APL Apollo Tubes shares in focus on report promoters may sell 0.85% stake via blocks deals today

Shares of APL Apollo Tubes will be in focus on Monday morning amid a media report that suggested promoter may sell up to 26.3 lakh shares, or 0.85 per cent equity, via block deals. As per CNBC-TV 18, the floor price is set at Rs 1,595 per share, which was at 4.3 per cent discount to the Monday's closing price for the stock. T he base size of the block deals is likely at Rs 303 crore and greenshoe option of selling another Rs 116 crore shares, the report suggested.

APL Apollo Tubes is the largest producer of structural steel tubes and pipes in India. With a strong pan-India presence, it serves as a ‘one-stop-shop’ for steel products catering to urban infrastructure, automobile, construction, housing, energy, irrigation, solar plants, and greenhouses.

APL Apollo Tubes is expected to incur Rs 500-600 crore of capex in FY24, out of which Rs 180 crore was already incurred in Q1FY24. It is looking to achieve its targeted total manufacturing capacity of 5 mmt. Following the completion of this phase, APL Apollo Tubes plans to consider adding another 5 mmt of capacity by FY30, provided the total production reaches 4 mmt by FY25.

The management has guided for sales volume of 1.5-1.6 mmt in H2FY24. It targets to achieve Ebitda of Rs 1,400-1,500 crore in FY24. Besides, the management expects the Raipur plant to contribute 0.5-0.6 mmt of volumes in FY24. Ebitda spreads from the Raipur plant is expected to be Rs 6,000-7,000 once the plant is fully stabilised, which Motilal Oswal Securities said will take 2-2.5 years. The stock is up 51 per cent year-to-date.

Centrum Broking said APL Apollo is targeting faster ramp up of 1 MT Raipur facility as demand response is strong for new innovative products. With combination of largely brownfield as well as greenfield expansion, it is expected to reach 5 mtpa capacity in FY24 itself, Centrum Broking said this month.

"We expect APL Apollo to record 27 per cent volume CAGR over FY23-25E to 3.7 MT in FY25E along with increase in share of VAP mix to 7 per cent resulting Ebitda per tonne of >Rs 5,500 per tonne. Apart, we expect strong balance sheet and turn into net cash company in FY25. With strong earning visibility, APL APollo is expected to achieve RoE of 32 per cent and RoCE of 28 per cent, respectively. We downgrade to ADD rating with target price of Rs 1,653," it said.