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.

• Achieved 10% year-over-year revenue growth in H1FY25, reaching ₹558.9 Cr, with sales volume up 14% to 46,727 MT.

• 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.

• Strategic acquisition of Kisan Mouldings expanded capacity and product range, supporting pan-India growth ambitions.

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

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 EBITDA was ₹19.4 Cr, down 20% YoY and 33% QoQ; EBITDA margin dropped to 7.7%.

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

• Net debt increased to ₹71 Cr in H1FY25 from ₹7 Cr in FY24.

• Employee expenses for Q2 were INR 870 million, with a sustainable quarterly run rate expected at INR 800 million as volumes rise.

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.

• Targeting over 25% revenue CAGR over the next three years, driven by capacity expansion and value-added products.

• 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.

• Ongoing brownfield and greenfield expansions to raise total capacity to 2,86,000 tons in 2-3 years.

• Sales volume guidance is maintained at 4 million tons for FY26 and 5 million tons by FY27.