APL Apollo Tubes Ltd: Well-poised for the big leap - BUY

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Ravi
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APL Apollo Tubes Ltd: Well-poised for the big leap - BUY

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APL Apollo Tubes Ltd: Well-poised for the big leap - BUY

CMP (Rs) 1,099, 12-mts Target (Rs) 1,275, Upside 16.0%

We hosted a Management Roadshow for APL Apollo Tubes Ltd on 20th February, 2017. As per the day-long investor interaction, the management seems upbeat on the ERW segment growth prospects, as also about strongly positioning itself to capitalize on the same, banking on its market leadership position. With high-end technology driven DFT capacity expansion near completion, APL believes it would be able cater to new end-use segments, penetrate further into the export markets and thereby manage to outpace the competition. The DFT capacity is expected to drive immediate volume growth while gradually contributing to margin improvement. Through DFT, APL also intends to gain market share from existing competitors who are using traditional technology. The Greenfield facility at Raipur would allow APL to enter the Eastern market where it currently has negligible presence. The management expects the industry to witness revenue CAGR of ~10% during next few years driven by expected pickup in infrastructure and growing applications of ERW products. We believe, with improving industry demand, new capacity coming on-stream and its market leadership position, APL is strongly placed to deliver strong topline and earnings growth over the next few years. We maintain our BUY rating on the stock for target price of Rs.1,275.

IIFL
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