Domestic brokerage Nuvama has initiated a reduce call on Apollo Pipes with a target price of Rs 198 per share, implying a downside potential of approximately 34 per cent from the current market price of Rs 300.
The brokerage flagged concerns over the company’s strategic shift in focus towards gaining market share at the expense of maintaining margins, which could weigh on profitability in the near term.
Nuvama highlighted that Apollo Pipes’ brownfield plant in South India could face a delay of 6-9 months given the broader challenges plaguing the industry. The delay in capacity expansion could impact the company’s growth trajectory and regional diversification plans.
Adding to the headwinds, the brokerage noted that the withdrawal of Bureau of Indian Standards (BIS) certification requirements and the lack of Anti-Dumping Duty (ADD) protection are expected to impact Apollo Pipes in a manner similar to the broader PVC pipes industry. These regulatory changes could intensify competition from cheaper imports and unorganised players.
The combination of margin compression from aggressive pricing strategies, project delays and unfavourable regulatory developments has prompted the brokerage to take a cautious stance on the stock.
Shares of Apollo Pipes closed at Rs 300 on the exchanges.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Stock market investments are subject to market risks. Readers are advised to consult their financial advisors before making any investment decisions. The views expressed by the brokerage are their own and do not represent the opinions of this publication.
