APL Apollo Tubes (NSE:APLAPOLLO) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the APLAPOLLO Tubes Limited Q2 FY 'twenty seven Earnings Conference Call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen only mode, there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Singh from ICICI Securities Limited. Thank you, and over to you, sir. Thank you, Doreen. Hello, everyone. Good evening, and a very warm welcome on APL Apollo Tubes Q2 and H1 FY twenty seven results conference call. From the management side, we have with us Mr. Chairman and managing director Mr. Rahul Gupta, director mister Deepak Goel, director for operations, mister Gupta, chief strategy officer, and mister chief financial officer.

1:06 I'll hand over the call now to for his opening remarks. Over to you. Thanks, Vikash, and thanks to ICHI Securities for hosting APLAPOLLO for its quarter two FY 'twenty seven earnings call. We have delivered our best quarter in terms of sales volume, EBITDA and net profit. The volume of 960,000 tonnes was not easy to achieve in the quarter two, given our UAE operations remain disrupted due to ongoing Middle East disruption and high swings in the raw material prices, plus the shortage of steel in the domestic markets along with the disruption in the container trade for export sales also.

2:00 So what we did to achieve this performance was we focused on our core strengths, which are number one, brand APLAPOLLO. So we ensured that products in the APLAPOLLO category get better pricing, and we achieve better realizations and better EBITDA spreads on those sale numbers. Number two, was our highly increasing focus on the value added products beyond construction and renewable sector. We have started to see the product line for defense and aerospace sectors also on the back of recently commissioned specialized tube mill, which can produce sizes from two fifty by two fifty millimeter dia with 16 millimeter thickness.

2:53 So these products are going in the defense and aerospace sector. We have mapped the applications, and we have started producing samples and giving to various authorities and agencies, which shall bear results in the next two to three months. If you look at the quarter two volume, APLAPOLLO and the roofing products, sale volume increased by 20% on Y o Y basis in the first half. We expect that this momentum will continue in the second half with double digit volume growth. So in the absence of export sales and UE operations, these are the two product verticals, which are supporting superior volume growth and also the margins because of better pricing and better brand value.

3:55 In terms of EBITDA, which has been our goalpost, I'm glad to share that we are on track to achieve 20% growth on the absolute basis by March twenty seven fiscal. So again, we are getting boost from the better pricing, increased sale of value added products in all categories and the quarter two EBITDA per ton of INR 6,000. We believe this is sustainable now as we enter in the second half because the contribution is coming from brand ABLAPOLLO products and roofing category, again, which are high value added products. And if the UE operations recover in the second half on stable geopolitical situation, we may do better than our expected 20% EBITDA growth, which we are guiding for FY 'twenty seven.

4:48 On balance sheet front, the working capital days remain zero. And the cash on books increased by 15% as at September 2026 to 16,000,000,000 versus INR 14,000,000,000 in June quarter. So our prudent working capital cycle remains intact, which continues to generate solid cash flows. And our CapEx also is on track as we target to achieve 7,000,000 tonne of greenfield brownfield capacity plus 1,000,000 tonne of debottlenecking capacity, which we have target to achieve in the next two years. That's it from our side. We'll be happy to take questions. Thank you very much. We will now begin the question and answer session.

5:39 If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Darshan from Dollar Capital. Please go ahead. Yeah. Thanks for giving giving me the opportunity and congrats on very good set of numbers. Just wanted to know your volume guidance for FY twenty seven. So earlier, we had guided for 15% volume growth. But now for H1, given our volume growth is at close to, I think, 4%. So just wanted to know whether what is our revised volume guidance for FY 'twenty seven?

6:32 Evening. First, Navi, if you see our volume growth of profitable business like APLAPOLLO brand and the roofing product, this is we are intact with the guidance of 15% growth. But due to Dubai problem and the shortage of steel in country, so we are unable to focus with the low margin business products. So there, we are not in too position to commit any type of volume growth. We do not know right now. But in our main products, there is our margin is there we are very confident we are going to achieve our volume growth.

7:21 Hardening to hear that, sir. And also I think there was some element of inventory benefit that we can see in Q2? Just wanted to know from you whether like Okay. Okay.

8:08 And sir, financial assets, balance sheet, the amount fallen to INR 57 crore versus INR $2.82 crore in March 26. So can you let us know what is that number as such? More than one year. Yes. So APL is more than one year now reclassified within one year. So if you see the other financial assets of the financial current assets, there is the amount has been increased. Okay. Okay. So that amount has basically moved to the other. And sir, the quarter on quarter interest cost has increased.

8:56 Also, if I remove the one off gain on account of stake sale in subsidiary, I think your other income has fallen quarter on quarter. So just wanted to know the reason for both both of these things. Yes. So other income, if you see, right, for the quarter, it is around 80 crores, right? The interest income has increased from INR 25 crore to INR 46 crore. So INR crore increase in the fixed deposit interest income. The other income you are saying is INR 80 crore? Yes. Yes. Q1 and Q2 put together from INR 40 crore, it has gone down INR 30 crore. Yes.

9:46 Nini, I'm just saying that is September 26 versus June 26, if I am seeing, and I'm removing the 10 crore divestment gain from other income. So 30 crore versus 30 or 40 crore in June 20 So just wanted to know reason for that. So some ForEx currency gain and losses between the two quarters. In quarter one, there was some foreign currency. Okay. That's okay. Thank you. Thank you.

10:34 Thank you. Our next question comes from the line of Sailesh Raja with three sixty one Capital Markets. Please go ahead. Yeah. Thanks for the opportunity. Congrats, sir, for the great set of numbers. Sir, our roofing sheet volumes appear to have improved significantly, which I believe could be one of the key drivers of implementing EBITDA per kg. So what is driving the sales growth in this segment? And who are all the competitors? What is our right to win? So how do you see this business scaling up in the next two, three years? What this business is our capacity right now, 50,000.

11:19 60,000 tons into 12. 700,000 capacity here. Seven I think we have done 45,000,135. $130,135 to 7 lakh divided by four. 175 per quarter quarterly brand or leased products developed. We are doing very well in this segment. Okay, sir. Which we are focusing, sir, in this roofing sheet? Yep. What's the building material solar solar is all put together So just to add to it, Salish, 50% goes into housing, 25% go into commercial and industrial, and 25% go into other Sure. Sure. Other application.

12:37 Yes. Okay. Okay. So this is a level two dia or how it is thickness I'm talking? Thickness is mix that is five five four to 3.5 thickness. Okay. Okay. Sir, so around two years ago, you know, we had targeted a reduction in power cost by 2 rupee per unit, bringing down the cost to INR 5 per unit. So where do we stand against that target today? INR 6.2, INR 6.3 Okay. Okay. So now so the freight cost, sir, it it Cost is our main focus area.

13:28 Cost This is about volume employment cost Okay. Okay. Sir, including other financial asset, our total cash balance is around INR 2,500 crores. So what is our plan for deploying cash efficiently? Have we ever evaluated the possibility of making upfront payment to the suppliers in exchange for yearly payment discount that by including margins? Or is there any other? Yeah.

14:33 Cash cash positive FY 'twenty seven. Then we take a call according to our big shareholders and with the Board. Okay. Okay. Okay, sir. Thank you. Our next question comes from the line of Bharat Shah with Bharat Shah Capital Ideas Private Limited. Once again, a hearty, hearty congratulations. I think a difficult quarter like last quarter, but I'm glad that our focus has remained unstinted on profitability rather than just getting paid away by volume or this and that.

15:33 I think overall focus on expanding the total profit pool, whether it comes from the mix, whether it comes from the volume growth, if it comes also from the cost efficiency, All of the head are believers for improving the profits. And I think... I I personally believe that in a difficult environment, challenging situation, this is wonderful focus and excellent outcome, which has been attained. So we're really glad about it. Thank you, Bharat. Last quarter, we got 40% are quite comfortable guidance.

16:52 And profit per ton at operating level of close to INR 6,000 profit And Anubhav, the free cash, I wanted to understand. Relatively last year, our free cash generation was stronger. Anything which has impacted our free cash generation in the first half of this year?

17:40 So, Bharat Pal, we have paid some capital advances for the CapEx. If you see in the first half, we have spent INR 400 crore rupees already in the first half versus in FY 'twenty six, the whole year, we spent INR 600 crore. So in second half, the cash outflow will be pretty low in the next six months. So that will improve the free cash flow. And below free cash flow, we did make dividend payments in the month of August, September. So that also impacted the total net cash flow. So if you look at the EBITDA to OCF, that will be better in FY 'twenty seven versus FY 'twenty six once we close the books annually. I see. So last year, I'm at a free cash, Karib, right?

18:36 Last year, it was around free cash flow INR 1,300 crores. Before dividend. You look at our presentation, Slide 19, we have shown the cash flow. Hanjeet? Eight minute. 19, one second. $19,000,000 In the first half, how much is the free cash that we have generated? So far, we have generated crores year about.

19:25 First half? Half, INR700 crores and then CapEx of INR400 crores. So free cash flow is around INR200 crores. Last year,. So one is the one is the dividend payment has been fully accounted for, the dividend payment in the first half. Yes. So so now for the second half, we generate... Like, mentioned that we should do around 1,200 crore EBITDA, right, and minus taxes and zero dividend and hardly 200 crore towards CapEx.

20:11 So we would reach... Like, we will surpass 1,300 crore of free cash flow, which we generated last year on whole. Okay. Perfect. Perfect. I think that's about it. And congratulations once again to the whole APLAPOLLO team. This is really entrepreneurial delight, I suppose, of Centergy in a difficult year to achieve this. Congratulations. Thank you, Bharav. Thank you. Thank you. Our next question comes from the line of Akshay Chadda with Canada Rubaco Mutual Fund. Please go ahead. Yeah.

21:06 Thank you for the opportunity, sir. I just have one question. So, basically, if I just see that the product mix has improved q o q o, y o y, at least in the volume terms, But the same doesn't get reflected in the GP. Actually, if I just see the GP per ton, that has contracted q o q. So the entire EBITDA per ton improvement that has happened q o q appears to be more from the operating leverage and the cost efficiencies that we spoke about. So sir, what explains this GP per ton contraction? Logically, it should have improved, right? So that is the only question I have. So actually, you're right. It is just one fact that, I mean, the APOLLO brand also has now life structures, right? So realization on light structures is slightly lower than the overall APLAPOLLO product portfolio.

22:03 So that's why the GP per ton is around 500 rupees per ton lower on quarter on quarter basis. So this is mainly because of light structures where the validation is low and so NSR is low and the GP per ton is also low. And what would be the contribution of these life structures in APL, if you could quantify? 35% of the mix. 35%. What was between the 25% in second quarter? And what was it in 1Q? Yeah. It used to be, like, mid double digit to high double digit. Okay. Okay. Thank you. Thank you. Participants to ask a question may press star and 1.

22:51 Our next question comes from the line of Sneha from. Please go ahead. Hi, team. Good evening, and congratulations on great set of numbers. Just wanted to understand how is the current demand scenario. The reason I'm asking is quarter one versus quarter two, we have seen a very big jump in volumes. Although we understand that the way has more or less remained muted, but leaving apart the roofing sheets where we've seen expansion happening, did the APLAPOLLO tube's volume increase so much? Where is the demand uptake coming from? That's the first one. APLAPOLLO demand is very good right now also. And also recently is very good. Like in the case of the APLAPOLLO brand we are looking also more than double digit growth in this quarter and first half second half also.

24:04 And then roofing products, lines maybe month of July. So I think this this quarter, we are targeting roofing product, one seventy five thousand. One seventy five... One lakh seventy five thousand, are targeting roofing product also. Understood, sir. Understood. Understood. So you're saying the same mix second quarter premium brand. You know that I can't commit anything to be APLAPOLLO brand and roofing product, we are very comfortable. Understood, sir. And how long have you been for us, sir, so far? Good.

24:53 Understood. Good. Understood. And, sir, secondly, with respect to... You know,, you used to give that EBITDA bridge of how your margins are increasing and above. We see a big swing happening from 5,500 odd levels to now around 6,000 odd levels. So majority of the contribution with respect to EBITDA margin? No. No problem at all. Sir, but with this now EBITDA per ton of 6,000, this looks sustainable.

25:59 Q q q three is much much better than this. Q three will be much better than this? Yes. 6000 super q three. Understood, sir. That is black pipe car. That I completely agree there is a premium. Black price 70,000 Yes. $68.69 types Understood, That was really helpful. Thanks a lot, team, and all the very best.

27:13 Thank you, Suneel. Thank you. Our next question comes from the line of Bharat Shah with Bharat Shah Capital, IDS Private Limited. Please go ahead. Anupa, on the Slide 18, I think EBITDA per ton of the first half, we have mentioned it is some 11,000 odd. I think it looks to be a typo. Yes, it is. Thanks for highlighting. We'll correct it. Yes. Okay. Thank Our next question comes from the line of Unkar Gogadari with Shree Investments.

28:13 So Thank

31:36 you, sir. Thank you. Our next question comes from the line of Shalin Kumar with UBS. Please go ahead. Yes. Good evening, Salveen. Salveen, may I call for a late join Sorry for repeating. Right?

32:44 I'm not realizing Dubai has a pent up demand. Right? FY '28. Right? Correct. So, basically, we can... If the carrier

35:52 that Dubai comes back, we can work with the 3,000 crore number in our mind for FY twenty eight. Dubai, I mean, there's still there's still availability in the country. This is normalization of situation. Normalization of the both of the we are in the container phase going to down. If this is another, are ready for INR 3,000 Our next question comes from the line of Shweta Dixit with Systematics. Good evening, sir. Congratulations on a good set of numbers. Sir, we are at 6,000 rupees per ton of EBITDA, but it's time to steel prices we support them.

36:41 Last time, I I agree completely the product mix definitely increase... Improve UI, but last time when we saw these kind of margins, steel prices are very supportive. That was in FY '23 roughly after the COVID revival. So, prices still to normalize if from 65,000 falls back to 60,000 or maybe 55,000. So scenario what kind of margins do we think is sustainable Also, Shweta, in quarter to FY 'twenty three,

38:53 the quarter you are referring to, in that quarter, we had very substantial gains in the coated pre galvanized tubes, okay? Because the difference between HR coil and pre coated coils was very high because of COVID, China exports were shut. So Indian companies were exporting outside India. So there were shortage of GP coils in India, and that category did really well for us, performed really well for us, and we had backward integration there. But this EBITDA of INR 6,000 per tonne in quarter two FY 'twenty seven, this is much, much sustainable, like the points Sanjay mentioned and also the capacity utilization operating leverage benefits what we are getting at run rate of 960,000 tonne per quarter.

39:41 Our utilization rates are almost 70%, 75%. So this EBITDA per tonne is much, much more sustainable than what we saw in quarter two of FY 'twenty three. And you may see the repetition in quarter three also in December quarter. So once we are able to deliver 6,000 per tonne and above in two consecutive quarters, you will feel much more confident that this is now sustainable. And then we exchange our headlines, then we are talking Understood.

40:58 And just a follow-up, this quarter maybe discounts margins? Okay. Understood. Thank you, sir. That's it. You. Our next question is from the line of Kumar Soumya with Ambit Capital. Please go ahead. Hi, sir. Good evening. Am I audible? Go ahead, Kumar, please. Yes. Yes. So on the DUBRE 500 crores EBITDA, so currently, the capacity is about 300,000, right? And that 200,000 tonne addition plant by the end of FY 'twenty eight?

41:51 So this capacity will increase to 500,000 tonne as the brownfield expansion is underway, right? We are adding two new mills. So by March, during all this disruption, we did not slow down on the brownfield expansion, Kumar. So by March 27, the Dubai capacity will be 500,000 tons, 500,000 tons. And on that, we can achieve INR 8,000 to 10,000 per ton EBITDA because those two new mills which are coming up, they are also a pretty high margin products. Okay. And secondly, on the heavy and super heavy, if you could give some ballpark number as in what is the share of this super heavy and heavy during this quarter specifically?

42:37 So, again, I mean, we have stopped giving that sensitive information. We can take this This is Voltan. Okay. Sure. Sure. Understood. Lastly, we talked about operating leverage helping us. But then, again, we are adding 2,000,000 tons of capacity over the next one year. So do you see this 6,000 tons still sustainable after we are adding those 2,000,000 tons capacity over the next one, one point five years? So Kumar, those new plants, which are greenfield, they are pretty small in size, so they will not add to my fixed cost bill too much. Then rest of the expansion is in brownfield, which anyways will not hurt my existing fixed cost to a great extent. So that's why we believe that now the capacity expansion does not hurt our EBITDA spreads too much like it used to do two, three years ago.

43:28 Got it. Got it. And lastly, on the price gap that we discussed in the start of the call. Is it possible to maintain this gap when, say, steel price starts to revert back or if there's a moderation in steel price and the competitive intensity starts to go up? Because right now, there's a lot of space between you and the second player and the third player. So I just wanted to understand your view, how you're looking at it when the street price starts to normalize. So Kumar, see, I mean, right now, the two main segments, like APLLO brand and the roofing products, they contribute almost like 92%, 93% to the total volume. Now here, we are not seeing much of impact from the lower or higher steel prices, right? Demand remains intact.

44:16 Our margins remain intact because of better pricing. So no softness in EBITDA spreads as such. Now if steel prices go down, our SG premium sales will start going up, right? So that will boost the overall volume. And like we are saying that on a metric basis on Excel sheet, EBITDA per ton may look slightly soft. But then whatever incremental volume comes from SG premium, it will add to my absolute EBITDA. So we are not concerned per se if steel prices go down that my EBITDA growth should taper down. No, it will only accelerate with the better volume from the SG brand. Got it. Thank you. That was really helpful. Thank you. You.

45:04 Our next question comes from the line of Shantanu Mishra, an individual investor. Please go ahead. Good evening, sir. So my question is slightly based on FY 'twenty eight guidance that you had given earlier of 8,000,000 tonne capacity. So if we consider that capacity, so can we expect slight improvement in utilization post that capacity enhancement? So see, again, you need to look our business from four verticals, HOLO brand, roofing product. These two segments, we are pretty confident given the current existing geopolitical situation. We are confident that we will deliver double digit volume growth in these two categories.

45:50 Dubai, I mean, we are currently at a run rate of 100,000 tonnes per annum versus capacity, which will be ready by March 27, will be almost 500,000 tonnes. So whenever Dubai situation improves, we can immediately hit 200,000,300,000,400,000 tonnes in subsequent quarters, right, that run rate. And once geopolitical the situation improves, so we assume that there could be some softness in the commodity prices also, so which could lead to declining steel prices in India as well. So then our SG premium sales will take over. So the point what I'm trying to make is we are not too much concerned with the movement of steel prices going up or down. Our business model is such is so resilient that we can drive our profitability if steel prices are going up by having better pricing by focusing more on value added products.

46:54 And if steel prices are going down, at the same time, our low value added product, SG, can add to the momentum with the increased volume. Our next question comes from the line of Vikas Singh with ICHI Securities Limited. Thank you. Sanjay, this is just eight question. Housing almost 50% exposure. And if salt rain falls almost 13% deficit. So rainfall deficit because the portion of this would be on tier two, tier three cities and farmers as well in the demand.

47:45 Negative impact but demand offer increase. Sir, APLAPOLLOWAGE Thank you.

49:42 Thank you. Our next question comes from the line of Prateek Talwatkar with SMIFS. Please go ahead. Yeah. Prateek, go ahead, please. Am I audible now? You are audible, sir. You may proceed. Yes, yes. Yes. So thanks for the opportunity, sir, and congrats on a good set of number. Just one data point question. Sir, what is the bad mix for the Q2 and the H2 for FY 'twenty seven? Which mix? Value added mix. Value added so Prateek, I mean, we have given this in our presentation, barring SG premium, everything is value added.

50:30 Okay. Okay. Thank you. Thank you. Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments. Over to you, sir. Thanks, everyone, for joining in. Look forward to seeing you again in our quarter three FY 'twenty seven earnings call. Thank you. Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.