Summary
APL Apollo Tubes Limited - Q3 FY26 Earnings Call Summary Thursday, January 22, 2026 4:00 PM IST
Event Participants
Executives Anubhav Gupta (Chief Strategy Officer), Chetan Khandelwal (CFO), Deepak Goyal (Director, Operations), Rahul Gupta (Director), Sanjay Gupta (Chairman & MD)
Analysts Abhishek (DSP Mutual Fund), Aditya Walekar (Axis Securities), Ajit Shetty (LCO Quantum Solutions), Bharath Shah (ASK Investment), Darshan Mehta (Axis Capital), Harsh Vasa (SBI Capital Securities), Kumar Soumya (Ambit Capital), Mudit Bhandari (IIFL Capital), Omkar Ghugardare (Shree Investment), Pallav Agarwal (Antique Stockbroking), Prashant Sharma (JM Financial), Sneha Talreja (Nuvama)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Sales Volume (9M) | 2.50 million tons | +11% YoY; within the guidance range of 10-15%. |
| Sales Volume (Dec-25) | 375,000 tons | Implies 4.4MT annual run rate; tested 5MT capacity at 90% utilization. |
| EBITDA per ton (9M) | >₹5,000 | Exceeded guidance; driven by premiumization and branding strategy. |
| Target Volume (FY26) | ~3.55 million tons | Management expects 1.03-1.05 million tons in Q4. |
| Net Cash | ₹560 crores | Surplus cash position; targeting ₹1,500 crores by end of Q4. |
| ROCE | 33% | Current level; management targets a move toward sub-40% levels. |
| Working Capital Days | 30+ days | Management targeting reduction to ~20 days through inventory rationalization. |
Geographic & Segment Commentary
- Raipur (Value-Added): Being repositioned as the central hub for all-India value-added and specialized products (above 6mm thickness). Logistics costs averaged ₹2,600/ton, which management aims to offset through higher margins on specialized mixes and centralizing inventory to reduce overall holding.
- Regional Plants: Local plants are being restricted to high-volume, thin-wall products (below 6mm) to cater to local markets. This strategy reduced freight costs from ₹1,150/ton towards a target of ₹750/ton and improved power efficiency from 92 units to 84 units per ton in December.
- Dubai Plant: Achieving a monthly run rate of 25,000 tons with an EBITDA target of ₹7,000/ton. Management views this as a key contributor to the long-term low-tax regime and margin expansion.
Company-Specific & Strategic Commentary
- Dual-Brand Strategy: Leveraging “APL Apollo” as a premium brand (₹3,000-4,000/ton premium) while using the “SG” brand to compete with smaller players at lower price points. This allows the company to act as both H1 (highest price) and L1 (lowest price) in the market to ensure 100% capacity utilization.
- Capacity Expansion (8MT Vision): Investing ₹1,500 crores over 2 years to reach 8 million tons. This includes 4 greenfield plants (East, South, West India), expansion in Raipur, and 1 million tons through debottlenecking (modernizing existing mills for ₹200 crores).
- Super Specialty (10MT Vision): Targeting 2 million tons of specialized tubes for EV, aerospace, and oil & gas by 2030. Management is actively scouting for JVs with Japanese, Korean, and Western companies to fast-track entry into these high-margin (EBITDA >₹10,000/ton) segments.
- Liability-Free Goal: Aiming to match current liabilities with surplus cash to graduate from being “debt-free” to “liability-free” by FY27.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Sales Volume Growth | 20% YoY for Q4FY26 & FY27 | Driven by entry into new regional markets (East India) and aggressive SG brand pricing. |
| EBITDA per ton | ~₹5,500 (FY27) | Upgraded from ₹5,000; driven by fixed cost dilution and lower freight/power costs. |
| Annual Sales Volume | >4.2 million tons (FY27) | Minimum floor guided by management based on current momentum. |
| Dividend Payout | 25% (FY27 onwards) | Targeted increase from current 20% floor due to high free cash flow generation. |
Risks & Constraints
| Risk | Context |
|---|---|
| Raw Material Volatility | HRC prices are a pass-through with 5-8 days lag; however, extreme swings (10%+) can impact short-term margins as seen in prior years. |
| Market Share Concentration | Reaching 4.5 million tons implies a ~65% domestic market share; management admits they must sell at “any price” in the SG segment to protect utilization. |
| Execution Risk | Adding 3 million tons of capacity in 24 months requires timely commissioning of 4 greenfield projects simultaneously. |
Q&A Highlights
Cost Optimization
- Question: What led to the significant upgrade in EBITDA guidance to ₹5,500? (Sneha Talreja)
- Answer: Fixed costs reduced by ₹300-400/ton due to higher volume (3.7L tons/month vs 2.6L). Strategic shifts reduced freight by ₹100-200/ton and power consumption from 92 to 84 units per ton (Sanjay Gupta).
Inventory Rationalization
- Question: How will you reach a negative working capital cycle? (Bharath Shah)
- Answer: Every regional plant now only makes products up to 6mm; all 6mm+ products are centralized in Raipur. This restructuring allowed us to clear old inventory and operate on a much leaner basis (Sanjay Gupta).
Competition & Strategy
- Question: How can you maintain 20% growth when you already have 60%+ market share? (Kumar Soumya)
- Answer: Our competitors are small, adding only 5,000-10,000 tons. We are aggressive with the “SG Premium” brand; we will sell it at any price point—even near HRC cost—to ensure our mills stay full (Sanjay Gupta).
Specialty Segments
- Question: What is the EBITDA profile of the 2030 specialty vision? (Omkar Ghugardare)
- Answer: We are targeting segments like EV, aerospace, and titanium pipes through JVs. These segments typically offer EBITDA of ₹10,000-15,000 per ton (Anubhav Gupta).
Key Takeaway
APL Apollo delivered a robust Q3 FY26, testing its 5 million ton capacity with record monthly volumes of 375,000 tons in December. The company successfully executed a dual-brand strategy, maintaining a ₹3,000-4,000 per ton premium on the APL Apollo brand while using the SG brand to capture volume from smaller players. Management upgraded its FY27 EBITDA guidance to ₹5,500 per ton and volume growth to 20%, supported by significant operational efficiencies in freight, power, and fixed-cost dilution. Strategically, the firm is transitioning from a debt-free to a liability-free balance sheet, targeting a ₹1,500 crore cash surplus by year-end. With a clear roadmap to 8 million tons by FY28 and a 10 million ton vision for 2030 involving high-margin specialty JVs, the company remains positioned to dominate the domestic structural steel market while expanding into global specialty niches. Management remains confident in passing through raw material fluctuations within a 5-8 day window.
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