,665
3,602
5,698
7,338
8,947
3,602
5,876
8,030
10,317
51
22
15
58
29
22
63
37
28
26.1
39.3
48.1
55.5
26.1
41.3
53.2
64.8
26.1
42.6
58.2
74.8
33
35.0
37
1,711
2,065
2,460
1%
21%
45%
Source: Company, MOFSL
7 September 2021
30
 Motilal Oswal Financial Services
APL Apollo Tubes
Key risks
Fluctuations in steel prices to impact margin
A sharp increase in steel prices may affect margin as APAT may not be able to pass
on the price fluctuations to its customers. Also, higher volatility in steel prices may
lead to inventory losses/gains.
APAT currently dominates (~50%) the domestic Structural Steel Tubes market. Going
forward, room for incremental growth via an increase in market share will be
slower. Penetration of Structural Steel Tubes in India is pegged at 4% (as a
percentage of the overall steel industry) as compared to the global average of ~9%.
Hence, slower industry growth could curtail growth at APAT.
Slower industry growth may lead to muted growth
As of FY21, APAT is operating at 4 WC days. For certain products (under Tricoat), WC
days are very low as it has a cash-and-carry model. Maintaining lower WC days is
going to be a challenge during the next phase of expansion.
Maintaining WC could be at risk
Lower entry barriers
Although entry into the Structural Steel Tubes business is not very easy, steel
pipe/tube players with a diversified network across India can enter, boosting
competition.
7 September 2021
31
 Motilal Oswal Financial Services
APL Apollo Tubes
Management overview
Mr. Sanjay Gupta, MD and Chairman
Mr. Sanjay Gupta has ~23 years of experience in diverse steel industry segments.
Under his vision, the company has evolved from a steel tube manufacturer to a
leader in branded steel products.
Mr. Arun Agarwal is a CA with 20 years of experience in the steel industry. He has
been associated with the company since CY09 and has been actively involved in all
strategic decisions within the group. Over the years, he has grown with APAT,
progressively shouldering higher responsibilities. He has been tasked with the
responsibility of driving all plants.
Mr. Arun Agarwal
Mr. Anubhav Gupta
Mr. Anubhav Gupta joined APAT in CY19 and is focused on strengthening its
strategic capabilities. He advises on corporate development, communications, and
marketing of the APL Apollo brand, with the aim of creating a strong position for the
company within domestic and global markets. He has over 12 years of experience in
fundamental research and analysis in the investment world, including positions
across investment advisory and investment banking firms.
Mr. Goyal has an extensive work experience (over 18 years), out of which he has
devoted 15 years exclusively to the steel Industry. He has been associated with
APAT for the last five years. He is involved in overseeing budget planning, funds
management, treasury, and taxation matters.
Mr. Deepak Goyal, CFO
Mr. Romi Sehgal contribution to the steel and tubes industry ranges from designing
and manufacturing of tube mills to putting up greenfield projects, and ensuring
uninterrupted optimum production from factories. He is a science graduate and has
worked in managerial and leadership positions in reputed companies such as Atlas
Steel Tubes, Atma Steel Tubes, Bharat Steel Tubes, and for 13 years in Gallium
Limited, which is a manufacturer of steel tube equipment.
Mr. Romi Sehgal, Director
With 20 years of industry experience, Mr. Vinay Gupta has in-depth knowledge in
manufacturing and trading of pipes, tubes, sheets, and other steel products. He has
been tasked with driving the company’s Pre-Galvanized and international market
businesses.
7 September 2021
32
Mr. Vinay Gupta, Director
 Motilal Oswal Financial Services
APL Apollo Tubes
Financials and valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
RM Cost
Employees Cost
Other Expenses
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Minority Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY15
31,383
25.7
26,807
412
2,348
29,567
94.2
1,816
5.8
220
1,596
664
45
977
0
977
339
34.7
0
638
638
7.6
2.0
FY16
42,136
34.3
35,546
629
3,145
39,319
93.3
2,817
6.7
341
2,476
695
103
1,883
-253
1,630
624
38.3
0
1,006
1,259
97.5
3.0
FY17
39,239
-6.9
32,324
754
2,832
35,909
91.5
3,330
8.5
509
2,821
720
60
2,160
0
2,160
639
29.6
0
1,521
1,521
20.8
3.9
FY18
53,348
36.0
45,483
862
3,292
49,637
93.0
3,710
7.0
534
3,176
813
80
2,443
0
2,443
862
35.3
0
1,581
1,581
4.0
3.0
FY19
71,523
34.1
63,077
1,079
3,439
67,595
94.5
3,928
5.5
643
3,286
1,134
117
2,269
0
2,269
787
34.7
0
1,482
1,482
-6.2
2.1
FY20
77,232
8.0
65,786
1,422
5,252
72,459
93.8
4,773
6.2
959
3,814
1,073
222
2,963
0
2,963
403
13.6
180
2,380
2,380
60.5
3.1
FY21
84,998
10.1
71,648
1,296
5,266
78,210
92.0
6,787
8.0
1,028
5,759
661
359
5,458
0
5,458
1,381
25.3
475
3,602
3,602
51.3
4.2
FY22E
1,08,903
28.1
90,961
1,489
7,397
99,848
91.7
9,055
8.3
1,170
7,885
398
413
7,900
0
7,900
1,991
25.2
211
5,698
5,698
58.2
5.2
FY23E
1,29,315
18.7
1,08,624
1,681
7,655
1,17,960
91.2
11,355
8.8
1,342
10,012
300
388
10,100
0
10,100
2,541
25.2
221
7,338
7,338
28.8
5.7
(INR Million)
FY24E
1,48,146
14.6
1,24,443
1,926
8,176
1,34,545
90.8
13,601
9.2
1,480
12,121
300
444
12,266
0
12,266
3,086
25.2
232
8,947
8,947
21.9
6.0
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Current Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Misc Expenditure
Appl. of Funds
FY15
234
4,717
4,951
0
4,822
745
10,517
6,472
760
5,712
429
240
191
0
6,656
3,196
1,753
188
1,520
2,710
2,063
375
272
3,946
0
10,517
FY16
234
5,441
5,676
0
6,498
859
13,033
7,291
1,058
6,233
429
320
131
0
9,491
5,944
2,201
14
1,333
3,572
2,581
506
484
5,920
0
13,033
FY17
236
6,798
7,034
0
5,944
813
13,790
6,922
454
6,468
230
1,224
4
0
10,519
4,696
2,949
16
2,859
4,656
4,039
459
157
5,864
0
13,790
FY18
237
8,141
8,379
0
7,751
994
17,124
9,617
988
8,628
230
460
11
0
12,483
5,915
4,321
68
2,179
4,688
3,793
814
81
7,795
0
17,124
FY19
239
9,402
9,641
0
8,581
1,200
19,422
11,626
1,548
10,078
230
275
494
0
16,663
7,835
5,433
478
2,917
8,317
6,989
1,220
108
8,346
0
19,422
FY20
249
13,313
13,562
954
8,338
1,012
23,865
17,246
2,507
14,738
1,375
101
15
0
16,431
7,842
4,764
456
3,370
8,796
7,644
979
173
7,636
0
23,865
FY21
250
16,697
16,947
1,383
5,203
1,112
24,644
18,568
3,535
15,033
1,375
1,077
15
0
16,491
7,599
1,306
3,579
4,006
9,345
7,859
1,310
177
7,145
0
24,644
FY22E
276
23,303
23,579
0
2,203
1,112
26,893
20,554
4,705
15,849
2,796
1,340
15
0
18,373
9,574
2,387
1,279
5,133
11,479
9,574
1,679
226
6,893
0
26,893
FY23E
276
30,226
30,502
0
2,203
1,112
33,817
22,751
6,048
16,703
2,796
1,393
4,515
4,500
21,983
11,311
2,834
1,742
6,095
13,573
11,311
1,993
269
8,410
0
33,817
(INR Million)
FY24E
276
38,691
38,967
0
403
1,112
40,481
24,991
7,528
17,463
2,796
1,404
4,515
4,500
29,797
12,902
3,247
6,666
6,982
15,493
12,902
2,283
308
14,304
0
40,481
7 September 2021
33
 Motilal Oswal Financial Services
APL Apollo Tubes
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY15
4.6
6.2
35.9
1.0
26.5
368.4
273.9
47.4
7.6
131.9
0.1
23.0
13.9
11.2
10.9
4.8
3.0
37
20
24
2.5
2.4
0.9
FY15
977
220
650
-67
1,367
3,146
2
3,148
27
3,175
-15
-1,829
-1,817
0
-443
-664
-117
-19
-1,243
88
101
188
FY16
9.1
11.6
41.1
1.7
28.0
186.6
146.8
41.4
5.7
85.7
0.1
1.9
23.7
14.5
13.6
5.8
3.2
51
19
22
2.7
3.6
1.1
FY16
1,630
341
669
-432
-2,335
-127
240
113
149
261
-18
-1,227
-1,096
0
1,673
-695
-141
-28
809
-175
188
13
FY17
11.0
14.7
51.0
2.1
22.5
154.4
115.7
33.4
6.1
72.3
0.1
23.3
23.9
16.1
15.8
5.7
2.8
44
27
38
2.3
3.9
0.8
FY17
2,160
509
711
-629
330
3,082
72
3,154
61
3,215
2
-1,761
-1,697
106
-554
-725
-234
-47
-1,454
2
14
16
FY18
11.5
15.3
60.7
2.4
25.3
148.5
111.0
28.0
4.5
65.4
0.1
7.0
20.5
14.5
14.1
5.5
3.1
40
30
26
2.7
3.9
0.9
FY18
2,443
534
789
-602
-2,342
823
91
914
48
961
2
-1,703
-1,654
100
1,807
-772
-283
-59
792
52
16
68
FY19
10.7
15.4
69.9
2.5
27.7
158.4
110.5
24.4
3.4
61.9
0.1
9.5
16.5
12.9
12.4
6.2
3.7
40
28
36
2.0
2.9
0.8
FY19
2,269
0
0
-673
287
1,884
1,693
3,576
-2,261
1,316
-390
13
-2,639
56
830
-1,014
-400
0
-528
410
68
478
FY20
17.2
24.2
98.3
0.0
0.0
98.7
70.3
17.3
3.2
51.1
0.0
-10.8
20.5
17.4
15.9
4.5
3.2
37
23
36
1.9
3.6
0.6
FY20
2,963
959
851
-403
725
5,096
0
5,096
-6,591
-1,495
479
1,763
-4,349
10
-244
-1,073
0
538
-768
-22
478
456
FY21
26.1
33.5
122.8
0.0
0.0
65.2
50.7
13.9
2.8
35.0
0.0
48.4
23.6
20.8
19.9
4.6
3.4
33
6
34
1.8
8.7
0.1
FY21
5,458
1,028
302
-1,381
3,577
8,983
0
8,983
-2,298
6,685
0
-4,171
-6,468
1
-3,135
-661
0
4,403
609
3,123
456
3,579
FY22E
41.3
49.8
170.9
2.7
6.5
41.2
34.2
10.0
2.2
26.0
0.2
9.7
28.1
25.9
26.7
5.3
4.0
32
8
32
1.6
19.8
0.0
FY22E
7,900
1,170
-15
-1,991
-2,049
5,015
0
5,015
-3,671
1,344
0
413
-3,258
1,306
-3,000
-398
-373
-1,594
-4,058
-2,301
3,579
1,279
FY23E
53.2
62.9
221.0
3.0
5.6
32.0
27.1
7.7
1.8
20.3
0.2
39.9
27.1
26.6
29.7
5.7
3.8
32
8
32
1.6
33.4
-0.1
FY23E
10,100
1,342
-88
-2,541
-1,052
7,761
0
7,761
-2,250
5,511
-4,500
388
-6,362
0
0
-300
-414
-221
-935
464
1,279
1,742
FY24E
64.8
75.6
282.4
3.5
5.4
26.3
22.5
6.0
1.5
16.5
0.2
52.9
25.8
26.1
33.6
5.9
3.7
32
8
32
1.9
40.4
-0.3
FY24E
12,266
1,480
-144
-3,086
-971
9,544
0
9,544
-2,250
7,294
0
444
-1,806
0
-1,800
-300
-483
-232
-2,815
4,923
1,742
6,666
Consolidated - Cash Flow Statement
(INR Million)
7 September 2021
34
 Motilal Oswal Financial Services
APL Apollo Tubes
NOTES
7 September 2021
35
 Motilal Oswal Financial Services
REPORT GALLERY
RECENT SECTOR THEMATIC REPORTS
Varun Beverages
RECENT INITIATING COVERAGE REPORTS
29 August 2021
1
 Motilal Oswal Financial Services
APL Apollo Tubes
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products.
MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on
www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading
Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity
& Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository
Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory &
Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are available on the
website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should
be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant
banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from
MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or
use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong
Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act"
and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and
investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for
distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document
relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule
15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order
to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities
International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in
respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of
which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
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 Motilal Oswal Financial Services
APL Apollo Tubes
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of
MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature.
The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed,
in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose
and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report
constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities
discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives,
financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document
should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including
the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be
suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial
risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions
contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as
endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and
alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect
or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment
banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and
independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other
person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of
or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject
MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category
of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors,
employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may
arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any
and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold
MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person accessing this information due to any
errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN
no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management
Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of
Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a
group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory
services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee
of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj
Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
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