Apl Apollo Tubes demonstrated fast growth in recent years. Will the growth continue?

06-06-2014 • About Apl Apollo Tubes ($APLAPOLLO) • By InTwits

Apl Apollo Tubes is a fast-growing stock in Iron & Steel Products industry. Its revenue performance, profitability and financial model stands it out vs. other public companies on the market.

Growth story

Apl Apollo Tubes showed fast growth in the last financial year. The company's revenue surged on 24.3% in FY2014. Together with revenue growth Apl Apollo Tubes also managed to keep EBITDA growth. EBITDA grew 3.14% for the same period.

In the last 3 years the company showed fast revenue growth of 40.5% from FY2011 to FY2014 annually. EBITDA surged on 19.8% from FY2011 to FY2014 annually.

Apl Apollo Tubes ($APLAPOLLO) financials for the last 5 years

mln. INR	FY2010	FY2011	FY2012	FY2013	FY2014
Revenue	38,124	9,010	13,923	20,083	24,970
Revenue growth, %		-76.4%	54.5%	44.2%	24.3%
SG&A, %			6.72%	6.58%
EBITDA	601	957	1,151	1,595	1,646
EBITDA growth, %		59.3%	20.3%	38.6%	3.1%
EBITDA margin, %	1.58%	10.6%	8.27%	7.94%	6.59%
Net Income	298	431	491	686	590
Net Income margin, %	0.781%	4.78%	3.52%	3.42%	2.36%

CAPEX	559	791	779	849	1,278
CAPEX/Revenue, %	1.47%	8.77%	5.60%	4.23%	5.12%
Debt	1,573	2,473	3,106	4,449	5,048
Cash	31	43	20	23	19
Net Debt/EBITDA	2.6x	2.5x	2.7x	2.8x	3.1x

ROIC, %	15.9%	20.5%	18.2%	19.5%	16.0%
ROE, %	16.7%	20.2%	18.3%	20.6%	14.9%

Profitability and return on investment

EBITDA growth was partly attributed to margin expansion. If we look for the longer period the company showed big decline in EBITDA margin of 4 pp from 10.6% in FY2011 to 6.60% in FY2014.

Apl Apollo Tubes shows attractive ROIC at 16.0% for the last 12 months which assumes stable development model. Three years ago it was a bit higher at 20.5%. For the last three years the average ROIC was 17.9%.

The company's Net Income margin dropped on 1 pp from 3.40% to 2.40% in FY2014. In the last 3 years Net Income margin dropped on 2.40 pp from 4.80% in FY2011 to 2.40% in FY2014.

Apl Apollo Tubes operates at ROE of 14.9%. It's average level of ROE for the last three years was 17.9%.

Capital expenditures (CAPEX)

To fuel this fast growth Apl Apollo Tubes had to invest in CAPEX.Apl Apollo Tubes's CAPEX/Revenue was 5.12% in FY2014. Apl Apollo Tubes's CAPEX/Revenue dropped on 3.66 pp from 8.77% in FY2011 to 5.12% in FY2014. For the last three years the average CAPEX/Revenue was 4.98%.

Leverage (Debt)

Having such a fast growth profile Apl Apollo Tubes keeps medium debt level at 3.1x Net Debt/EBITDA. In the longer period Apl Apollo Tubes showed fast leverage growth of 0.52x from 2.54x in FY2011 to 3.06x in FY2014.

Valuation vs. comparable companies

At the end of trading day today Apl Apollo Tubes traded at 6.8x EV/EBITDA which is 57.3% lower than 16.0x Iron & Steel Products peer group avearge calculated on the basis of 85 companies. The company trades at 10.5x P/E which is 39.1% lower than 17.2x Iron & Steel Products industry avearge calculated based on 6 companies.

For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. At the end of trading day today Apl Apollo Tubes traded at 30.5x EV/(EBITDA-CAPEX) which is 123% higher than 13.7x Iron & Steel Products peer group avearge calculated on the basis of 1 company.

Peers in Iron & Steel Products

Below we provide Apl Apollo Tubes benchmarking against other companies in Iron & Steel Products industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Metal Coatings (India) ($METALCO)		-21.7%	20.4%	-15.8%	13.0%
Usha Martin ($USHAMART)		-47.1%	10.4%	7.8%	12.5%
Lakshmi Precision Screws ($LAKPRE)		-29.7%	9.9%	-6.2%	7.5%
Nile ($NILE)		-33.5%	7.5%	-19.1%	6.9%
Bedmutha Industries ($BEDMUTHA)		-46.1%	10.7%	-7.4%	2.7%

Median (9 companies)		-31.6%	10.7%	-9.7%	2.7%
Apl Apollo Tubes ($APLAPOLLO)		-76.4%	54.5%	44.2%	24.3%

Top companies by EBITDA margin, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Usha Martin ($USHAMART)	7.7%	18.7%	13.2%	18.1%	18.7%
Lakshmi Precision Screws ($LAKPRE)	7.7%	14.5%	15.9%	16.2%	7.0%
Bedmutha Industries ($BEDMUTHA)	7.4%	11.2%	7.1%	8.0%
Remi Edelstahl Tubulars ($REMIEDEL)	1.6%	6.7%	6.5%	6.4%
Nile ($NILE)	2.5%	6.4%	5.5%	5.6%	6.0%

Median (9 companies)	5.1%	6.4%	5.5%	5.6%	6.0%
Apl Apollo Tubes ($APLAPOLLO)	1.6%	10.6%	8.3%	7.9%	6.6%

Top companies by CAPEX/Revenue, %

Top
	FY2010	FY2011	FY2012	FY2013	FY2014
Usha Martin ($USHAMART)	8.5%	26.0%	21.6%	23.5%	29.0%
Lakshmi Precision Screws ($LAKPRE)	1.8%	14.3%	8.5%	2.5%
Nile ($NILE)	0.4%	4.2%		0.4%
Vallabh Steels ($VALLABHSQ)	3.4%	0.9%	0.7%	0.4%

Median (4 companies)	1.8%	2.9%	5.8%	1.5%	29.0%
Apl Apollo Tubes ($APLAPOLLO)	1.5%	8.8%	5.6%	4.2%	5.1%

Top companies by ROIC, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Gandhi Special Tubes ($GANDHITUBE)	29.4%	31.2%	28.3%	18.9%	13.2%
Usha Martin ($USHAMART)	8.0%	9.5%	4.3%	6.5%	7.6%
Lakshmi Precision Screws ($LAKPRE)	11.5%	13.7%	14.4%	11.9%	3.1%
Gujarat Containers ($GUJCONT)				20.0%
Uni Abex Alloy Products ($UNIABEXAL)	36.0%	25.3%	21.3%	13.5%

Median (17 companies)	11.4%	10.8%	8.5%	9.2%	7.6%
Apl Apollo Tubes ($APLAPOLLO)	15.9%	20.5%	18.2%	19.5%	16.0%

Top companies by Net Debt / EBITDA

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Crimson Metal Engineering Company ($CRIMSON)	2.5x			12.3x
Bedmutha Industries ($BEDMUTHA)	3.1x	2.3x	3.9x	9.5x
Vallabh Steels ($VALLABHSQ)	5.7x	10.1x	5.6x	7.5x	0.0x
Remi Edelstahl Tubulars ($REMIEDEL)	11.0x	4.9x	5.5x	4.8x
Usha Martin ($USHAMART)	4.9x	2.6x	10.0x	4.8x	4.8x

Median (14 companies)	3.2x	2.4x	2.6x	3.0x	0.0x
Apl Apollo Tubes ($APLAPOLLO)	2.6x	2.5x	2.7x	2.8x	3.1x

Apl Apollo Tubes stock price chart

Apl Apollo Tubes financials

mln.	FY2010	FY2011	FY2012

Revenue	38,124	9,010	13,923
EBITDA	600.6	956.6	1,151
Net income	297.8	430.9	490.6
CAPEX	559.1	790.5	779.0
Debt	1,573	2,473	3,106
Cash	30.773	43.280	20.220

About Apl Apollo Tubes

APL Apollo Tubes Limited manufactures and sells steel tubes and pipes in India. It offers MS black round tubes for liquid transmission, idlers, mechanical and engineering, structural, water and sewage, water well, fire protection, fencing, and other applications; galvanized iron tubes that are used in underground piping, overground piping, power, refineries, scaffolding, engineering structurals, scientific experiments, and fire-fighting systems; and pre-galvanized tubes for applications in fencing, cabling, ducting, automotive, and greenhouse structures. The company also provides hollow sections that are used in construction, machinery, automotive, furniture, storage system, and transmission tower applications; and API tubes, such as plain-end, threaded-end, and belled-end pipes, as well as through-the-flow line pipes for use in conveying gas, water, and oil and natural gas industries. In addition, it offers dynamically balanced tubes for use in engineering sector; idler tubes for conveyors; and propeller shafts and bobbin tubes for use in textile industry. The company also exports its products to approximately 35 countries. The company was formerly known as Bihar Tubes Limited and changed its name to APL Apollo Tubes Limited in 2010. APL Apollo Tubes Limited was founded in 1986 and is based in Ghaziabad, India.