The Story of 731% Returns!
APL Apollo Tubes Ltd is a prominent company that specializes in the production of structural steel tubes in India. APL Apollo Tubes Limited, also known as APL Apollo, is the largest producer of structural steel tubes in the country, with a capacity to produce 2.6 million tonnes per annum. They have a wide distribution network of warehouses and branch offices in 29 cities across India, serving both domestic and international markets, including 20 countries worldwide.
Stock Performance
APL Apollo Tubes have been on a tremendous growth trajectory in the past 3 years and has given 731% returns to their shareholders. In the last 1 year the stock has gained 27%.
Financial Performance
Companies revenue expanded by 5% YoY to ₹4,431 crore in the reporting Q4’23.
The Operating Profit of the company has grown by 21% Y-o-Y to Rs.323 crore in Q4’23 from Rs.266 crore.
The Net profit of APL Apollo Tubes has grown by 20% in Q4 of FY23 as compared to Q3 of FY23.
Management Guidance for Future Action Plan
Management has guided for sales volume to be in the range of 2.8–3 MMT, 3.8–4 MMT, and 4.5–5 MMT for FY24, FY25, and FY26, respectively. Additionally, the company guided for exports of 100K tonnes in FY24 and expects it to reach 200–300K tonnes over the next 2-3 years.
Regarding profitability, the company expects an EBITDA of Rs. 5,000 per tonne for FY24, with a subsequent increase to Rs. 5,500–6,500 per tonne in the future.
Meanwhile, the CAPEX for increasing the capacity from 3.6 MMT to 5 MMT in the next 12–18 months will be Rs. 500–600 crore, which will be funded through internal cash flows.
Further, the company has set an ambitious goal of becoming debt-free by early FY25 while also aiming for ROCEs to reach 35–40% going forward. Additionally, the company foresees significant opportunities arising from railway modernization initiatives.
Conclusion
APL Apollo Tubes presence in a niche business, first-mover advantage (introduction of innovative, first-of-its-kind products) in the structural steel tubes space, and improved earnings quality (better margin/RoE profile) make it a interesting opportunity to explore. To explore more such stocks with Weekend Investing smallcase you can check out our Mi20 smallcase below.
