Result Analysis: APL Apollo – Q2FY21

Result Analysis:  APL Apollo – Q2FY21 

Total revenue from operations 2,202 Cr
1,647 Cr (33.70%) YoY | 1,110 Cr (98.32%) QoQ

Half yearly revenue: 3,311 Cr Vs. 3,719 Cr (-10.94%)

Net Profit of 102.6 Cr
59.6 Cr (72.82%) YoY 21.9 Cr (381.49%) QoQ

Half yearly Net profit: 124.5 Cr Vs. 111.9 Cr (11.71%)

EPS (in Rs.) 36.80
23.91 YoY |6.72 QoQ

Half year ending EPS: 43.52 Vs. 44.84

View: Result is above expectation and strong. YoY revenue and profit both have up. Strong recovery as compare to QoQ after business resume.
 

Business Updates & Highlights

Q2FY21 EBITDA was around INR 169.1 Cr Vs. 72 Cr in Q2FY20 Vs. 71.1 Cr in QoQ Q1FY21 therefore up by 134.7% in YoY and up by 135.1% in QoQ. EBITDA margin is around 7.6% Vs. 4.3% in YoY Vs. 6.4% in QoQ. Therefore EBITDA margin improved by 330 bps in YoY.

EBITDA per ton was INR 3,514 (+78% YoY).

Operating cash flow was 271% in H1FY21 Vs. 107% in FY20.
 

Split of Equity share

The sub-division of equity shares of the Company from the existing One (1) equity share of face value of Rs. 10/- each into Five (5) equity shares of face value of 2/- each. To facilitate larger shareholder base, to increase liquidity and to make the shares more affordable to investors. Record date yet to be notified and expected to completion in next 2-3 months subject to shareholders approval.
 

Financial

 

ROE and ROCE is around INR 17.9% and 21.3% respectively and book value per share is around INR 544 and share is currently trading at 5.7x of its book value. Company is currently trading at annualized PE of 36 which is average as per Industry benchmark. Promoter holding is around 39.5% in the company which is low but increased in QoQ.. Mutual fund hold around 13.5% in the company. Company is very strong operating cash flow as of Sep 2020 it was around INR 651.9 Cr Vs. 305 Cr in Sep 2019 (Very Strong). Debt equity ratio in Sep 2020 was 0.2 Vs. 0.6 in FY 2020 (Significantly improved) 

Share View

 

Share price high 3,195 (52 week) and now 3,106. APL Apollo Tubes Limited (APL Apollo) APLAPOLLO is India’s leading branded structural steel tube manufacturer. Headquartered at Delhi NCR, the Company operates 10 manufacturing facilities with a total capacity of 2.5 Million MTPA. APL Apollo’s multi-product offerings include over 1,500 varieties of Structural Tubes to be used for Residential and Commercial Construction and Infrastructure development. The Company’s vast distribution network of over 800 distributors is spread all across India, with warehouses cum- branch offices in over 28 cities.

Position: Share support price is INR 2,750/2500. Long term investor should continue with the company.
 

Opportunities

 

APL Apollo Tubes Ltd has created its dominant leadership in structural steel tube industry. The Q2FY21 performance was significantly better than Q1FY21, which was partially impacted due to disruption from COVID-19. 40% Market Share in Structural Steel Tubes and Growth rate is 27% CAGR in last 10 years. Sales Volume in FY11 was 195 (K Ton) Vs. 1,633 in FY20 (K Ton) significant growth. company is also catering new opportunities with more structured way like warehousing (As per JLL report there will be 344 mn sq. ft of warehousing space in India by 2022), affordable housing (Trends for affordable housing with low cost & faster completion is picking in India), urban Infra (Govt plans to start 100 additional airports by 2024, To invest Rs19,000 crore in upgrading airport infrastructure in the country, especially in smaller cities over next three years) and urban real estate India’s vertical growth pushed high-rises buildings with G+20 floors or more to record highs in 2019) etc. Monopolistic business with highest market share around 40% as per nearest competition its around 12%.
 

Risk

 

Low operating margin business and its around 7-8%. Despite having the largest capacity in the ERW segment, market share is estimated at 14-16% at present, although, estimated to increase to 18-20% in over the next 3 years. ERW pipe manufacturers are 'steel convertors' and fluctuation in raw material prices are passed on to the consumer but with a lag of 1-2 months. Hence, margins are susceptible to fluctuations in prices of steel (Hot rolled coil).

Sources: Various publications

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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