Thread by @myfinology

Why we liked Apollo Pipes but never recommended it?

✅ > 20% revenue 5yr CAGR, highest among top five peers

❌ Operating margin of 12-13% as compared to industry's 16-17%

More reasons in this thread ⤵️

✅ Company increasing its revenue share from high growth and high margin CPVC pipes

❌ Faces stiff competition from bigger players eyeing the CPVC market like Astral, Prince, etc

#business

❌ 55-60% revenue concentration in UP & Rajasthan only

❌ Inability to pass on fluctuation in raw material prices to customers

#pipeline

✅ Margins might improve as it is expanding into value-added products

✅ Being a new player, it is giving incentives to distributors that is affecting its margins, which could improve going ahead

#Investment

After considering the previous points, there were two other major issues why we did not recommend Apollo Pipes:

❌ Less entry barriers due to low fixed capital intensity and supply glut that limits pricing power

❌ Margins vulnerable due to fluctuations in PVC prices

❌ Apollo is a pretty small player in a highly competitive industry, which is towards the upper end of the riskometer

We can not afford such high risk for our clients. That is why we did not recommend it.

#stocks

Apollo Pipes' report card by Recipe:

✅ Quality business model
❓ Robust financials
✅ Ethical management
✅ Strong growth prospects
❓ Reasonable valuations
❌ Adequate safety net

Apollo Pipes scored 50% in Recipe's scorecard. But we require a minimum of 90-100% to recommend a stock.

View our recommendations now at Recipe.finology.in/stock-and-mutu…