Is Apollo Pipes a good buy now? Know why analysts are bullish on Apollo Pipes share The management took various initiatives in the recent past to strengthen its core business and enhance its market. For 2024-25, the company aims to strengthen its Pan-India presence and enhance plant utilisation. Should you invest in Apollo Pipes?
Apollo Pipes Ltd: The pipe and fittings manufacturer is expected to report modest volume growth in the September quarter due to volatility in the PVC resin prices and the destocking of inventories in July and August amid muted demand due to the monsoons and a slowdown in construction activities. However, the company’s long-term prospects remain strong, as the management maintained its guidance of 25% revenue CAGR for the next three years. It is also confident that it will achieve RoCE of 25% to 30%, supported by working capital efficiencies.
The company has a capacity of 2.16 lakh tons (including Kisan Mouldings) and operates with over 1,000 channel partners (at the end of the June quarter). It offers a diversified product portfolio that includes CPVC, UPVC and HDPE pipes and fittings, bathroom products, water tanks and solvents. The products have applications in various sectors like plumbing, sanitation, water supply, infrastructure and agriculture. Proven expertise in complex projects, strong and experienced management and cost-efficient manufacturing processes are some of the company’s key strongholds.
The company is a beneficiary of the healthy growth prospects of PVC pipes. Urbanisation, the government’s push for cleanliness and sanitation, rising demand for housing, requirements for infrastructure for irrigation and water supplies and beneficial properties of PVC pipes such as lightweight, ease of transportation and longer lifespan are some of the factors driving the growth of PVC pipes. According to the company’s 2023-24 annual report, the Indian PVC Pipes market is expected to reach $5.55 billion by 2030 and will grow at a CAGR of 7.2% from 2023 to 2030.
The management took various initiatives in the recent past to strengthen its core business and enhance its market. Introduction of high-value product lines (expected to provide impetus to volumes and profitability), setting up of the Varanasi unit (to be commissioned by the end of 2024-25) and increased market presence through improvement in distribution network are some of these initiatives. Moreover, the acquisition of the controlling stake in Kisan Mouldings strengthened its presence in West India and provided benefits by enhancing market positioning, brand positioning, SKU range, and quality of plant and machinery.
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The company is also aiming for a brownfield expansion of 28,500 tons in the future which will increase its total capacity to 2.86 lakh tons in the next 2-3 years and will include new products like PVC-O pipes (a highly profitable product) and Window and Door profiles (application in housing building materials segment). It is also aiming to create a prudent balance between agriculture and building materials in the next 2-3 years. For 2024-25, the company aims to strengthen its Pan-India presence and enhance plant utilisation.
Selection methodology: We pick the stock that has shown the maximum increase in ‘consensus analyst rating’ during the past three months. The consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (1 for strong buy, 2 for buy, 3 for hold, 4 for sell, 5 for strong sell). An improvement in consensus analyst rating indicates that the analysts are getting bullish on the stock. Only stocks with more than five analysts covering them are considered. You can see similar consensus analyst rating changes during the past week in ETW 50 table.
This story originally appeared on: India Times - Author:Faqs of Insurances
