APLAPOLLO - APL Apollo Tubes Limited Share Price

The management of APL Apollo Tubes outlined a positive outlook, emphasizing robust growth driven by market share gains, capacity expansion, and margin improvement initiatives. Key points include:

1. Volume Growth: Targeted sales volume of 3.1"“3.2 million tons for FY25, with aspirations to reach 4 million tons by FY26 and 5 million tons by FY27. Growth is fueled by a structural shift from sponge iron to HR coil-based pipes, international expansion (Dubai plant at 58% utilization), penetration into Eastern India via new plants (Gorakhpur/Siliguri), and adjacent product lines (e.g., HVAC/water pipes).

2. Margin Expansion: EBITDA/ton aims to rise to Rs.4,500"“5,000+ (from ~Rs.4,300 in Q3) through operating leverage (ramping utilization from 3.3M to 4.5M+ tons), value-added product mix (Raipur/Dubai plants contributing Rs.400"“500/ton), and reduced discounting as demand recovers.

3. Capacity & Capex: Current capacity of 4.3"“4.5M tons to expand to 5M tons, supported by Rs.6B residual capex (internally funded). Raipur plant (55% utilization) and Dubai operations are key focus areas.

4. Macro Trends: Anticipated recovery in government infrastructure spending post-budget and retail demand revival in H2 2025. International markets (Middle East) show promise, with orders from Saudi Arabia and improved service-driven penetration.

5. Innovation & Cost Control: New products (e.g., 1000mm square pipes, Galvalume) and cost optimization to drive margins. Balance sheet remains strong (near-zero debt) with efficient working capital management.

Challenges include near-term raw material volatility and delayed government capex, but management remains confident in market leadership and execution.

Question 1:
Amit Dixit: Congratulations for a good set of numbers and strong rebound after Q2. The first one is essentially, if I still look at your other expenses per ton, they are practically very static... What kind of discounting did we see this quarter? And where is it likely to settle?
Answer:
Other expenses (freight, power) are variable and tied to volume; discounts are netted from selling prices, not part of expenses. Freight/power rose due to higher volume, but non-variable expenses (stores, branding) will stagnate, reducing per-ton costs as volumes grow.

Question 2:
Akshay: Why are rustproof product margins lower? With market share gains in general segment, will value-added product (VAP) mix improvement slow?
Answer:
Rustproof margins appear lower due to blending sheets (lower margins) with pipes (INR6,000/ton). General segment growth (sponge-iron substitution) doesn't impede VAP growth, as capacity/resources for both exist. VAP demand hinges on macro recovery; current focus is capturing sponge-iron market share.

Question 3:
Shaleen Kumar: Can FY25 EBITDA exceed last year's? How will margins improve?
Answer:
FY25 EBITDA target is "slightly better" than last year's INR1,192 crore despite lower per-ton margins. Margins will rise via INR400"“500/ton operating leverage (capacity ramp-up), VAP mix gains, and reduced discounting. Heavy/light structural margins aim to improve to INR2,500"“6,000/ton.

Question 4:
Rohit Singh: What caused the slowdown in government spending?
Answer:
Delayed budget approvals and fund releases post-elections impacted infrastructure spending. Sectors like railways/aviation remain strong; water/transportation lag. Anticipated budget-driven fund releases could revive demand.

Question 5:
Gargi: Explain cold-rolled mill usage and Shankara/SG Mart sales. Discuss export strategy.
Answer:
30% of products use cold-rolled HRC (thinner gauges). Capacity constraints led to partial outsourcing, but new plants (Malur, Ahmedabad) will expand in-house capacity. Exports to Middle East (16,000"“17,000 tons/month) focus on service efficiency; Dubai plant expansion (300k→500k tons) will bolster global presence.

Question 6:
Devvrat Mohta: Confidence in Q4 EBITDA improvement?
Answer:
Targeting INR4,500+/ton EBITDA in Q4 (INR5,000"“6,000 long-term) via reduced discounting, operational efficiency, and demand revival. Sales policies align with INR5,000/ton margins.

Question 7:
Sneha Talreja: HRC price trends and anti-dumping duty (ADD) impact?
Answer:
ADD may stabilize HRC prices but unlikely to spike sharply. Secondary steel (sponge iron) faces cost disadvantages as primary players (JSW, AM/NS) expand blast furnace capacity.

Question 8:
Pallav Agarwal: Why did realizations rise despite HRC price decline? Solar segment contribution?
Answer:
Higher stock-in-trade (raw material) sales skewed realization; adjusted NSR remained stable. Solar (alu-zinc coils, tracker tubes, rooftop pipes) is a nascent segment (small volume) with growth potential via design-focused partnerships.

Question 9:
Bhavin Pande: Heavy structural demand resilience?
Answer:
Heavy structural demand (infrastructure projects) grew 20% YoY despite macro challenges due to APL's dominant market share. Retail-driven light structural demand awaits consumer recovery.

Question 10:
Aditya Welekar: Residual capex increase (INR3.5B→INR6B)?
Answer:
Capex revision (INR6B for 5.5M tons vs. 5M earlier) covers new plants (Gorakhpur, Siliguri, Ahmedabad, Malur) and Dubai expansion.

Question 11:
Arpit Tapadia: Raipur raw material shortage?
Answer:
Temporary Tata Steel supply disruption caused minor volume loss (5k"“10k tons). Sourcing stabilized post-January.

Question 12:
Mann Ashar: Competition in narrow-width HRC pipes?
Answer:
No distinct "narrow-width HRC" category"”market bifurcates into primary/secondary steel. APL's focus remains primary HRC pipes, competing on quality/service.