IDBI Capital has maintained 'Buy' on APL Apollo Tubes (APL) with new target price of Rs 1,606.
APL Apollo Tubes reported better than expected profitability for Q4FY21 as its EBITDA was 19% higher than our estimate. EBIDTA/tonne at Rs 4,742 (+59% YoY) was a strong beat and was led by better product mix and scarcity of raw material (steel)/tubes. APL's EBIDTA jumped 72% YoY to Rs 2 billion.
Management targets volumes of 4 million tonnes by FY25 with focus on value added products for the rest of 2 million tonnes.
Commenting on the result review, the broking firm said, "The second wave of Covid-19 has started to impact volumes. Hence, we cut our volumes estimates for FY22; nevertheless, we raise our margin estimates for FY22/FY23 as we expect margins of H2FY21 to sustain. Overall, our FY22/FY23 EBITDA estimates are higher by 3%/7%, respectively. We value the stock at a PER of 32x FY23E EPS (earlier 25x FY22E) and raise our target price to Rs 1,606 (earlier Rs 1,149). Maintain BUY."
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