APL Apollo Tubes Limited, India’s leading branded structural steel tubes manufacturer, is looking to achieve a double-digit growth in EBITDA margins in three years by continuing with cost-control, new innovations and other value-additions and sustain the current EBITDA run rate of INR 250 crore, the company said at an investor’s call to announce its first quarter (Q1) results.
The company is of the view that the market is likely to recover by 15-20% in Aug’21 and is targeting sales volume of 1.8-2.0 million tonnes (mn t) in FY’22.
The company is also focusing on a capex increase from the existing 2.6 mn t to 4 mn t in FY’22. Plus, it is looking at a 1 mn t capacity expansion from its 11th plant in Raipur and the remaining 0.5 mn t from other brownfield expansions.
Furthermore, having good enquiries in hand, APL Apollo has a couple of ongoing projects using tubular technology directly with EPC contractors:
1.Hospital (2mn sq ft) project to be completed within 6 months. The structure is to be completed within 50 days.
2.Oxygen plant (0.1mn sq ft) structure to be completed in 15 days.
The company is showing keen interest in securing multiple hospital construction and bullet train orders.
The Tricoat merger is on track and the process will be completed by FY’22.
Other highlights
1. Q1 sales volume down 14%: The company registered a 14% decline in its sales volume to 373,124 tonnes (t) in Q1FY’22 compared to 435,000 t in Q4FY’21. The sales were impacted by the second wave of Covid-19 and sporadic lockdowns. Also, high raw material prices at INR 5,000/t and net realisation at INR 8,500/t contributed to the low sales volume.
2. EBITDA/t shot up 44% q-o-q in Q4: The company registered INR 6,825 EBIDTA/t, marking a significant growth of 44% quarter-on-quarter (q-o-q) in Q1 compared to INR 4,742 in Q4 FY’21. Meanwhile, on an annual basis, Apollo recorded INR 2,982 in Q1FY’21, up 129% y-o-y.
3. High steel price contraints: The company fears if the steel prices continue to rise, domestic demand will be affected, thereby, impacting sales. Also, the gap created between the long and flat products are making people shift towards longs.
4. Value-added product expansion: In Q1FY’21, the value-added portfolio was assessed at 67% against 60% in Q4FY’21.
5. Update on net working capital cycle: The net working capital cycle reduced to 7 days in Q1 against 8 days in FY’21. However, the pandemic has started to improve from late July which gives good visibility for the rest of FY’22.
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