APL Apollo Tubes (APL) is India’s leading structural steel tube manufacturer with a capacity of 2.6 million tonne per annum (mtpa) and a pan-India presence. Shares of APL Apollo Tubes have outperformed by giving multibagger returns as the stock has rallied more than 250% in a year and has surged over 115% in 2021 (year-to-date). From trading over ₹480 per share level in September 2020, the multibagger stock's level has jumped to ₹1,875 apiece currently.
Its market share enhanced from 27% in FY16 to 50% in FY21, led by a strong distribution network, branding, offering of customized & innovative products and capacity enhancement, HDFC Securities said.
In a note, the brokerage firm said that having a 50% market share, adopting the latest technologies and withholding a strong brand image, APL stands much ahead of its competitors. “Using advanced technology, it has managed to offer customised products in a much shorter duration than peers, placing it much ahead of them; we believe it would continue to stay ahead, going forward."
HDFC Securities has initiated coverage on the stock with a Buy rating and has a target price of ₹2,226 per share. It expects APL’s revenue, net profit to grow at CAGRs 20%/34% over FY21-24E, led by healthy volume growth, margin expansion, reduced working capital, and reduced debt.
"APL has successfully captured the mindshare of fabricators and architects, making its steel tubes as their first choice for applications. Along with innovative products and offerings, APL has aggressively focused on creating a strong brand image through large-scale print and TV commercials, sponsorships of mega sports events and roping in of celebrities as brand ambassadors. These efforts have allowed it to successfully creep into the rural areas, which are yielding strong results,'' the note added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
