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Emkay Global
APL Apollo
Tubes (Buy)
CMP: ₹1,890
Target: ₹2,812
We hosted a one-day NDR for APL Apollo Tubes (APAT) in Mumbai. APAT maintained its FY18-20 guidance of 20-25 per cent volume CAGR and remains upbeat on its latest technology, Direct Forming Technology (DFT).
The next generation DFT was one of the most favourite topic. DFT has enabled APAT to offer customised products at a lower cost and in less time than its competitors. It has also given access to overseas markets including US, Europe and West Asia. APAT expects to make 8-10 per cent better margins using this technology.
Investors also discussed 2QFY18 results which were in line with expectations. APAT reported impressive sales volume growth of 18 per cent and earnings growth of 21 per cent y-o-y despite GST implementation headwinds.
The management highlighted that most of its 400 products are specialised and are used in high-growth sectors. We maintain our earnings forecasts with target price of ₹2,812, implying 49 per cent share price upside.
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