Dominant position in the steel pipes segment at a time when economic cycle is set to improve post Covid, puts APL Apollo in a very sweet spot

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APL Apollo is India’s largest producer of electric resistance welded (ERW) steel pipes with 50% market share. Over the years, through organic and inorganic initiatives, the company enhanced its ERW capacity, which is currently ~2.5x its nearest competitor. These pipes have wide application with major use in the infrastructure sector for water, gas and other liquids. Value added steel pipes finds application in building and construction and has been a driving sales and profitability. Low cost of production and extensive distribution network is a major advantage. Main risk factor is slow down in consumption. We have a neutral weight rating on the stock due to rich valuations and rising steel prices. Covid-19 has impacted sales but whenever lockdowns have been lifted, sales rebound as the nature of products is such that demand does not evaporate, it is only postpones – 03-06-2021 Price: 1332.55 Rating: Neutral Weight Recommendation: Hold

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