APL Apollo Tubes Limited

APL Apollo Tubes reported a robust Q3 FY26, with 9-month sales volume increasing 11% YoY, aligning with its 10-15% guidance. The 9-month EBITDA per ton surpassed expectations, exceeding INR5,000. In December 2025, the company achieved a sales volume of 375,000 tons, demonstrating almost 90% utilization of its 5 million ton capacity. Consequently, management upgraded its sales volume growth guidance to 20% for 4QFY26 and FY27, and raised its EBITDA guidance to almost INR5,500 per ton.

The company's strategy of pricing premiumization for its APL Apollo brand has been successful, with the market accepting a INR3,000-4,000 per ton premium for its products. The introduction of the SG brand in the base category has allowed the company to compete effectively with smaller players in the structural steel tube segment. This dual-brand approach has been instrumental in expanding EBITDA spreads and capturing a broader market.

APL Apollo Tubes is aggressively pursuing capacity expansion, aiming to increase from 5 million tons to 8 million tons in the next two years. This expansion involves an investment of INR1,500 crores, entirely funded by internal cash flows. The plan includes four greenfield projects (two in East India, one in South India, and one in West India) and one brownfield project in Raipur for value-added products. Additionally, 1 million tons of capacity will be added through debottlenecking with minimal investment, contributing to a vision of 10 million tons capacity by 2030, with 2 million tons dedicated to super specialty segments.

The company has implemented significant cost control measures. Increased sales volumes, reaching 3.7 lakh tons per month, have led to a substantial reduction in fixed costs. Efforts to optimize logistics include reducing freight costs by focusing on local markets, targeting INR750 per ton from previous rates of INR1,150-2,600 per ton. Electricity consumption has also been reduced from 92 units in October to 84 units in December, further contributing to margin improvement.

APL Apollo Tubes reported a surplus cash of INR5.6 billion (INR560 crores) and anticipates this figure to reach INR1,500 crores by Q4 FY26. Gross debt has reduced to INR548 crores as of December 2025, down from INR600-615 crores in March 2025. The company is on the verge of becoming a liability-free entity, aiming to reduce working capital days from 30+ to a 20-day range. ROCE currently stands at 33% and is projected to expand to sub-40 levels, with a target of 40% within FY27.

Management confirmed that changes in raw material prices, particularly HRC, are fully passed on to customers. This pass-through mechanism operates with a short lag of 5-8 days, effectively insulating the company's margins from raw material price volatility. This established practice is well-understood and accepted by both the industry and channel partners.