APL, Apollo Tricoat trade ex-bonus; stocks record fresh life-time highs

In the past three months, APL Apollo Tubes and Apollo Tricoat have outperformed the market by surging 30% and 22%, respectively, when compared to a 12% rise in the Sensex.

Shares of APL Apollo Tubes (up 13 per cent at Rs 1,049.90) and Apollo Tricoat Tubes (up 10 per cent at Rs 948) have hit their respective new highs on the BSE in intra-day trade on Thursday, on going ex-bounus. Both the companies have issued bonus shares in the ratio of 1:1 i.e. 1 free equity share for every share held by the shareholder.

The board of directors of respective companies had fixed Saturday, 18 September, 2021, as the record date, for the purpose of ascertaining the eligibility of shareholders entitled for issuance of bonus equity shares.

In the past three months, the stock of APL Apollo Tubes and Apollo Tricoat have out-performed the market by surging 30 per cent and 22 per cent, respectively, as compared to a 12 per cent rise in the S&P BSE Sensex.

APL Apollo Tubes is India’s leading structural steel tube manufacturer with a capacity of 2.6 million tonne per annum (mtpa) and a pan-India presence. The company’s market share has enhanced from 27 per cent in FY16 to 50 per cent in FY21, led by a strong distribution network, branding, offering of customized & innovative products and capacity enhancement.

APL’s strategy to focus on rural areas and tier 2/3 cities paid-off well during the reverse migration last year. With 24 per cent CAGR in both revenue and PAT over FY11-21, it has emerged as one of the pioneers in the segment, much ahead of competitors, according to analyst at HDFC Securities.

Going ahead, we expect APL to post revenue/PAT CAGRs of 20 per cent/34 per cent over FY21-24E, led by an increased mix of value-added products (75 per cent in FY25 vs 57 per cent in FY21), capacity expansion, improved margins, and enhanced government spending on infra. APL’s valuation has sharply rerated on market share gains, debt reduction, robust growth visibility, and margin expansion. It is trading close to the average multiple of building material stocks as 75 per cent of its product mix caters to this segment, the brokerage firm said in as initiated coverage report.

During financial year 2020-21 (FY21), APL Apollo decided to merge Apollo Tricoat into itself. This merger should help in increasing the average EBITDA per tonne for APL Apollo by about B180-200 in the coming year. The company also increased the capacity of Apollo Tricoat by 0.10 Mn TPA in FY21, which is likely to increase further in the current year.

At 10:44 am; APL Apollo Tubes was traded 4 per cent higher at Rs 966 and Apollo Tricoat up 3 per cent at Rs 890, adjusted to bonus share, on the BSE. In comparison, the S&P BSE Sensex was up 0.18 per cent at 58,830.