APL Apollo Tubes Limited Q3 FY22 Earnings Conference Call Insights

Key highlights from APL Apollo Tubes Limited (APLAPOLLO) Q3 FY22 Earnings Concall

Management Update:

• APLAPOLLO said it was a mixed quarter for the company, with volume falling short of expectations. The company reiterated its FY25 sales volume outlook of 4 million tonnes, considering the new Raipur facility will start operation and production would ramp at the earliest.

Q&A Highlights:

• Sujit Jain from ASK Investment asked about the increase in price difference between steel tube made from scrap and HRC and what’s the difference currently. Sanjay Gupta MD answered that the difference in the month of November and December was about INR 20,000/tonne. Now there has been decrease in flat product price and increase in long products prices. So now the difference is close to INR7,000-8,000/tonne.

• Rahul Agarwal from InCred Capital enquired if HRC normalizes and falls by another 20% hypothetically what happens to the EBITDA per tonne in FY23. Sanjay Gupta answered that if there is no big structural change, the company won’t be affected. The company would benefit in margins if HRC comes down.

• Rahul Agarwal from InCred Capital also queried about the monthly EBITDA absolute run rate the company aims for next year. Anubhav Gupta replied that the company doesn’t want to breakup EBITDA per tonne on a yearly basis. The guidance is of 4 million tonne sales volume by FY25. EBITDA per tonne, the company expects INR250 per tonne of gradual improvement.

• Abhishek Ghosh from DSP Mutual Fund asked about the new initiative of Apollo Mart. Sanjay Gupta MD said that in the furniture store the company is not investing any money; 100% money is taken care by the distributors. APLAPOLLO will give designs and the techniques of working. On the tech side, the company is investing INR5-10 crore.

• Ankush Agarwal from Surge Capital asked that if the company’s business gains conversion on a margin basis of HRC or on a tonne basis. Sanjay Gupta MD answered that it’s on a tonne basis.

• Ritesh Shah from Investec was asking about any update on outsourcing the commoditized part of the company’s business. Sanjay Gupta answered that right now there is no logic of outsourcing but when the company’s capacity is fulfilled then it would go four outsourcing.

• Ritesh Shah from Investec additionally asked about the company’s thoughts on setting up a plant overseas, in UAE. Sanjay Gupta MD commented that APLAPOLLO opened a small company in UAE. And in April or May the company is going to start the plant. And the idea behind setting up the UAE plant is to grow the export market of the company.

• Nakshita Mehta from Credent Asset Management enquires about the visibility of the Raipur plant that is expected to be partially operational by H1 FY23. Sanjay Gupta MD said that about 4 lakh tonne of quantity the company is targeting from the new Raipur plant in next FY22-23.

• Nakshita Mehta from Credent Asset Management also asked about the incremental EBITDA the company is expecting from the Raipur plant. Sanjay Gupta said that INR 250 crore is what the company is targeting next year from the Raipur new plant.