Apollo Pipes targets capacity-led recovery as CPVC growth supports FY27 volume outlook

Investment View and Target Price

In its August 4, 2026 Q1FY27 result update, Choice Institutional Equities maintained its BUY rating on Apollo Pipes Ltd with a target price of Rs 620 per share. The positive thesis is based on a projected recovery in volumes, capacity additions, stronger infrastructure and real-estate demand, market-share gains from unorganised pipe manufacturers, and a rising contribution from higher-margin products such as CPVC.

Q1FY27 Performance

Apollo Pipes reported a weak Q1FY27 relative to Choice Institutional Equities estimates. Sales volume was 24.5 KT, down 3.3 per cent year on year and 22.0 per cent quarter on quarter, versus the broker estimate of 31.5 KT. Muted demand and dealer-level destocking were the key reasons.

Realisation increased to Rs 1,20,699 per tonne, supported by product mix and pricing. Apollo Pipes reported an adjusted loss after tax of Rs 85 million, compared with profit after tax of Rs 99 million in Q1FY26 and Rs 15 million in Q4FY26.

Management Commentary and Business Trends

Management attributed the margin pressure to inventory write-downs following changes in PVC resin prices, aggressive pricing and fixed costs associated with new business verticals. Management reported consolidated EBITDA margin of 7 per cent, with Apollo Pipes standalone at 8 per cent and Kisan Mouldings at 6 per cent.

• Government infrastructure business in OPVC and HDPE was stagnant because of budget and tender delays.
• Agriculture demand was weak after a 30 per cent fall in PVC resin prices in April and the monsoon season.
• Construction and real estate, which represent 60 per cent of sales, improved in May and June after a poor April.
• CPVC delivered year-on-year growth, aided by the Lubrizol partnership.
• Water tanks grew at a double-digit rate, while bath fittings were almost flat.

Capacity Expansion and FY27E Outlook

Management expects high double-digit volume growth during the balance of FY27E. The outlook is supported by the newly commissioned Varanasi plant, which is targeted to reach 30 per cent utilisation in FY27E, the Maharashtra facility ramp-up, post-monsoon demand recovery and PVC resin-price stabilisation.

Apollo Pipes plans Rs 2,000 million of capex during FY27E-FY28E, funded through internal cash flows. It has also identified land for a large South India plant, which is expected to be acquired in FY27E. Window profiles are expected to contribute 7 per cent to 8 per cent of FY27E revenue and ultimately 10 per cent as utilisation rises. Kisan Mouldings is rationalising plants and focusing on its Tarapur facility.

By FY31, management aims to operate four large plants, each generating Rs 8,000 million to Rs 10,000 million of revenue at an EBITDA margin above 10 per cent. In addition, it aims to generate Rs 10,000 million of non-pipe revenue from areas including bath fittings and window profiles.

Broker Forecasts and Valuation

Choice Institutional Equities forecasts a 15 per cent volume CAGR in FY26-FY29E, 3 per cent annual realisation growth and 464 bps of EBITDA-margin expansion. Following the weak quarter, the broker reduced FY27E EBITDA by 12.0 per cent and adjusted PAT by 20.6 per cent, while retaining its revenue estimates.

The broker projects adjusted PAT to rise from Rs 75 million in FY26 to Rs 1,162 million in FY29E, while ROCE is expected to improve from 1.1 per cent in FY26 to 13.1 per cent in FY29E.

The Rs 620 target price is based on 35.0 times FY28E core EPS of Rs 17.6.

Key Risks

• Greater volatility in PVC resin prices.
• A slowdown in government infrastructure spending.