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 to ₹558.9 Cr in H1FY25, 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.

• PAT dropped 38% year-over-year to ₹16.7 Cr, reflecting margin pressures and higher costs.

• Ongoing capacity expansion and strategic acquisition of Kisan Mouldings to drive future growth.

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 at ₹19.4 Cr, down 20% year-over-year and 33% sequentially; margin at 7.7%.

• Profit before tax for the quarter was ₹252.02 crore; for the half-year, it was ₹537.51 crore.

• Net working capital days increased to 54 in H1FY25 from 19 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 25%+ revenue CAGR over the next three years.

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

• 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.

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