Investment Thesis Apollo Tricoat tubes LTD 8th June 2020

BSE Sensex NIFTY 50

COMPANY OVERVIEW 31642.70 9251.50

Poly Medicure Limited (Polymed) is engaged in the development, manufacturing

and marketing of quality Disposable Medical Devices. The company
manufactures and supplies in India and Internationally, a diverse portfolio of
disposable medical devices in the product verticals of Infusion therapy, blood
management, gastroenterology, surgery and wound drainage, anesthesia and
urology. The company has a well-diversified and de-risked business model, Stock Info
comprising a wide range of products with clients across more than 105
Scrip (BSE) APOLLOTRI
countries.
INVESTMENT THESIS Equity Shares (mn) 138.10

M.Cap. (Crs) 1201

Huge Potential Domestic Growth
52-Week Range (Rs) 503/170
India imports over 70% of its medical device requirements, which indicates a
great opportunity for local manufacturing. Polymed has been investing heavily CMP as on 5.6.20 395.20(BSE)
in increasing its manufacturing capacity and R&D; it has also been consistently
Book value
introducing new products which are import substitutes. Currently 70% revenue 65.64
comes from exports.
Financial Snapshot & Valuations
Initiative By The Government: (INR b)
Due to Corona virus pandemic government has decided the anti-dumping duty which was imposed
earlier shall remain in the force till Dec 2020 unless revoked to protect its domestic market. Y/E Mar FY19 FY18 FY17
Also in Sept 2019 government launched the Scheme ‘Nal Jal Se’ which aims to provide portable water Sales 7 191 61
EBITDA -0.02 11.61 3.41
to 18 lakh rural households. So, this will require large diameter ERW pipes for distribution of water
PAT 2 10 4
and smaller diameter pipes for last mile connections and intercity connections. This campaign will EPS (INR) 29.7 26.7 33.4
therefore be beneficial for the steel pipe industry as a whole. Growth 11.6 -20 47.5
(%)
The Rapid Expansion: Book 44.9 38.1 24.7
In FY 17 the company has a capacity to produce 1.3 million tonnes per year and has 7 plants in India. value
Apollo management than adopted rapid expansion policy and currently has 11 units in India and can RoE (%) 2.38 13.62 37.31
produce 2.5 million tonnes per year. During Q1FY20, Apollo Tricoat started commercial production of RoCE (%) 3 17 14
EV/EBITDA (x)
26.3 30.8 27.5
In-line galvanized (ILG) pipes and designer pipes at the green-field plant at Malur, Bengaluru
(150,000tn) and in July'19 commercial production of door frames also commenced at its green-field P/E (x) 28.43 41.4 33.1
manufacturing facility at Dujana, Dadri (50,000tn). Management has guided to increase their capacity Shareholding pattern (%)
to 250kt p.a. by FY20 with a volume contribution of 100kt in FY20E.
As On Mar-20 Dec-19 Mar-19
Promoter 62.53 62.76
Market Leaders in Steel Products: Public 23.58 14.31 16.34
FII 4.22 13.77 13.09
Consistently from FY15 onwards market share has seen a marked improvement from 12% to 15% in MFs 1.39 16.92 18.46
Q1 FY20. During Q1FY20, across product segments. It has a market share of 28% in GP Pipes, 26% Others 4.46 3.65 0.73
in Hollow Sections thus making it the leader in the section in the organized market, 8% in Black Pipes
and 9% in GI pipes. These market share gains continue driven by distribution expansion, product
portfolio diversification and customization, brand strengthening led by media spends and focus on
value added products (DFT, GI/GP, IGL etc) .

Acquisition Of Plan1 Health

With the acquisition of Plan1 health s.r.l., an Italy based manufacturing
company, Polymed now has access to new technology in Oncology and Vascular
Access devices and opens more opportunities with the acquired company’s
worldwide customer base. Plan1 Health products adhere to the highest quality
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Investment Thesis Apollo Tricoat tubes LTD 8th June 2020
standards in Europe and are synergetic with the Company’s product portfolio.
Key Risks

Innovation And Adaption Of New Technology:  Volatility in steel prices as

it is a key raw material
Apollo Tricoat has continuously adopted new technology through its innovation for the betterment
 Economic slowdown to
of its business and products. It was the first company to offer pre-galvanized and colour coated
pipes and then in 2016 company was pioneer to bring Direct Forming Technology (DFT) which effect infrastructure
allows it to offer customized products at lower cost with shorter lead times, DFT enables direct spending.
formation of hollow pipes of various sizes and shapes.  Competitive Intensity to
DFT enhances the efficiency and reduces material cost by 2-10%. Further, DFT can process smaller restrict pricing power.
orders in 30-40 minutes compared to traditional methods which would take 6-8 hours.  Failure to achieve
desired level of
operating activity.
Region WIse Product Mix
Contribution
GI Hollow
Central
West Pipe Othe Section
And
s rs
East
West
South
GP 7% 5% Black Pipes Key Catalyst
North 14% 25% North Hollo GP Pipes
18% Pipe
Central And s w GI Pipes  Higher import duty on steel
South East Secti
43% 23% Others products.
on
Black 52%  Strong distribution network
Pipe and it has pan India presence
s which will help the company to
13%
grow its presence
 ERW steel tubes market is
expected to grow at ~10-12%
CAGR, thereby providing a huge
Comparison With BSE: opportunity for the company.
 First company to introduce
‘Galvant Technology’ will
enable the company to expand
Growth its portfolio in the high margin
segment
464%

136%
82%
28% 20% 16%
2% 5%
2017 2018 2019 2020

Apollo Tricoat BSE

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Investment Thesis Apollo Tricoat tubes LTD 8th June 2020