At a Glance
APL Apollo has built an empire bending steel tubes, with a 26% profit CAGR over 5 years and 63% stock CAGR to match. But is a 67x P/E for a 6–7% OPM pipe maker justified? As India builds more infra, is this hype or steel-solid growth?
🔄 TL;DR
- Stock is up 5.7x in 5 years (CAGR 63%)
- Net profit up 3x from FY20 to FY25 (CAGR 26%)
- Sales doubled to ₹20,690 Cr in FY25
- OPM: 6%, ROE: 19.4%, ROCE: 22.8%
- P/E: 67x, P/B: 12x
- Promoter holding down to 28.3%
- Fair Value Range: ₹1200 to ₹1450
📊 Growth Story: From Black Pipe to Greenfield King
APL Apollo has morphed from a boring tube supplier to the Tesla of the ERW steel pipe industry. Except instead of Musk tweets, it has:
- 10 factories churning 5 million+ tonnes annually
- Products used in infra, housing, solar, railways, greenhouses
- Asset-light play: high volumes, lower margins, massive reach
5-Year Financials Snapshot (₹ in Cr)
| Year | Revenue | Net Profit | OPM % | EPS (₹) |
|---|---|---|---|---|
| FY20 | 7,723 | 256 | 6% | 9.58 |
| FY21 | 8,500 | 408 | 8% | 14.42 |
| FY22 | 13,063 | 619 | 7% | 24.73 |
| FY23 | 16,166 | 642 | 6% | 23.14 |
| FY24 | 18,119 | 732 | 7% | 26.39 |
| FY25 | 20,690 | 757 | 6% | 27.28 |
- 5Y Revenue CAGR: 22%
- 5Y Profit CAGR: 26%
- 5Y EPS CAGR: 22%
OPM is consistent at 6–7% — not great, but very stable.
🏢 Business Model: Make It, Shape It, Ship It
- High-capacity greenfield expansion via ₹1,500 Cr CAPEX
- Apollo Structural = 68% of revenue; used in warehouses, metros, real estate
- Apollo Z = 28%, value-added niche formats
- Apollo Galv = 4%, zinc-coated tubes for higher durability
This is a volume game, not a pricing game.
📈 Valuation: Expensive Pipes or Premium Growth?
- Current Market Cap: ₹50,895 Cr
- EPS (FY25): ₹27.28
- P/E: 67x — that’s Zomato territory, not steel
- Book Value: ₹152 → P/B: 12x
- ROE: 19.4% — strong, but doesn’t justify such a high P/E unless growth doubles
Compare with peers:
| Company | P/E | ROCE | OPM |
|---|---|---|---|
| APL Apollo | 67.2 | 22.8% | 6% |
| Ratnamani Metals | 36.8 | 21.5% | 16% |
| Welspun Corp | 15.9 | 25.6% | 10% |
| Jindal Saw | 10.1 | 19.3% | 10% |
APL’s valuation is 2x its best peer, despite average margins.
🚀 Risks: Fragile Pipe Dreams?
- Promoter holding has dropped from 34.5% in FY22 to 28.3% in FY25
- FII holding surged to 31.78%, which means reliance on external flows
- Any construction slowdown could hit demand
- Raw material volatility (HR coils) can dent margins quickly
- Stock trades at 12x book — one of the highest in metals/infra
👩💼 Management & KMP
- Chairman: Sanjay Gupta, the face of Apollo’s transformation
- Known for aggressive expansion, branding, asset-light scaling
- Critics say too much debt is being swapped with dilution, not internal accruals
KMP track record is solid — but overpromising on guidance may backfire.
📊 Fair Value Estimate
Method: PEG-Based Valuation
Assuming:
- FY25 EPS = ₹27.28
- Reasonable PEG = 1.5 (for 26% growth)
- Fair P/E = 1.5 × 26 = 39x
FV = 27.28 × 39 = ₹1,063
Add premium for scale, brand, ROCE: ~15–30%
🌐 EduInvesting Fair Value Range: ₹1,200 – ₹1,450
Current price is ₹1,833 — so priced 20–35% above optimistic fair value.
🚫 Final Verdict: Built Like Steel, Priced Like Software
APL Apollo is a rare mix of execution + branding in a low-glam sector. But:
- You’re paying growth stock multiples for a 6% OPM pipe company
- Even though earnings grew well, the valuation math looks stretched
- Great company, solid management — just not at any price
If margins don’t improve, the pipe might crack under valuation pressure.
Tags: APL Apollo, Steel Pipes, Infra Stocks, Tube Stocks, EduInvesting, OPM, ROE, Structural Steel, Sanjay Gupta
✍️ Written by Prashant | 📅 June 18, 2025
