APOLLOPIPENSEQ4 FY2022May 09, 2022

Apollo Pipes Limited

8,102words

123turns

11analyst exchanges

4executives

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Management on call

Udit Gajiwala

YES SECURITIES LIMITED

Sameer Gupta

MANAGING DIRECTOR – APOLLO PIPES LIMITED

Ajay Kumar Jain

CHIEF FINANCIAL

Anubhav Gupta

GROUP CHIEF STRATEGY

Key numbers — 40 extracted

26%

segment. We have reported strong performance during the quarter with our sales volume growing by 26% Y-o-Y to 16409 metric tons per annum. As the contribution from the SDP CPVC pipes and value added

rs,

tfolio increasing reach in your geographies and incremental capacities. Over the next few quarters, we anticipate this performance trend to strengthen led by an improving demand environment, expansi

42 Crore

take in utilization levels. Moving onto the operational front, the company did an annual capex of 42 Crores towards enhancement of capacity, debottlenecking and adding balancing equipments majorly in CP

2247.5 Crore

demand and consumption in key domestic markets. Revenue from operations for the quarter stood at 2247.5 Crores as against 1074.2 Crores in Q4 FY2021 higher by 42% and FY2022 revenue growth was even better at

1074.2 Crore

n key domestic markets. Revenue from operations for the quarter stood at 2247.5 Crores as against 1074.2 Crores in Q4 FY2021 higher by 42% and FY2022 revenue growth was even better at 51% Y-o-Y with revenues

42%

operations for the quarter stood at 2247.5 Crores as against 1074.2 Crores in Q4 FY2021 higher by 42% and FY2022 revenue growth was even better at 51% Y-o-Y with revenues of 784.1 Crores against 518.

51%

as against 1074.2 Crores in Q4 FY2021 higher by 42% and FY2022 revenue growth was even better at 51% Y-o-Y with revenues of 784.1 Crores against 518.1 Crores last year. Sales volume for the quarter

784.1 Crore

Q4 FY2021 higher by 42% and FY2022 revenue growth was even better at 51% Y-o-Y with revenues of 784.1 Crores against 518.1 Crores last year. Sales volume for the quarter stood at 16409 metric tons reportin

518.1 Crore

42% and FY2022 revenue growth was even better at 51% Y-o-Y with revenues of 784.1 Crores against 518.1 Crores last year. Sales volume for the quarter stood at 16409 metric tons reporting a growth of 26% as

14%

metric tons and FY2022 sales volume stood at 53849 metric tons as against 47333 metric tons up by 14%. On the profitability front, EBITDA for the quarter improved by 5% Y-o-Y to Rs.28.4 Crores vers

ainst 47333 metric tons up by 14%. On the profitability front, EBITDA for the quarter improved by 5% Y-o-Y to Rs.28.4 Crores versus 27 Crores in Q4 FY2021. EBITDA margin which stood at 11.5% in Q4

Rs.28.4 Crore

metric tons up by 14%. On the profitability front, EBITDA for the quarter improved by 5% Y-o-Y to Rs.28.4 Crores versus 27 Crores in Q4 FY2021. EBITDA margin which stood at 11.5% in Q4 FY2022 was lower by 406

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Guidance — 20 items

Sameer Gupta

opening

“To begin with, I am pleased to unveil the performance, which has been outstanding compared the CAGR of the industry in the segment.”

Sameer Gupta

opening

“Over the next few quarters, we anticipate this performance trend to strengthen led by an improving demand environment, expansion in addressable markets and sustained uptake in utilization levels.”

Sameer Gupta

opening

“Going forward we remain confident that this product along with our other value added book often like fitting, solvent cements, fitting adhesives products will enhance our reach and sales.”

Sameer Gupta

opening

“Additionally, we are aiming to optimally utilizing our capacity over the next coming years, which will also help augment sales volume going ahead.”

Sameer Gupta

opening

“Going forward, we expect to deliver a robust performance in the quarters to come and further gain momentum on the back of making India's journey for improved totality, steady extension essentially in key geographical areas and better brand acceptance and recall.”

Ajay Kumar Jain

opening

“Going forward, we anticipate EBITDA margin trends to 15.”

Ajay Kumar Jain

opening

“On the balance sheet front our net cash position stood healthy around 3.3 Crores in FY2022 with healthy cash flow generation and improving capacity utilization level we are in the planning mood for our next phase of capex, which will be focused towards value added products witnessing strong demand.”

Ajay Kumar Jain

opening

“Capex will be largely funded from internal cash flows.”

Ankit

“Outlook for both the segments building materials had been doing pretty well for sometime I think last two years had been tough and above, given the increase in prices of agri products, do you think the agri demand might also revive in the next year and how has been the demand for the month of April and first week of May, if you can talk about on agri particularly?”

Ankit

“Given the next year, how has been the next year, on agri side during April?”

Risks & concerns — 3 flagged

The impact of improved capacity in earlier quarter has a visible growth in sales of locomotive products.

— Sameer Gupta

Just last question on the CPVC resin availability, so we had been hearing the last year has been in terms of procuring CPVC resin, so how is situation currently and how are the plays in the situation where because supplier of CPVC is posing challenge?

— Ankit

Sir, in the last question you mentioned that very aggressive revenue growth we have in the next three years and I pressure that would be primarily from your building material side, so any colour in terms of how has been the channel addition in terms of non-agri distributors, has it been improving significantly as compared to our agri distributors?

— Bhargav Buddhadev

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Q&A — 11 exchanges

Thanks for the opportunity and congratulations for a great numbers given the volatility on the PVC prices and good growth in the volumes that we have seen. Sir, if it is give us the broad breakup of state of revenues in agri and building segments, so what has been the breakup of sales from agri and building segments for Q4 FY2022 and FY2022 full year and the outlook as we see for the current week?

Anubhav Gupta

Good evening. This is Anubhav Gupta. So, between the agri and building material if you see the mix broadly we closed FY2022 at 50:50, which was 40:60 in the beginning and we improved it to 50:50 through all the quarters and where the CPVC and the bathroom fittings and water tanks growing at much faster pace versus the overall growth of the company, we see this mix will move towards 60:40 and 65:35 eventually and plus also the push we will get from the media campaign, which we started, so that also will help us build our brand in the building material category at the accelerated phase, so we be

Good evening, Sir. My first question is what is the portion of fittings in CPVC particularly in our revenue mix for financial year 2022?

Anubhav Gupta

If you see our fittings the proportion will be around 15%. What about this CPVC? CPVC again will be in the same range. 15% you are saying? Yes. Right and Sir, can you tell the demand outlook for the next year for our products particularly the building segment? Yes, we are pretty confident of healthy growth because like I said that we are targeting 30% revenue growth, which will be constituting of 15% to 20% volume growth and rest value growth so there are like two to three factors, which I like to highlight, one is that our southern western plants and even the new plant, which we started last

Sir, thank you very much for the opportunity. So I had some questions to the previous participant, if I look at our historical kind of doubled our volumes in the last five years and now we are talking about doubling our volumes more or less in the next three years, so just wanted some more color on that which are the segments that we are targeting and also maybe some thoughts on the capex over the next two to three years, which may be required even we maybe around 95000 or maybe 100000 tons of volume, so what kind of capex will be needed to ramp up the capacity, so some thoughts on that?

Anubhav Gupta

Just one clarification that we have doubled our revenue not the volume right and the guidance to more than double is also revenue in the next three years, not the volume right, so the same revenue CAGR we are talking about, so the key drivers for this aggressive growth are various, so one is the product expansion what we have done in the last two years so those products will ramp up, we see good demand for those products, we have already started marketing those products, the acceptance has been good for our clients, from our customers and now the production is wrapping up, there is good volume

Sir, thanks for the opportunity and congratulations for good set of numbers. Sir, firstly on the Chhattisgarh capex which was commissioned a few months ago, so how is the sections witnessing for the central region from there and secondly are we also catering the eastern market from that plant?

Anubhav Gupta

That capex was done keeping in mind two things, one was to penetrate in the agreement of Central India, which was MP and Chhattisgarh and then to start selling in our eastern markets to both building materials right so the total capex was completed on month of March-April last year, so it has been almost like 11-12 months of operations we have seen and we have targeted to ramp up this plant in the next two years so the first 12 months performance has been as per expectation and the results are encouraging, we have been able to add good distributors as well there and with the help of our above

Good afternoon team and congrats on a good performance. My first question is, is it possible to highlight what could be the overlap in terms of distribution between your bath fitting business and the pipe business?

Anubhav Gupta

So the channel is same, Bhargav, almost same. Understood, secondly in the last two years the receivables days have been coming down so earlier it was 60 to 65 days and it has reduced to about to 50 to 55 days now that the raw material situation is likely to improve, do you expect the trade payable days to be back to historical levels or this is where it should be maintained? We have lowered our credit payables from 34 to 26, so I guess 26 to 30 should be the new normal going forward now that we are getting better terms as our scale is increasing whether it is exports or domestic and going forw

Sir, congratulations on the great set of numbers. I have a couple of questions like management has mentioned about the growth of 30% CAGR for the next three years, but what kind of ROCE target we are looking to end up at the three year level, perhaps we are sitting at around 16% as of FY2022?

Anubhav Gupta

I mean if you see the ROCE and ROE on reported basis it appears at 16.5%, but on our business ROCE which is I mean core business ROCE if you just add debt and equity so ROCE jumped to 20% I mean again the other way to look at it is today our gross block is around 350 Crores and our working capital is 150 Crores, so the total capital employed is below 500 Crores and on this we have generated almost 100 Crores EBITDA and if you deduct 15 Crores to 20 Crores depreciation that is the ROCE, but then we have already increased our capacity in a significant way right. Today we are at 45% to 50% utiliz

Thank you for the opportunity. My question is what would be our non-pipe revenue for the year FY2022 and what would be targets going forward?

Anubhav Gupta

I think non-pipe you will want to include the fittings and tanks? Yes. So I think put together that should be around 18% to 19%? So, fitting would be around 15% right? Yes, that is right, 15% fitting and 4% to 5% other products, yes. That 15% to 20% volume guidance including fittings or non-fitting? I mean that we are talking at company level right, so if you have to break it up into sales volume and value that is what will become 20% volume and 10% value, but if we see quick ramp up in our value added products, so the volume growth could be less, but the value could be high, so I think that w

Thank you for the opportunity to ask the question. Actually my question was just wanted to clear a little bit of confusion around you know what is the value added part of the business and how do you split it between fittings, tanks and CPVC pipes, so I am sorry if this question is repetitive, but the way I understand is, is 15% in fitting, 4% to 5% is pipe and another 15% is CPVC pipe, is it?

Anubhav Gupta

Yes, broadly you are right and plus in UPVC pipes that is divided into agri and building materials, so building materials is value added. Okay and how does that relate to our EBITDA per ton because typically I mean from the looks at least the value added component is high now so does that mean 17000 per ton is little low in that case, is that I am missing something, I just want to clarify my doubt here? Yes, EBITDA per ton varies from 11000 to 12000 ton to 25000 per ton. That is correct. Then what you are saying is that as the share of our fitting when times goes up we would have a better EBIT

Good evening, Sir. I just wanted to ask the capex number, which you have guided in this, what is the proportion of maintenance capex and what is the growth capex and what will be this proportion going forward also?

Anubhav Gupta

Maintenance will be 20% to 25% and 75% will be growth capex. Thank you.

Good evening everyone. First question is in terms of revenue mix, so can you share the north, east, west, south revenue mix in FY2022?

Anubhav Gupta

Manish, north will be 60% to 70% and rest will be divided among the equal zones. Can you possible to share, how the growth in this year specifically in terms of our north having a share larger right now, wanted to understand the overall growth if you look at can you break it up how the north had grown and the rest of the geographies have grown in FY2022? If you see I mean we have grown at 50% at company level so north will be like 30% to 35% north and the other states because south we got the plant 18 months ago, so in east we started the production 12 months ago and Ahmedabad also the west zo

Thank you everyone. I hope we have been able to answer all your questions satisfactorily. Should you need any clarifications or would like to know more about the company, please feel free to contact our team. Thank you once again for taking the time out given us on this call.

Management

Speaking time

Anubhav Gupta

Moderator

Ankit

Jigar Shah

Anika Mittal

Manish Mahawar

Sameer Gupta

Aman Agrawal

Bhargav Buddhadev

Vijay Chavan

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Opening remarks

Udit Gajiwala

Thanks, Nirav. Good evening and on behalf of Yes Securities Limited, I welcome you all on the Q4 FY2022 earnings call of Apollo Pipes Limited. From management side, we have with us Mr. Sameer Gupta - Managing Director, Mr. Ajay Kumar Jain - Chief Financial Officer and Mr. Anubhav Gupta – Group Chief Strategy Officer. We shall start the call with brief opening remarks from the management side and then open the call for their questions. Over to you, Mr. Gupta!

Sameer Gupta

Thank you. Good afternoon everyone and thank you for joining us on our Q4 FY2022 earnings call to discuss the operating and financial performance. I hope you all had the opportunity to go through our results presentation, which provides details of our operational and financial performance for the fourth quarter and full year ended March 31, 2022. To begin with, I am pleased to unveil the performance, which has been outstanding compared the CAGR of the industry in the segment. We have reported strong performance during the quarter with our sales volume growing by 26% Y-o-Y to 16409 metric tons per annum. As the contribution from the SDP CPVC pipes and value added product segments were the major drivers for the growth complimented by expanding product portfolio increasing reach in your geographies and incremental capacities. Over the next few quarters, we anticipate this performance trend to strengthen led by an improving demand environment, expansion in addressable markets and sustained

Ajay Kumar Jain

Good afternoon everyone. I will briefly cover the financial performance during the quarter and full year ended March 31, 2022. The company delivered solid operational and financial performance during the quarter driven by an uptake in demand and consumption in key domestic markets. Revenue from operations for the quarter stood at 2247.5 Crores as against 1074.2 Crores in Q4 FY2021 higher by 42% and FY2022 revenue growth was even better at 51% Y-o-Y with revenues of 784.1 Crores against 518.1 Crores last year. Sales volume for the quarter stood at 16409 metric tons reporting a growth of 26% as against 12987 metric tons and FY2022 sales volume stood at 53849 metric tons as against 47333 metric tons up by 14%. On the profitability front, EBITDA for the quarter improved by 5% Y-o-Y to Rs.28.4 Crores versus 27 Crores in Q4 FY2021. EBITDA margin which stood at 11.5% in Q4 FY2022 was lower by 406 BPS Y-o-Y. EBITDA for FY2022 stood at 93.4 Crores as against 74.3 Crores growing by 26% Y-o-Y wit

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