The brokerage house Nuvama Institutional Equities raised the target price on APL Apollo Tubes by 6.1% to Rs 2,076 from Rs 1,956. It has kept the ‘Buy’ rating unchanged. As per the report, the rise in price target comes on the back of growth which came amid weak demand.
Nuvama on APL: Higher HRC prices to led growth
Plus, the growth is led by market share gains and channel re-stocking in the last 10–15 days in anticipation of higher HRC (Hardness Rockwell C) prices.
HRC stands for the Rockwell Hardness C scale, a technique for assessing the hardness of steel. It is capable of maintaining a sharper edge for a longer period, but also potentially becomes more brittle.
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“APL Apollo reported healthy Q4 FY25 sales volumes at 850K tons, up 25% YoY/3% QoQ (in line with our recent checks: Volumes to pick up; spreads key to watch),” said Nuvama. “Importantly, with discounts being withdrawn, EBITDA/t should get back to Rs 4,700 in Q4 FY25.”
APL Apollo could post an operating profit of Rs 400 crore in the last quarter of the current financial year, which will be in line with the company’s guidance and brokerage’s estimate.
Nuvama on APL: Spread to raise profitability
The company’s future strategy is a key variable given the strategy reversal towards profitability and a recent uptick in spreads. It is currently at Rs 6/kg. This spread has the potential to rise further by Rs 2–3/kg led by increasing HRC prices, according to Nuvama. The spread, which at the peak was Rs 18–20/kg, fell to Rs 2–3/kg for a few months until January 2025.
Also, the domestic HRC prices have been rising on the back of a 12% provisional safeguard duty implemented on HRC. While producers have increased prices by Rs 52k/ton. “However, we believe excessive price hikes shall be limited due to rising HRC capacities in India,” said Nuvama.
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The company reported an increase of 30.7% year-on-year in net profit at Rs 217 crore for the third quarter of the current financial year,
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