High Piotroski Score stock which is one of the leading and largest producers of Structural Steel Tubes in India gets ‘Buy’ tag on it from Axis Direct, with a target price of Rs. 1,950, which is an upside potential of 25 percent from its recent price.
The Piotroski score is a discrete score that ranges between zero and nine reflecting nine different criterias used to determine a firm’s strength. It is used to determine stocks with best value, with nine being the best and zero being the worst. APL Apollo Tubes Limited has a high Piotroski score of ‘9’ determining it to be a stock with best value.
APL Apollo Tubes
With a market capitalization of Rs.43,152 Crores,On November 2, 2023, the shares of APL Apollo Tubes were trading at Rs. 1,555.05 per share, up 1.86 percent from its previous day close price.
Axis Direct, one of the well-known Financial Services firm, has given a ‘Buy’ tag on the company’s stock with a target price of Rs 1,950 indicating a potential upside of 25 percent as compared to the recent stock price levels.
The rationale behind providing such a recommendation pertains to various trigger points Comprising,
The Ramp-up in Raipur Plant capacity of 1.2MT is now on stream. In Q2FY24, the plant achieved volumes of ~100kt at 28 percent utilization vs 75kt in Q1FY24. The plant will ramp up to 40 percent utilization in Q3FY24 and the Volumes will eventually ramp up to ~1.2MT at a 100 percent capacity utilization level by FY26 as the company’s market-creation efforts have bought order visibility.
EBITDA/t at Raipur improved to Rs 5000/t from Rs 4000/t in Q1FY24, which will increase to a steady state of Rs 6000-7000/t once the ramp-up gets completed over the next 2.5 years.
The company has Vision 2025 where it targets Revenue/EBITDA to grow 2x/2.5x over FY23 levels by FY26. Its FY24 sales volume guidance is now at the lower end of the previous guidance range of 2.8-3MT. Moreover, capacity and sales volume are expected to reach 5.0MT by FY25 and FY26 respectively.
The company has planned a Capex of ~Rs 6 Billion for a 5 Mtpa expansion, out of which Rs 3.56 Bn was spent in H1FY24, and the remaining Rs 2.0 Bn will be spent in H2FY24. The company’s vision is to grow to a capacity of 10MT by FY30.
The company’s 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/t. These new projects provide demand visibility for the company over the next few years.
With a lower Capex intensity ahead, higher OCFs, and the Raipur plant stabilizing in due course, the company’s ROCE is likely to improve from ~27 percent in FY24 to 37 percent by
FY26. The company’s vision is to expand its capacity over to 10 mtpa by FY30 providing a growth tailwind in the longer term.
As per the financial statements of the company, its revenue grew 23.75 percent from Rs. 13,063.32 Crores in FY22 to Rs. 16,165.95 Crores in FY23, accompanied by increasing profits of Rs. 618.98 Crores to Rs. 641.86 Crores.
It has reported a return on equity (ROE) of 23.51 percent and a return on capital employed (ROCE) of 26.88 percent, it is making good returns on its equity and capital employed.
According to the latest shareholding data available for the September 2023 quarter, the company’s Promoters hold 29.67 percent stake, the Domestic Institutional Investors hold 12.72 percent and the Foreign Institutional Investors (FII) hold 28.63 percent.
APL Apollo Tubes Limited is one of the leading and largest producers of Structural Steel Tubes in India, with multi-product offerings that include over 1,100 varieties of Pre-galvanized tubes, Structural steel tubes, MS Black pipes and Hollows sections.
Written by: Bharath K.S
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