India Equity Value investor, Trivikram Consultants

Prashant Vaishampayan

India Equity Value investor

Picking Long Term Multi-bagger stocks

Trivikram Consultants

Trivikram Consultants is an equity research service founded by Prashant Vaishampayan, a registered Research Analyst with SEBI in India. Prashant has done equity research since 1992.  He worked with Jardine Fleming, SG Securities, UBS and Kotak Securities. Since 2010, he is managing his portfolio and doing outsourced equity research for institutional clients. A team of six professionals helps him in equity research. We focus on pharma, agro-chemicals, auto and auto components, banks and financial services, specialty chemicals and niche manufacturing sectors.   

Equity Bottom-Up

In the FY18 annual report, <a href="https://www.smartkarma.com/entities/16132" target="_blank" data-smartkarma-citation="entities:16132:1">Apl Apollo Tubes (APAT IN)</a> discusses its plans to expand its distribution network to penetrate further in remote locations and to reach out to the new customers in unexplored territories.  With the commencement of all 8 DFT lines (Direct Forming Technology), it is aiming at a total installed capacity of 2 Mn MTPA. APL Apollo operationalized 6 DFT lines across its facilities of Raipur, Hosur and Murbad in FY18. APL Apollo will be commissioning another 2 lines across existing facilities of Sikandarabad and Hosur in 1H FY19E. To improve and protect the margins, APL Apollo is broadening the product mix, creating a better brand value and trying to service some niche segments. Servicing the niche segment should help them increase their margins. As far as cost-effectiveness is concerned, APL Apollo is already one of the lowest cost producers in the industry and will try to ensure that this lead is maintained.
The FY18 annual report supports our bullish view of APL Apollo's future. We have not made any revision in our forecasts post FY18 Annual Report review. We forecast APL Apollo revenues to grow at 29% CAGR (over FY18-20E with a volume growth CAGR of 20% over FY18-20E. We expect the EBITDA to grow at a CAGR of 31% in FY18-20E and the EBITDA per tonne to reach ~Rs. 3,700 by FY20E from Rs. 3,100 in FY18. We expect the EBITDA margins to be stable at 7.4% in FY20E from 7.2% in FY18. We expect PAT to grow at 40% CAGR over FY18-20E. 
We have kept our EPS for FY19E &amp; FY20E unchanged at Rs. 91.6/- &amp; Rs. 132.4/- respectively and PE multiple at 24x to arrive at the fair value of Rs. 3,390/-.
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 217px;"></td>
<td style="text-align: right; width: 146px;">
FY17
</td>
<td style="text-align: right; width: 146px;">
FY18
</td>
<td style="text-align: right; width: 168px;">
FY19E
</td>
<td style="text-align: right; width: 171.5px;">
FY20E
</td>
</tr>
<tr>
<td style="width: 217px;">
P/E(x)
</td>
<td style="text-align: right; width: 146px;">
23.3
</td>
<td style="text-align: right; width: 146px;">
19.2
</td>
<td style="text-align: right; width: 168px;">
14.2
</td>
<td style="text-align: right; width: 171.5px;">
9.8
</td>
</tr>
<tr>
<td style="width: 217px;">
ROE (%)
</td>
<td style="text-align: right; width: 146px;">
18.7
</td>
<td style="text-align: right; width: 146px;">
19.1
</td>
<td style="text-align: right; width: 168px;">
20.6
</td>
<td style="text-align: right; width: 171.5px;">
23.0
</td>
</tr>
<tr>
<td style="width: 217px;">
ROCE (%)
</td>
<td style="text-align: right; width: 146px;">
30.9
</td>
<td style="text-align: right; width: 146px;">
30.3
</td>
<td style="text-align: right; width: 168px;">
33.2
</td>
<td style="text-align: right; width: 171.5px;">
36.0
</td>
</tr>
</tbody>
</table>
<div class="content-caption">Source: Trivikram Consultants research as on 03-10-2018</div>
<div class="content-remarks">
Note: E= Estimates; Mn= Million, MTPA= Million Tonnes Per Annum
</div>

In the FY18 annual report, Apl Apollo Tubes (APAT IN) discusses its plans to expand its distribution network to penetrate further in remote locations and to reach out to the new customers in unexplored territories.  With the commencement of all 8 DFT lines (Direct Forming Technology), it is aiming at a total installed capacity of 2 Mn MTPA. APL Apollo operationalized 6 DFT lines across its facilities of Raipur, Hosur and Murbad in FY18. APL Apollo will be commissioning another 2 lines across existing facilities of Sikandarabad and Hosur in 1H FY19E. To improve and protect the margins, APL Apollo is broadening the product mix, creating a better brand value and trying to service some niche segments. Servicing the niche segment should help them increase their margins. As far as cost-effectiveness is concerned, APL Apollo is already one of the lowest cost producers in the industry and will try to ensure that this lead is maintained.
The FY18 annual report supports our bullish view of APL Apollo's future. We have not made any revision in our forecasts post FY18 Annual Report review. We forecast APL Apollo revenues to grow at 29% CAGR (over FY18-20E with a volume growth CAGR of 20% over FY18-20E. We expect the EBITDA to grow at a CAGR of 31% in FY18-20E and the EBITDA per tonne to reach ~Rs. 3,700 by FY20E from Rs. 3,100 in FY18. We expect the EBITDA margins to be stable at 7.4% in FY20E from 7.2% in FY18. We expect PAT to grow at 40% CAGR over FY18-20E. 
We have kept our EPS for FY19E &amp; FY20E unchanged at Rs. 91.6/- &amp; Rs. 132.4/- respectively and PE multiple at 24x to arrive at the fair value of Rs. 3,390/-.





FY17


FY18


FY19E


FY20E




P/E(x)


23.3


19.2


14.2


9.8




ROE (%)


18.7


19.1


20.6


23.0




ROCE (%)


30.9


30.3


33.2


36.0




Source: Trivikram Consultants research as on 03-10-2018

Note: E= Estimates; Mn= Million, MTPA= Million Tonnes Per Annum


APL Apollo Tubes Ltd: FY18 Annual Report Analysis: DFT to Drive the Growth