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Higher discount hurts margin

In-line revenue; EBITDA below our estimates

APL Apollo Tubes (APAT IN) net sales improved ~6% YoY and ~13% QoQ to ~INR 45.7bn, largely in line with our and Consensus estimates of ~INR 44bn and ~INR 45bn, respectively. However, EBITDA declined ~13% YoY and remains flat QoQ at INR 2.8bn, slightly below our and Consensus estimates of ~INR 3.0bn and INR 3.1bn, respectively. PAT fell ~16% YoY but rose~3% QoQ to ~INR 1.7bn. Net cash was ~INR 0.2bn as on end-FY24 vs net debt of ~INR 2.4bn as on end-FY23. Further, working capital days fell from five days in FY23 to one in FY24.

EBITDA/tonne falls ~17% YoY and ~11% QoQ

Sales volume grew ~4% YoY and ~12% QoQ to ~0.68mn tonne. Realization was up ~2% YoY but flat QoQ at INR 67,315/tonne. Operating cost moved up ~5% YoY and ~2% QoQ to INR 66,102/tonne. EBITDA/tonne contracted ~17% YoY and ~11% QoQ to INR 4,132 due to 1) higher discount offered to customers to achieve volume growth, and 2) increased sale of low-margin roofing sheet products.

Volume CAGR of 20-25% over the next three years

As per management, FY24 volume of ~2.6mn tonne was below guidance of ~3mn tonne, primarily due to the slowdown in construction activities and delay in ramp-up of Dubai as well as Chhattisgarh-based Raipur units. Management aims for a volume CAGR of 20-25% over the next three years on 1) rise in capacity from the current 3.8mn tonne to 5.0mn tonne in FY25, and 2) ramp-up in utilization of Raipur & Dubai units.

Valuation: reiterate Accumulate with a lower TP of INR 1,628

We cut our EBITDA by ~20% for FY25E and ~10% for FY26E to factor in volume underperformance. However, we retain our long-term positive stance and believe capacity addition & gradual ramp-up will be key volume drivers. Also, APAT’s industry-leading capacity and strong brand positioning bode well for margin. Despite being in capex mode, the company has turned net cash in FY24 and management targets to achieve a net cash of ~INR 10bn by end-FY25. Therefore, we reiterate Accumulate. We roll over to March 2026E from December 2025E, with a new TP of INR 1,628 from INR 1,679 on 30x (unchanged) March 2026E P/E.

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