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APL Apollo Tubes Ltd.’s revenue/Ebitda/profit after tax stood largely in line with our estimates. On a consensus basis, it was a slight miss of 4%/3%/5% respectively. Revenue grew by 17%/2% YoY/QoQ, led by higher sales volumes, partially offset by a drop in hot-rolled coil steel prices (down 1.5%/4% YoY/QoQ).
Value added products sales stood largely flat at 55% versus. 54% in Q2 FY23. Ebitda grew by 40%/6% YoY/QoQ to Rs 325 crore, a 3% beat versus our estimates, which was on account of topline growth.
The company’s Ebitda/tonne improved by 25%/4% YoY/QoQ to Rs 4,817/tonne, which is its highest level so far. Profit after tax grew by 35%/5% YoY/QoQ, 2% ahead of our estimate, led by higher Ebitda, partially offset by higher finance costs.
Outlook:
APL Apollo Tubes market-creation efforts have brought more orders from railway stations and airports for the heavy structural and coated products at Raipur which has higher Ebitda/tonne.
These new projects provide demand visibility for the company over the next few years. With a lower capex intensity ahead, higher operating cash flows, and the Raipur plant stabilising in due course, the company’s return on capital employed is likely to improve from ~27% in FY24 to 37% by FY26.
APL Apollo’s vision is to expand its capacity over to 10 million tonnes per annum by FY30 providing a growth tailwind in the longer term.
Valuation and recommendation:
We increase our Ebitda for FY25/26 by 6%/7% and roll forward our valuation at 33 times price-to-earning of September 2025 earning per share (From 32 times at June 2025 earning per share) on continued demand visibility to arrive at our target price of Rs 1,950/share.
Our target price implies an upside of 22% from the current market price. We maintain our ‘Buy’ rating on the stock.
Key Risks to our estimates and target price
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Failure to ramp up the Raipur plant as guided by the company.
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Steep fall in HRC prices leading to destocking by traders.
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Macroeconomic risk impacting the demand for structural steel.
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