APL Apollo Tubes Limited Q1 FY23 Earnings Conference Call Insights

Key highlights from APL Apollo Tubes Limited (APLAPOLLO) Q1 FY23 Earnings Concall

Management Update:

• APLAPOLLO said volume fell short of expectations in 1Q23, losing about 60,000 tons of sales volume. However, the company expects this to recover in coming quarters as the prices stabilize.

Q&A Highlights:

• Rahul Agarwal from InCred Capital asked about the outlook on HRC and the price today. Sanjay Gupta MD said the price today is close to INR57. And looking at international market and local market, it may come down to INR52 or INR53 in the next 1-2 months.

• Rahul Agarwal of InCred Capital asked about the overall outlook for the full year in terms of volume. Sanjay Gupta MD said that for 1H, the company took a target of 10-11 lakh tonne and for 2H target was of 12-13 lakh tonne. Still the company believes it will fulfill the target.

• Rahul Agarwal with InCred Capital also asked about the TriCoat EBITDA per tonne of INR9,200 for 1Q23 being high.  Sanjay Gupta MD replied that it was due to better sales mix in TriCoat in 1Q23. It should retract back to its normal long-term avg. of INR7,000 to INR8,000 per ton the company has been guiding.

• Vikash Singh of Phillip Capital asked about the market share expectation by FY25 for the company. Sanjay Gupta MD said today the market is close to 7 million tonne. Of that 3 million is primary steel and 4 million from secondary steel. Out of the 3 million, APLAPOLLO is targeting 2.3 million. The structural steel market share expectation is between 65-70% in FY25.

• Vikash Singh from Phillip Capital enquired if the company has taken any inventory write-down during 1Q23. Sanjay Gupta MD clarified there is no inventory write-down. The raw materials the company is taking is selling as per its raw material prices.

• Akash Pawar with Sahasrara Capital asked about the impact of primary steel capacity coming in India on APLAPOLLO margins. Deepak Goyal CFO answered that it’s not going to impact the company’s margins, ideally it should increase. It will impact the steel sector because when there is more capacity coming in, the historical pricing upside will mellow down.

• Bhavin Pandey asked that given the recent correction in steel and commodity prices, if the company is expecting rest of the 3 quarters to take up the volumes lost in 1Q23. Sanjay Gupta MD said it’s definitely yes. The same phenomenon happened in 2H22. So APLAPOLLO is expecting the lost volume to recover.

• Rahul Jain from Systematix enquired about the product profile from the Raipur plant.  Sanjay Gupta MD said that for Raipur, there are three product categories. Out of the 3 product categories, 1 category is where APLAPOLLO is launching the product for the first time in the in the world, which is color coated Tubes. Second is 500 square diameter heavy tube, the first in India. And third is color coated sheets.

• Rahul Jain from Systematix also asked if the Raipu plant would increase the company’s margin profile. Sanjay Gupta MD said that the EBITDA per tonne should be INR6,000-8,000 per tonne. The existing margin range is INR4,500-5,000 per tonne.