APL Apollo Tubes Ltd is one of the leading manufacturers of branded steel tubes in India with a total capacity of 1.8 million tons per annum (MTPA). Apart from this, it is the largest producer of Electric Resistance Welded (ERW) steel pipes and sections in India.
Valuation: Given strong demand and helathy volume growth visibility given capacity expansion, we forecast revenue/net profit cagr of 10%/12% over FY1820E. Currently the stock is trading at an attractive valuation and we expect the company to enjoy higher valuation owing to strong earnings growth trajectory, healthy free cashflow generation and improvement in return ratios going ahead. We recommend ACCUMULATE rating on the stock with a target price of Rs. 1,835, based on 16x FY20E EPS.
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