 "PVC pipe")
Shares of Apollo Pipes (APL) rallied 6 per cent to hit a new high of Rs 718.70 on the BSE in Thursday’s subdued intra-day trade on healthy business outlook. In comparison, the S&P BSE Sensex was down 0.17 per cent at 63,038 at 02:40 pm.
Thus far in the current calendar year 2023, the stock has rallied 42 per cent, as compared to a 3 per cent rise in the S&P BSE Sensex.
APL manufactures pressure pipes (PVC, ring-fit and self-fit pipes), column pipes, casing pipes, plumbing pipes, soil-waste-rainwater pipes, fittings, and water tanks.
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APL said the Indian PVC pipes and fittings market expected to register 15 per cent CAGR during FY22 - FY26. Key growth drivers are the government’s push for cleanliness and sanitation to boost water management sector, increased building of affordable houses and growing housing demand and requirement for infrastructure for irrigation and water supplies.
Meanwhile, APL witnessed revenue growth of 17 per cent in fiscal 2023 driven by volume growth of 24 per cent, but realisations fell year-on-year owing to decline in polyvinyl chloride (PVC) resin prices.
Sharp correction in PVC resin prices resulted in inventory loss in the second and third quarters of fiscal 2023, impacting profitability. As a result, earnings before interest, tax, depreciation, and amortisation (Ebitda) margin declined to 7.5 per cent in fiscal 2023 from 12.1 per cent in fiscal 2022.
CRISIL Ratings expects APL’s revenue to grow by 11-12 per cent in the current fiscal 2024 supported by healthy demand, with Ebitda margin improving to 10-12 per cent. The company is in the process of adding 25,000 tonne capacity in fiscal 2024, which will be funded through a mix of equity infusion (warrants) of Rs 260 crore over the next 18 months and internal accrual. The rating agency believes APL will continue to benefit from increasing geographical presence and diversified product profile while maintaining a healthy financial risk profile.
Looking ahead, the management said various pro-growth measures undertaken by the government, especially in the rural, infrastructure and agricultural space should lead to better demand and consumption of the company’s products in the domestic market over the medium-to-longer term.
With the improvement in operation/capacity utilization of Raipur plant, the management is confident to open up the untapped and high potential markets of Central and Eastern India supported by the expected positive trend in industrial growth for years ahead.
