APL Apollo Tubes

APL Apollo Tubes reported a robust Q3 FY26, achieving a 9-month sales volume growth of 11% YoY and an EBITDA per ton above INR5,000, despite facing challenges like a construction ban in Delhi NCR and falling raw material prices. The company demonstrated strong operational efficiency, with December sales volume reaching 375,000 tons, annualizing to 4.4 million tons, and capacity utilization hitting nearly 90% on its 5 million ton capacity. This performance was attributed to strategic pricing and brand leverage.

The company is aggressively expanding its capacity from the current 5 million tons to 8 million tons in the next two years, with a total investment of INR1,500 crores funded by internal cash flows. This includes four greenfield projects (two in East India, one in South India, one in West India) and one brownfield expansion in Raipur for value-added products. An additional 1 million tons will come from debottlenecking. The long-term vision is to reach 10 million tons of steel tube capacity by 2030, with the incremental 2 million tons focused on super specialty segments.

APL Apollo has successfully expanded its EBITDA spreads, with APL Apollo-branded products commanding a premium of INR3,000-4,000 per ton and the SG brand contributing INR1,500-2,000 per ton. Strategic cost control measures, including significant reductions in fixed costs (INR300-400, likely per ton), freight costs (INR100-200 per ton), and electricity consumption (from 92 units till October to 84 units in December), have contributed to the upgraded EBITDA guidance of almost INR5,500 per ton.

The company is prioritizing a liability-free balance sheet, currently holding a surplus cash of INR5.6 billion (INR560 crores), with a target to reach INR1,500 crores by Q4 FY26. Efforts are underway to rationalize inventory days from over 30 to a 20-day range, which will further improve cash flow. The Return on Capital Employed (ROCE) is expected to expand from 33% to sub-40 levels, reflecting improved capital efficiency and a strong financial position.

APL Apollo has upgraded its sales volume growth guidance to 20% for both 4QFY26 and FY27, alongside the improved EBITDA per ton guidance of almost INR5,500. The company's strategy involves leveraging its dual-brand approach (premium APL Apollo and base category SG brand) to capture market share effectively. Management expressed confidence in achieving these targets, citing a significant competitive advantage over the next largest player.

The company is exploring high-margin specialty tube segments, which offer EBITDA spreads of INR10,000-15,000 per ton. To accelerate entry into these specialized areas (e.g., EV, aerospace, petrochem, oil and gas, heavy engineering), APL Apollo is actively seeking joint ventures with Japanese, Korean, European, and American companies. The management expects to provide more clarity on these global partnerships and specific segments within the next 2-3 quarters.