APL Apollo Tubes (533758) Q2 24/25 earnings summary

Executive summary

• Q2 FY25 saw a sharp correction in steel prices, leading to all-time low EBITDA spreads and significant inventory losses, but management remains confident about future growth and margin recovery.

• Sales volumes expanded quarter-on-quarter, benefiting from operating leverage, and the company is targeting 3.2 million tons in sales for FY25, with a strong outlook for H2.

• Channel partners are maintaining low inventory levels, indicating robust secondary sales and continued demand momentum.

• Ranked among the top 7 PVC pipe manufacturers in India with 2,16,000 ton capacity and 8 plants.

• Achieved 15% 5-year sales volume CAGR, 22% revenue CAGR, and 20% EBITDA CAGR.

• Consolidated revenue from operations for the quarter ended September 30, 2024, was ₹4,773.91 crore, up from ₹4,630.40 crore in the same quarter last year.

Financial highlights

• Q2 profitability was impacted by an inventory loss of INR 2,000 per ton due to a steep INR 7,500 per ton fall in steel prices, and additional customer discounts of INR 500 per ton to support sales.

• Q2FY25 revenue at ₹250.4 Cr, flat YoY, but down 19% QoQ; sales volume up 2% YoY, down 24% QoQ.

• Q2FY25 EBITDA at ₹19.4 Cr, down 20% YoY and 33% QoQ; EBITDA margin at 7.7%, down 193bps YoY.

• Net profit for the quarter was ₹193.17 crore, compared to ₹202.87 crore in the prior year quarter.

• Total income for the quarter was ₹4,788.69 crore, with a half-year total of ₹9,787.70 crore.

Outlook and guidance

• Management is confident of achieving and potentially surpassing the 3.2 million ton sales target for FY25, with quarterly volume targets rising from 7.5 lakh tons in Q2 to 11-12 lakh tons in subsequent quarters.

• EBITDA per ton is expected to recover to INR 4,000-5,000 in H2 FY25 and normalize at INR 5,000 per ton in FY26, with potential to reach INR 6,000 per ton as volumes ramp up.

• Targeting 25%+ revenue CAGR over the next three years.

• Capacity expansion to 2,86,000 tons in 2-3 years, including greenfield and brownfield projects.

• The company operates in a single segment: manufacturing of ERW steel tubes and pipes.