APL Apollo Tubes Limited (APLAPOLLO) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the APL Apollo Tubes Ltd. Q1 F527 Earnings Conference Call, hosted by Antic Stock Broking Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Pallavagarwal from Antic Stock Broking. Thank you. I know what to you, sir.

Yeah, thank you, Lizanne, and good morning, everyone. Apologies for the delay in starting the call. So, we have the Senior Management of EPL Apollo Tubes, Representative Mr. Sanjay Gupta, the Chairman and Managing Director, Mr. Rahul Gupta, the Director, Mr. Deepak Gowell, the Director of Operations, Mr. Anwar Gupta, the Chief Strategy Officer, and Mr. Cheetan Khandelwal, the Chief Financial Officer. So, I'd now like to hand over the call to Anwar for his opening remarks. Over to you, Anwar.

Thanks, Pallav, for hosting Apollo Tubes for its Quota 1 FI27 earnings call. I apologize to all the participants for starting this call a bit late. There was a technical issue with the operator. Thanks for joining in. Just to highlight that Mr. Rahul Gupta, the director, and Chetan Khandelwal, the CFO, they have gone for an urgent meeting. So the call is being attended by Mr. Sanjay Gupta, myself, Anubhav, and Mr. Deepak Goyal, the executive director. So quarter 1 FI27 was the mixed quarter wherein the volume was below expectations, but the profitability was better than expectation despite declining the quarterly volume. So we have to decode the volume of 745,000 tons for the quarter, and if we map it with the quarter for FY26 volume, there were three, four factors which impacted the volume. Number one, of course, being the UV operations, which were hit because of the geopolitical situation there, and we lost almost 25,000 tons quarter on quarter. Number two reason was decline in the volume of HG Premium brand, which, of course, is in competition with the secondary material. So because of a price gap, which was pretty high, the volume suffered there. Number three reason was the energy crisis in India, which impacted our volume for some of the products like rust-proof pipes and roofing products. So there also we lost 25-30,000 ton volume. And the last reason being of high factory inflation during the quarter, which led to the softer demand in the construction industry. And it impacted both primary sales Secondary sales and secondary sales. Primary sales because prices were pretty high and there was fear of correction in commodities. This led to de-stocking by our channel partners. And secondary demand which comes from the EPC contractors and real estate developers. And not only structural steel pipes but other construction materials like cement, tiles, plywood, plumbing pipes, cables and wires, electrical fittings, bath fittings. Every construction material product prices went up. So the ETC contractors and developers, they kind of delayed their purchases, which impacted the primary sales, sorry, the secondary sales for Apollo steel pipes. Now, the run rate was around 250,000 tons per month for the quarter one. Our focus was on maintaining the profitability because the situation was so uncertain because of the ongoing geopolitical situation. So we chose to focus on profitability, and as a result, you would see that our gross profit per ton increased by 1,000 rupees on quarter-on-quarter This was, of course, due to our better pricing power as we were holding on to prices. If steel prices were going up by 1000 rupees per ton, we tried to improve our prices for our product by plus 100, plus 200 rupees per ton over and above steel price increase. And because of our strong brand positioning and pricing power, we could sustain that. And because of For improvement in gross profit by 1,000 rupees per ton, our EBITDA per ton was plattish above 5,500 rupees per ton on QOQ basis, despite the negative operating leverage, which arose because of 20% decline in volume on QOQ basis. But now that scenario is slightly improving, we are again focusing on volume growth, and in month of July, the volumes are up by 20% on month-on-month basis. We, of course, tweaked some pricing for some of the product categories, so we do expect that our EBITDA spreads will remain in range of Rs.5000 to Rs.5500 per ton throughout the year. For full year, we do expect and we are confident that we will be able to achieve 20% growth in absolute EBITDA. Quarter-on-quarter basis, it is tough to anticipate absolute EBITDA, We are confident that for the full year, we will be able to achieve 20% EBITDA growth in FI27 versus FI26. Now, the capacity which is coming online, whether it is Gorakhpur, which is 200,000 ton plant, then Siliguri, 300,000 ton plant, then New Malur, which is almost a 1 million ton plant, And another 0.5 million ton plant, which we are contemplating in either Maharashtra or North Karnataka, put together 2 million ton plant capacity will come online over the next two and a half years. And over and above, 1 million ton of new capacity through debottlenecking across the plants. So, with this 8 million ton, our share of value-added products, which right now is like 65%, it will increase to almost 75-80%. So, as a portfolio, we are continuing to decommoditize so that impact of steel price volatility and gap between primary and secondary steel, it continues to have lesser and lesser impact on our performance. On a balance sheet front, the working capital days remain below zero, and the cash on books, which we hit 15 billion INR in March 26, it remains at a similar level at 14 billion INR in June quarter as well, and we continue to remain prudent in our working capital efficiencies. All in all, we can say that quarter two will be better than quarter one in terms of volume and absolute EBITDA. And second half, the macro factors should come into play in positive manner, which will boost second half performance for Apollo better than H1. And it will give It will give us room to achieve our annual guidance of 20% if it has growth. And the new capacity expansion which will start coming in phases from second half of this year till FI 28, we will continue to improve our financial performance over the next 3-4 years from FI 28 to FI 30. That's all from our side. We'll be happy to take questions now.

Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question, may please press star and 1 on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question gets in. The first question is on the line of Shaleen Kumar from UBS India. Please go ahead.

Yes, thank you. Thank you. And congrats for the good set of numbers despite tough macro. Thank you. Thank you, Sanjeeji. So, Sanjeeji, I have a question with you.

Thank you. I am 20% and above EBITDA growth.

Okay. Okay. So, you are maintaining?

101% growth.

Okay. That's very good to hear, sir. The second thing I want to understand is Dubai, Dubai as a market, right? So, where is it right now? And is it right to assume that there will be a pent-up demand as well as a reconstruction demand going forth? And the second part of this would be...

We have a stock of almost We are very hopeful that our margins and demand will remain good. Number two, our Gorakpur, the new area in this zone, in September, will start a little while, so Q3 will give us a full ramp-up volume. I don't think I have any problem to cross 15% volume growth.

So, basically, we are confident because of the new capacity is coming.

Good morning, everyone, and welcome to the call.

That's very, very good to hear, sir. That's very good to hear. Sir, a class thing. Because the, you know, commodity price inching up, the gap between fatra and steel again increases. So, how is it impacting us?

Thank you. This is a matter of time. I'm just waiting for that time. You can see that the gap between the steel plants and the capacity of India will come to India. And if the capacity of India will come to India, the capacity of India will come to India, because the cost will be much higher. The real statement is Apollo will come to India.

I hear you, sir. I hear you.

I'm sorry, everyone, and welcome to the call.

The next question is from the line of Sneha from Nuwama. Please go ahead.

Good morning, team, and thanks for the opportunity. A couple of questions from my end. One is you clarified the guidance already. I would like to ask, sir, you also mentioned that, you know, Tata, Jindal, you know, everyone is adding capacity on the, you know, on the upstream segment. But what we also understand while doing channel check for these, like example, Tata is, you know, expanding capacity from 2 and, you know, has planned to even go to up to 4 to 5 million tons into pipes also. They are also getting aggressive with respect to servicing. What's your take on the competitive intensity in the coming sector? How is it at this point of time? And how is it likely to be going ahead? And, you know, what are the measures that we are taking in order to retain market share and, in fact, keep improving? That's fourth.

Good morning, Srinya. Good morning, everyone, and welcome to the call. We can't even build a game plan. Our target is to maintain our 60-65% market share.

Understood. Sir, while you are already showing optimism that 20% growth will be achieved in 9 months, how has July been for us, and what has changed between June to July? What has happened, which is further giving an optimism. Like when April started, you already hinted for a slower quarter. If you could tell us that how July month has been and why you are so optimistic that Q2 onwards, you know, things are looking up. Like, changes kya hoi hai between June to July? Has the primary and the secondary steel spread reduced? Has the demand on ground increased? Interest been pade hai, you know, what are the things we would like to hear?

You know, this is not a big thing, and the steel prices are still up, but the price is still up. Good morning, everyone, and welcome to the call. Thank you. This scenario will be very hopeful that our demand will be good, and we will complete it.

Understood. That was quite helpful, sir, of 3,00,000 volume in the month of July. Last question from my end. You know, you gave the guidance that our value-added product segments we are adding, you know, capacity, which is where you share and value-added will go to 75-80%. Could you help us, sir, what are the things that we are doing value-added? For example, 1,000 by 1,000, as we recently launched, and you know which are the other products, like roofing products, you said, which will take this portion higher?

Sinead, our Guragpur plant and Siliguri plant are here. These two plants are in the totally different regions, which will directly impact our volume volume. Because we don't have anything in the market. It's very reasonable, because we are available to service. And this plant is totally different, I can't give it as much detail, Anubhav can talk one-to-one, but this plant is totally valued, we are thinking that the EBITDA margin is 8000 plus.

Understood, sir. That was really helpful. Thanks a lot, sir. I'll take the rest with Anubov. Thank you so much.

Thank you.

All the best.

Thank you. Thank you. The next question is Kundalayan Abharat Chha from BCS Capital Ideas Private Limited. Please go ahead.

Sanjay ji, namaskar.

Namaskar, Bhavad-Bai, namaskar.

Namaskar. First of all, in a very challenging quarter, very difficult conditions, I think APL Apollo tubes is performed with a great degree of aplomb, I must say, because this has not been an easy quarter to deal with, with too many variables and too many challenges around. So, while there may be perception of some volume decline, but I would say it is a very creditable delivery in a very, very difficult quarter, where too many things were reflecting a moving part challenges. Sanjati, at both stage, will it be sometime next year? Can we say that the focus on quarterly or periodic still price fluctuation, volume up and down due to demand conditions, We can reasonably leave behind and we can purely, confidently focus on profitable growth in a very considered, predictable way with the rising share of valued products, etc. So, we can say that we should be at that situation where, of course, volumes will grow with the strategy in our strong product portfolio, but the profitable growth in a very predictable way, we should reach that state in the next year.

We are struggling for 4,000 rupees son of EBITDA. Then we increased our salary to 4,000 to 4,500 rupees per ton. From 4,500 to we stable our salary to 5,000 rupees per ton EBITDA margin. Now we are trying to reach the 55,000 rupees per capita per quarter on quarter basis. In spite of the cost increase by 1,000 rupees per quarter due to low volume, Thank you.

Good morning, everyone, and welcome to the call. Profit pool, predictability, and its growth will be almost reasonably under our control rather than worrying about many of these other variables which will engage our mind time to time, sometime or the other. That will be fair.

Yeah, abhi bhi hai, but I can say ki 70-75% hai. Vaan pa hum 100% ho jayenge.

Thank you. Thank you, Sanjaji. And once again, compliments to you and APL Apollo team. In very difficult situation, very, I would say, impressive performance. Congratulations.

Thank you, Baladai for showing confidence on us. Okay, now we have a quarter of a month, so we will forgive ourselves. Otherwise, we will leave no more.

No, I am also today, and I also believe that Sanjay Ji is a unique entrepreneur in the country.

So, happy this time. Thank you. So nice of you, Baladai. Our whole process is that we will leave no more. Thank you and all the bills. Thank you.

We'll move on to the next question. That is on the line of Akshay from AK Investments. Please go ahead.

Hi sir, thanks for the opportunity and congratulations on the good set of numbers in difficult times.

So, sir, my first question is about EBITDA per ton.

So, as you have already guided that 5,500 to 5,500 will be the range for FI27. So, going forward in the FI28, FI29, how much EBITDA per ton are we expecting? How much year-on-year increment in EBITDA per ton are we expecting going forward?

So, Akshay, see, I mean, right now the focus is to maintain EBITDA spreads between 5000 to 5500. Of course, last two quarters have been good at 5500 per ton, but now that for the next nine months, we need to cover up on the volume which we lost. So, there could be some tweaking which we did in our pricing, and there could be 100 to 100 here and there for 5500 per ton. Then again, as the volumes ramp up, we could gain traction from the operating leverage benefits, which could come as a surprise. So we'll wait for that, how much it comes up. Going forward, as our value-added product portfolio keeps on increasing, the idea is to improve EBITDA spreads 100-200 per ton on yearly basis, and our target is that Apollo at 8 million tons should be generating 6,000 rupees per ton over the next 2-3 years when we ramp up this capacity.

Okay, so fair enough. Thank you for the opportunity. All the best.

Thank you. The next question is in the line of Dhananjay Bagrodhia from Alchemy. Please go ahead.

Hello. Hello. Hello. Yes, please go ahead. So firstly, congratulations on our fantastic numbers on EBITDA per ton in such a tough environment. So I wanted to understand, in pre-engineered buildings, do we have any thought process on how that could be for us, let's say, a year from today? Is that a segment we are looking at actively growing it? And B, with steel prices stabilized, should then we be targeting a higher EBITDA per ton?

So, Dhanaj, currently, like for the pre-engineered building structures, 20% is steel pipes, okay? And it's a 100-ton structure, 20%, 20-ton is approximate steel pipe, which is used, right? And the sizes range from 150mm by 150mm, it goes up to 1000mm by 1000mm, with thickness starting from 4mm in general and goes up to 40mm, right? So, in this category, our market share is again 65-70%. So, all the top PEB companies in India, I mean, they will be buying 60-70% of the requirement from APL Apollo. They buy from us directly also, and they also buy from our distributors. Larger players, they want to have contracts directly with Apollo, and medium to small size players, they buy through our distribution channel. So, it's a growing segment, right? It's a growing segment, and we continue to focus heavily to service this industry.

But is this a sector which we would look to directly speak to an end customer? Because if we have the raw material, we have the know-how, is that something we would look to do more in depth?

No, no. We are happy servicing this sector. That's all.

Okay, fine.

Sure.

Thank you so much.

Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star in one. The next question is on the line of Aditya Velekar from Access Securities. Please go ahead.

Yeah, thank you for the opportunity. So, my question is to, so just wanted to understand what's happening between quarter 1 FY26 to quarter 1 FY27 on a year-on-year basis. We have seen that the volumes have declined, but EBITDA per turn have increased. And if I see the branded products where we earn higher premium like APL Apollo brand and the way operations, the volumes have decreased. But despite of the low operating leverage and higher cost, our EBITDA pattern has increased. So within these specific brands, APL Apollo brand, what's happening? Are we able to increase, generate a high demand in the brand because of the product make?

Sorry to interrupt, sir. Your voice is breaking up. Hello, is it audible? Yes, sir. Please proceed.

Yeah, so my question is to Anubhao. I want to understand on a year-on-year basis, if we see the EBITDA per ton has increased despite the drop in the volumes, and within volumes, also if we see the branded products like APL, Apollo brand, and Dubai operations, the volumes have decreased. So despite the lower operating leverage, our EBITDA per ton has increased. So, I understand that we are increasing our value-added products, but on the face of it, if we see the absolute volumes of APL Apollo brand and UAE operations, those have decreased. So, what explains this EBITDA pattern increase on a year-on-year basis?

Aditya, this pertains to our pricing strategy, which we adopted in the month of January of 2025, wherein we decided that we need to reposition APL Apollo branded products. Okay, in the market, and we increased the pricing by almost 500 rupees per tonne. Okay, so that is what boosted our EBITDA spreads starting through for FI25, and all four quarters of FI26, I mean, you saw the better spreads, right, and it continued in quarter one of FI27. So, despite the dropping volume, our better pricing strategy has worked to boost the EBITDA spreads.

Okay, understood. And second question, Anubhav, is on the solar opportunity. So, if we refer to your slide, we are saying almost 30 to 35 gigabats of annual solar additions, and that translates to almost 830 kT of addressable market. So, so far, are we catering to, means, so far, have we started supplying to this market, and out of the total opportunity, how much is our share?

So, yes, there are two, three types of products which we have launched in the market and which is supporting this industry. The traction is there, right? Right now, the contribution is a bit low, but over the next two, three years, we expect this to contribute 4-5% to the total volume.

Understood. I am asking because this solar capacity addition, NEP has a huge target, means they want to, this theme of solar capacity addition will persist for next five years and more. So, this will be an additional lever for our volumes, if I understand.

Definitely, yes, Aditya, and that's why, I mean, we got into this space, and like I said, we are as optimistic as the government is to boost the renewable energy contribution in India, and we have a good portfolio to support this industry also.

Okay, thank you. Thank you.

The next question is in the line of Darshan Mehta from Dollars Capital. Please go ahead.

Yeah. Hi. Thanks for giving the opportunity. So my first question was for this SG Premium brand. So how should we look at the realizations? I mean, what are the current realizations and what kind of EBITDA button do we make in this product? And how would that product go as a percentage of total volumes for FI 27 and FI 28? So that was my first question.

Yeah, Darshan, so HG Premium right now, I mean, the current pricing will be around 58,000 rupees per ton, which is almost 6-7% lower than brand APL Apollo products. EBITDA spreads range from 0 to 1,000 rupees per ton, depending on market opportunity, what kind of volume we want to gain in one micro market. So EBITDA spreads would vary from micro market to micro market. Okay. We also use this as strategy to boost volume, to cut down competition, to take market share from Patra players. So, it plays differently in different micromarkets.

Okay. Okay. And so, currently, as you said, it is hovering around 0 to 1,000 rupees per den, depending on the market conditions and the volumes you choose to make over here. So, can, let's say, in next two years, I'm referring to, let's say, after FY28, can we see this 1,000 rupees per ton increase to maybe around, let's say, 1,200, 1,500 per ton, or you would basically, I mean, how are you looking at this product? Will you be making higher EBITDA pattern, or is it something to, you know, control the patra players? Like whenever you think you want to control patra players, that is when you start, you know, delivering high volumes on this side. So I just want to understand the strategy for this product.

Darsan, good morning. This is totally play, and it's going to capture the market share. And this is totally dependent on the pricing of the difference between the primary and the secondary. If there is a gap in the last date of the 11th century, so we don't have a lot of play in our hands and we don't have any benefit from the cash loss. But this gap when it comes down to like quarter four, three, four rupees, five rupees kg, then this becomes a master stock. Thank you. With this gap between the secondary and the primary, it can't work.

Okay. Thank you, Sanjiri. And sir, your Gorakhpur capacity would be coming in Q3, you said, right? Yes. And one more capacity, you said, would be coming in Silikudi. Okay, okay. So, basically, I think when you are saying this 20% volume growth, you are, I think, this growth of

20% growth, what I'm saying, I will play in Gurukpuri, Siliguri, and the export market, which I have done a lot of work in Dubai, and as well, now, India's export is closed due to high container prices. We will slow down the container prices, so our export will also be very big. So, these two-three factors are included in it. So, we will also give a ramp-up volume.

So, and earlier, I think the plant at West Coast, I think we were thinking about bhooj, right? So, now that bhooj is out, and I think maybe...

We changed our plant. From boost to our Mumbai plant, because the Mumbai plant, which I had, we are going to export to Puna. And now, we have a freight cost of almost 1100-1200 rupees per ton. So, now we are going to put around the Puna corridor, like our freight cost of Puna market will be 200-300 rupees per ton.

Okay. And, sir, we have made some investment in this group-shared services company. So, what would be the function and what purpose will it serve? Okay, okay. So, we were saying that there would be a common HR head for maybe SD Mart and our group companies. Understood. Understood, sir. Thank you. Thank you very much.

Thank you. The next question is in the line of Andrei Purushottam from Cogito Advisors. Please go ahead.

Thank you for taking my question. Congratulations for a good performance in difficult conditions. I had a very small question. Your employee costs last quarter have gone up significantly. So is there an explanation for that, and how should we look at this employee cost going forward? Is it likely to remain, and is that going to have any effect on damping margins?

The next question is from the line of Vikas Singh from ICTI Securities. Please, please go ahead.

Good afternoon, sir, and thank you for the opportunity. Sir, this quarter, we had our value-added versus general product mixed. And secondly, like you said, previous year, you had a conscious decision that you didn't get the price. But looking at current commentary, in order to gain the market share, are we reversing that strategy and now we'll go for a higher volume? Even if it is in general category, versus the pricing management.

It's not defined as a very difficult thing, but some of our product range of total basket 15-20% we have done some addressing pricing policy.

So Vikas, this is for the 20% of the portfolio, not across the segment, that we are saying we will reduce the pricing. Only for the 20% of the portfolio, we have tweaked some pricing to gain volumes.

No, because if I see 1 million tons in this quarter, despite the monsoon, my asking rate would be 4,000,000 tons per month, to at least even the 15% volume growth. So where would I do 1,000,000 tons per month, and it would be more of a general or value added, this would be a major concern.

Thank you.

Khali, this quarter, what percentage of my general product is, tell me about this.

Total, 35%. What was it about? Yes.

Thank you.

Thank you.

Thank you. The next question is from the land of Dhagesh Shukla from Incorrect Capital. Please go ahead.

Hello, sir. Thank you for the opportunity. I just wanted to confirm one thing. Actually, it was not audible at that time. The guidance for this year EBITDA growth for the whole FY27 is 20% and the volume growth guidance is also same, right? It's 15 to 30%. Volume is 15 to 20% and EBITDA is 20%. Yeah, it's more than 20%. Sorry, EBITDA is more than 20%. And volume growth is 15 to 20%. And what about the next financial year?

Any guidance on the FY28? Okay.

That's it from my side. Thank you. Thank you.

Thank you. The next question is on the line of Rajesh Ravi from each of these securities. Please go ahead.

Hi, sir. Good afternoon, and congrats on good set of numbers on the margins front. My question pertains to first, you know, the change in volume reporting this year of Delhi's portal, which I believe is more representative of the business. So, would you also like to share the number for the segment as you were, you know, declaring earlier across Apollo structure, Apollo grid, and Apollo galvanized? So, for the new business segments now, the reporting segments that we have created, would you like to report the victim margin number also?

Yeah, so, Rajesh, see, I mean, there are like four broad categories, Apollo branded products, SG premium branded products, UA operations, and roofing products.

Thank you.

Okay, and roofing also you are counting in the 6,000, 7,000 bracket, right?

Now you are going to go below 6,000, 7,000. Understood.

No, I was referring to earlier in preceding quarters in your presentation. We used to say segmental EBITDA margin. So, you know, so I was talking from that perspective. Would you like to start with that practice? We have given the volumes for past two years. The volume in Q2 may be higher by 10-15% year-on-year, and hence the second half, H2, the volume requirement would be closed as, you know, one of the earlier participants asked, the art grade for H2 will be closer to 4 lakhs per ton on a monthly run rate basis. So first, this is, yeah.

Thank you.

The Apollo brand or the SG premium will take massive share and U.A.E. obviously.

No, no, Apollo brand, roofing and SG premium, then you can't say anything. That will depend on the second and primary. Mainly the Apollo brand, U.A.E. and roofing.

Understood. So, I was just trying to understand, when you ride this strong growth, Your margins of this 50-500 may not be at risk. This is what the basic purpose of the...

Sir, Sir, Rajesh, 2-3 things are... Abhi ke pricing policy ke samsama 2-300 rupees ka hit hai amko, but as time jaysi operational liberties po jayega to cover up ho jayega.

Understood.

Understood. So anything north of 5,000 is doable. No, no. 5,000 is what neche jane ka kut matla bhi nahi hai. It's understood. It's understood. Rajesh, just to activate...

Close your question by saying that we are targeting 20% EBITDA growth on absolute basis, right? So, that is the goalpost for us. Now, volume is 15%, 16%, 17% growth. EBITDA pattern is 5500, 5600, 5400. That will depend on quarter on quarter how things ship up. But our goalpost is 20% EBITDA growth on absolute basis.

Understood. 20% absolutely. That's great. I'll come back and see. Thank you and all the best.

And our target is, come back is, come back is, this quarter of the ROC, 30% of our target is 40% of our target.

Super. Great, sir. I'll come back and see. Thank you. Thank you.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for your closing comments.

Thanks, everyone, for joining our call, and apologize again to start this call a bit late. Thanks, Antique, for hosting us. Look forward to see you again. Thank you, everyone. Have a good day.

Thank you, members of the management team. Ladies and gentlemen, with that, we conclude today's conference. We thank you for joining us. Anyway now, disconnect your lines. Thank you.