13 October 2021
Company Update | Sector: Others
APL Apollo Tubes
BSE SENSEX
60,737
S&P CNX
18,162
CMP: INR855
TP: INR1,035 (+21%)
Buy
Growing applications, paving way for a growth phase
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 (%)
APAT IN
166
213.5 / 2.8
1050 / 266
-12/15/156
450
63.2
We analyzed the shifting trends in the Structural Tube industry, driven by growing
consumption of steel tubes in Construction projects, coupled with growing acceptance
and increasing applications of steel tubes. Key drivers of APAT’s performance include:
a) growing usage of structural tubes as a replacement to RCC, b) first-mover advantage
by installing DFT in India, and c) leadership position to help benefit from this shift.
Integration of structural tubes in Construction projects
Financials Snapshot (INR b)
Y/E MARCH
2022E 2023E 2024E
Sales
117.8 149.1 170.7
EBITDA
9.0 11.3 13.6
Adj. PAT
5.6
7.4
9.0
EBITDA margin (%)
7.7
7.6
8.0
Cons. Adj. EPS (INR) 20.5 26.7 32.5
EPS Gr. (%)
56.8 30.4 21.9
BV/Sh. (INR)
85.2 110.4 141.2
Ratios
Net D:E
0.1
-0.1
-0.2
RoE (%)
27.9 27.3 25.9
RoCE (%)
25.9 26.7 26.2
Payout (%)
6.6
5.6
5.4
Valuations
P/E (x)
41.8 32.0 26.3
EV/EBITDA (x)
26.3 20.6 16.7
Div. Yield (%)
0.2
0.2
0.2
FCF Yield (%)
0.4
2.1
3.0
Shareholding pattern (%)
As On
Jun-21 Mar-21
Promoter
36.9
37.0
DII
9.4
10.0
FII
25.7
24.2
Others
28.0
28.8
FII Includes depository receipts
Stock Performance (1-year)
APL Apollo Tubes
Sensex - Rebased
1,000
800
600
400
200
Jun-20
38.4
15.5
0.0
46.1
India is currently witnessing growing acceptance for structural tubes in
Construction projects due to a multitude of benefits. Structural tubes offer:
i) 40-50% less dead weight, ii) higher strength-to-weight ratio, iii) higher
load carrying capacity, iv) faster completion time, v) higher carpet areas, etc.
when compared to RCC structures.
From an environmental point of view, structural steel tubes cause no air
pollution, can be recycled, and the used steel has a good monetary value
even after decades.
The Structural Steel Tube market, as percentage of steel consumption,
across the globe/Europe/North America stood at 9%/11%/7% as against 4%
in India. Usage of structural steel tubes in Construction projects (in India) is
currently pegged at just 10-15%. This is due to non-availability of large size
tubes, limited size range, large MOQ (minimum order quantity), high lead
time, and wastage.
In the domestic market, overall cost per sq. ft. for an RCC structure is
~INR4,000, whereas for a steel tube structure it stands ~INR4,200.
Completion time for construction of steel tube structures is significantly
lower (completion time for a ‘G+8’ building takes 2-3 years for RCC
structures, whereas for steel tube structures the duration is just 9-18
months), leading to lower interest cost, faster turnaround time, and higher
cost saving
.
Global steel tube players have better realizations and higher revenue share
from Building Material and Infrastructure (20-40%), leading to higher
operating margin. APAT’s global counterparts have operating margin in the
14-19% range (refer
Exhibit 4),
as compared to APAT’s 8% (as on FY21).
Going forward, we expect the application of structural steel tubes to
increase significantly, with an increasing shift from RCC to structural tubes.
The Structural Tube market in India is expected to increase to 22MMT from
4MMT over CY21-30E.
APAT was the first domestic player to introduce Direct Forming Technology
(DFT) in India, an Italian technology used for tube manufacturing. With the
introduction of DFT, APAT will be able to manufacture tubes tailor-made to
client requirements, require less lead time, and be able to take small MOQs
even for non-standard sizes. Tubes manufactured with cut-to-length (as per
design) leads to lower wastages, thereby reducing overall cost.
APAT to lead the space by pioneering DFT in India
Sumant Kumar - Research Analyst
(Sumant.Kumar@motilaloswal.com)
Research Analyst: Yusuf Inamdar
(Yusuf.Inamdar@motilaloswal.com) |
Darshit Shah
(Darshit.Shah@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.