The Apollo Tricoat Tubes scrip has jumped 195 percent in the past one year and currently boasts of a market capitalisation of Rs 1,219 crore.
Shares of building products manufacturer Apollo Tricoat Tubes hit a record high of Rs 401 on February 7 after posting robust Q3 FY20 numbers
Post Q3 results, Prabhudas Lilladher initiated its coverage on the stock with a buy call and target of Rs 498, implying 29 percent potential upside from current levels.
The stock has surged a whopping 195 percent in the past one year and currently boasts of a market capitalisation of Rs 1,219 crore. It was quoting at Rs 401, up Rs 14.15, or 3.66 percent on the BSE at 14:21 hours IST.
"Apollo Tricoat is expected deliver impressive volume/revenue CAGR of 32.4/35.6 percent over FY20-22E on back of 1) ramp up in existing products as well as new product that are replacing wood due to multiple benefits such as higher strength, durability, cost effectiveness, termite and fire proofing and environment friendliness," the brokerage house said.
It also noted that the company has a strong product pipeline and will give the company an edge over its competitors.
"Strong parental lineage with superior execution capabilities, brand presence and branding, pan India distribution network will allow quick volume ramp up. Going ahead capacity will be steadily expanded in products with strong traction. Volume growth will result in per ton EBITDA CAGR of 12.3 percent to Rs 6,840 in FY22," it said.
"Although Apollo Tricoat is much smaller in size and products are in the nascent stage, for the reasons stated below, we believe it will be able to penetrate markets faster than any other player would have done and hence deliver robust growth," said the brokerage.
With better capacity utilisation and no major capex, it will generate free cash which will be used to repay debt, it added.
Given the impressive earnings CAGR of 53.3 percent (FY20-22), Prabhudas Lilladher valued Apollo Tricoat on PE basis and assigned target multiple 15x to FY22E earnings (PEG of 0.3x) which is at the lower end of the range (15-20x) at which plywood majors are trading and much lower than tile manufacturers that are trading between 20-25x.
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