Shares of APL Apollo Tubes, the country's leading structural steel tubes manufacturer, gained strongly in Wednesday's trade after losing nearly 10% of their value in the last eight trading sessions.
The company's shares opened strongly in today's session at Rs. 1,197 each against the previous closing price of Rs. 1,189, and rose further during the trade to reach an intraday high of Rs. 1,261, up 6%.
The sudden spike in the stock came after the manufacturing activity in China, the world's largest producer of metals, expanded at the fastest pace in more than a decade in February, as production zoomed after the lifting of COVID-19 restrictions late last year.
The stock has largely been on an upward trajectory since May of last year and has surged by 64%, reaching a record high of ₹1,337 apiece on February 17.
On February 2, the company reported its consolidated net profit at ₹170 crore for the December quarter of FY23, a surge of 32% YoY.
In Q3FY23, the company recorded its highest-ever quarterly sales of 605k tonnes, up 50%YoY, while total expenses jumped 34% year on year to ₹4,054 crore from ₹3,028 crore in Q3FY22, primarily due to an increase in material costs. Despite higher sales, EBITDA/tonne fell by 10% YoY to ₹4,510 due to a weaker product mix.
The total revenue from operations during the quarter climbed 34% to ₹4,327 crore, led by higher volumes at Apollo Structurals.
Post the company's Q3 earnings, domestic brokerage firm IDBI Capital maintained its "buy" rating on the stock with a revised target price of ₹1,484 apiece from ₹1,216 earlier.
The brokerage expects APL’s EBITDA/net profit to grow at a CAGR of 18%/20% over FY22-25E. The Raipur plant's volumes and margins will be key metrics to watch in the coming year, it added.
Earlier, another domestic brokerage firm, Motilal Oswal, also reiterated its "buy" rating on the stock with a target price of ₹1,400 apiece, in its research report dated January 6.
The brokerage said the rapid capacity expansion, strong leadership position, and high industry growth trends will lead to robust growth in sales volume for the company.
APL Apollo Tubes over the years has created a moat with its strong execution capability, scalability, wider distributor network, diversified plant locations, and innovation of diverse applications for structural tubes, said Motilal Oswal.
The Indian structural tubes market is expected to reach 22mmt by CY30E from 4mmt in CY19, registering a 17% CAGR. The brokerage pointed out that the company is set to capture a larger share of the growing market by adding capacity and expanding applications in diverse areas.
The company already has over 1,500 SKUs, which is the largest in the industry, helping the company in capitalizing by offering a one-stop shop for the entire structural steel tube solution, it highlighted.
The company's current manufacturing capacity of 3.6mmt is almost 4x that of other listed players such as Surya Roshni, Hi-Tech Pipes, JTL Industries, and Rama Steel Tubes, it highlighted.
14 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
