APL Apollo Tubes (APAT), a pioneer and market leader in India’s structural steel tubes industry with ~55-60% market share and a manufacturing capacity of 5 million metric tons (MMT) per annum across more than 11 plants, is currently facing demand headwinds. These challenges stem from subdued demand in the infrastructure segment, de-stocking at the dealer level in domestic markets, and the West Asia crisis impacting operations at its Dubai plant. APAT’s volume growth trajectory is currently facing challenges because of disruptions in its Dubai operations, led by the West Asia crisis. Further, domestic demand was also hit by higher construction costs, muted infra activity, and dealer destocking due to expectations of lower HRC prices. To protect profitability in a softer demand environment, management has intensified its focus on EBITDA/MT improvement through cost-rationalization initiatives and enhancing the share of value-added products (VAP). Currently, VAP constitutes 58% of the portfolio. As a result, we believe APAT remains on track to achieve the lower end of its FY27 EBITDA growth guidance of 20–25% YoY (~INR21.6-22.5b).

We forecast a revenue/EBITDA/PAT CAGR of 13%/18%/18% over FY26–FY28. We reiterate our BUY rating on the stock with a TP of INR 2,150.