Target: ₹1,330

CMP: ₹1,092.75

APL Apollo Tubes (APAT)’s long-term growth story remains intact underpinned by growing application and rising consumption of structural steel tubes in residential and commercial buildings, warehouses, factories, agriculture and other infrastructure works.

The industry, post-inventory destocking in the last quarter because of higher steel prices, is now witnessing channel re-stocking led by correction in steel prices.

From our channel checks, we sense the overall demand scenario to be better with channel re-stocking happening in anticipation of a stable or marginally higher steel price.

Primary steel (HRC) price declined from the all-time high level and accordingly the gap between primary and secondary steel prices narrowed.

We believe APAT’s earnings momentum would continue with: growing demand across segments; increased product penetration with the help of a robust distribution network,; an increase in the share of VAP, thus driving margins; the introduction of Apollo Mart; and its market leadership position.

Improving operating leverage, growing share of VAP and addition of high margin products from the Raipur unit are likely to result in an improvement in margin and higher cash generation.