Why is APL Apollo Tubes falling/rising?

8 hours ago

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On 22-Dec, APL Apollo Tubes Ltd witnessed a notable rise in its share price, closing at ₹1,859.00, up by ₹38.35 or 2.11%. This upward movement reflects the company’s robust financial performance and sustained market outperformance relative to benchmarks and peers.

Consistent Outperformance Against Benchmarks

APL Apollo Tubes has demonstrated remarkable resilience and growth over various time horizons compared to the broader market. Over the past week, the stock surged by 6.87%, significantly outperforming the Sensex’s modest 0.42% gain. This trend extends over longer periods, with the stock appreciating 7.60% in the last month against the Sensex’s 0.39%. Year-to-date, the company’s shares have risen by 18.04%, nearly doubling the Sensex’s 9.51% increase. Over one year, the stock’s return of 18.98% again outpaces the Sensex’s 9.64%, while the three-year and five-year returns stand at 75.07% and an impressive 397.56%, respectively, far exceeding the Sensex’s 40.68% and 85.99% gains. This consistent outperformance underscores strong investor confidence and the company’s ability to deliver superior returns.

Technical Strength and Market Positioning

On the day in question, APL Apollo Tubes traded close to its 52-week high, just 4.09% shy of the peak price of ₹1,935. The stock has been on a four-day winning streak, accumulating a 7.32% gain during this period. Intraday, it reached a high of ₹1,873, marking a 2.88% increase. Importantly, the stock is trading above all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—signalling strong technical momentum. Although there was a decline in delivery volume by 18.68% compared to the five-day average, liquidity remains sufficient to support sizeable trades, with a typical trade size of ₹2.17 crore based on 2% of the five-day average traded value.

Robust Financial Fundamentals Driving Investor Confidence

The company’s strong fundamental profile is a key driver behind the stock’s rise. APL Apollo Tubes boasts an average Return on Capital Employed (ROCE) of 27.96%, reflecting efficient capital utilisation. Net sales have expanded at an annual rate of 23.85%, while operating profit has grown at 26.46%, signalling healthy operational performance. The firm’s conservative leverage is evident in its low Debt to EBITDA ratio of 0.35 times, indicating a strong capacity to service debt obligations.

Recent quarterly results have been particularly encouraging, with net profit surging by 460.38% and operating cash flow for the year reaching a record ₹1,213.28 crore. The company has reported positive earnings for three consecutive quarters, with a quarterly PAT of ₹301.54 crore and a half-year ROCE of 27.53%, both among the highest in its history. These metrics highlight sustained profitability and operational strength.

Valuation and Institutional Backing

APL Apollo Tubes maintains a fair valuation with a Return on Equity (ROE) of 22.8 and a Price to Book Value ratio of 11.2. Despite this, the stock trades at a discount relative to its peers’ historical valuations, offering an attractive entry point for investors. The company’s PEG ratio of 0.6 further suggests undervaluation relative to its earnings growth, which has risen by 79.9% over the past year.

Institutional investors hold a significant 52.63% stake in the company, reflecting strong confidence from sophisticated market participants. This holding has increased by 2.75% over the previous quarter, signalling growing endorsement of the company’s prospects by professional investors.

Market Recognition and Long-Term Outlook

APL Apollo Tubes is ranked among the top 1% of companies rated by MarketsMojo across a universe of 4,000 stocks, securing the fourth position in both the Mid Cap category and the overall market. This recognition reflects the company’s strong fundamentals, consistent earnings growth, and market leadership. Its ability to outperform the BSE500 index over one year, three years, and three months further reinforces its status as a market-beating stock.

In summary, the rise in APL Apollo Tubes’ share price on 22-Dec is underpinned by a combination of strong financial results, favourable valuation metrics, robust technical indicators, and growing institutional interest. These factors collectively contribute to sustained investor optimism and the stock’s impressive performance relative to benchmarks and sector peers.

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