Apollo Pipes Limited
8,270words
109turns
11analyst exchanges
3executives
Management on call
Pranav Mehta
EQUIRUS SECURITIES LIMITED
Sameer Gupta
MD – APOLLO PIPES LIMITED
Ajay Kumar Jain
CFO – APOLLO PIPES LIMITED
Key numbers — 40 extracted
18%
ur channel partners who went for these talking modes. The PVC resin prices have been corrected by 18% in Q1 FY2023 and are further down by 17% in the July month so far. The current levels are fairly
17%
lking modes. The PVC resin prices have been corrected by 18% in Q1 FY2023 and are further down by 17% in the July month so far. The current levels are fairly near to pre-COVID levels in dollar terms,
36 Crore
ble uptick and utilization levels. Moving on to the operational front the company did an Capex of 36 Crores in Q1 FY2023 towards enhancement of capacities, debottlenecking and adding balancing equipment m
218.9 Crore
demand and consumption in key domestic markets. Revenue from operations for the quarter stood at 218.9 Crores as against 137.6 Crores in the Q1 FY2022 higher by 59% Y-o-Y. Sales volume for the quarter stood
137.6 Crore
in key domestic markets. Revenue from operations for the quarter stood at 218.9 Crores as against 137.6 Crores in the Q1 FY2022 higher by 59% Y-o-Y. Sales volume for the quarter stood at 14406 metric tons re
59%
erations for the quarter stood at 218.9 Crores as against 137.6 Crores in the Q1 FY2022 higher by 59% Y-o-Y. Sales volume for the quarter stood at 14406 metric tons reporting a growth of 38% as again
38%
igher by 59% Y-o-Y. Sales volume for the quarter stood at 14406 metric tons reporting a growth of 38% as against 10402 metric tons in Q1 FY2022. On the profitability front EBITDA for the quarter impr
15%
nst 10402 metric tons in Q1 FY2022. On the profitability front EBITDA for the quarter improved by 15% Y-o-Y to 20 Crores versus 17.4 Crores in Q1 FY2022. EBITDA margins which stood at 9.2% in Q1 FY20
20 Crore
ric tons in Q1 FY2022. On the profitability front EBITDA for the quarter improved by 15% Y-o-Y to 20 Crores versus 17.4 Crores in Q1 FY2022. EBITDA margins which stood at 9.2% in Q1 FY2023 was lower by 35
17.4 Crore
2022. On the profitability front EBITDA for the quarter improved by 15% Y-o-Y to 20 Crores versus 17.4 Crores in Q1 FY2022. EBITDA margins which stood at 9.2% in Q1 FY2023 was lower by 352 bps Y-o-Y. Duri
9.2%
improved by 15% Y-o-Y to 20 Crores versus 17.4 Crores in Q1 FY2022. EBITDA margins which stood at 9.2% in Q1 FY2023 was lower by 352 bps Y-o-Y. During the quarter higher depreciation and financial cos
352 bps
res versus 17.4 Crores in Q1 FY2022. EBITDA margins which stood at 9.2% in Q1 FY2023 was lower by 352 bps Y-o-Y. During the quarter higher depreciation and financial costs impacted net profit. Depreciati
Guidance — 20 items
“Over the next few quarters we anticipate this performance strength to strengthen led by an improving demand.”
“Going forward we remain confident that our value-added offerings like pipe fittings, solvent cement, taps and faucets will enhance our reach and strengthen sales.”
“Additionally we are aiming to optimally utilizing our capacity over the next coming years which also help augment sales volume going ahead.”
“Going forward we expect to deliver a robust performance in the quarters to come and further gain momentum on the back of Make in India for improved totality, steady extension essentially in geographical areas and untapped Eastern and Northeast areas for penetration and trend surveys.”
“CAPEX in the coming period will be largely funded from internal cash flows on the working capital front additional raw material requirements that newly commissioned capacity has moderately impacted inventory levels though our endeavor remains on maintaining our overall working capital cycle at stable levels.”
“So what we are trying to create here is the very solid platform for the plumbing solutions which started from agri pipes four, five years ago, but now we are a complete building material plumbing solution company with more than 1500 SKUs and our market share extended from 0.75% to 2.5% in last four years and our target is to take it to 4% over the next three years based on the current capacities what we have and what we are putting up over the next 12 months.”
“Understood and any inventory loss which is accounted for in the first quarter and let us assume that the current price stays as it, what kind of inventory loss do you expect for second quarter.”
“My first question is we have the target of doubling our FY2022 revenues in next three years that is by 2025 should hit 1500 to 1700 Cr.”
“So my question is on what basis are we targeting such values, means, do we have any some existing order book or otherwise and simultaneously on the capacity utilization side we do have the current utilization level of 43% to 44% so what makes us to believe that we shall achieve the 75% utilization by the end of financial year 2025 that is as per our target of 70% volume growth year-on-year, means, basically are we having some existing order based on which we are guiding this.”
“So we do not work on order book basis, the guidance what we have given of doubling our revenue over the next three years is based on three factors.”
Risks & concerns — 6 flagged
This drop of 3000 per ton on Q-o-Q basis is purely because of the decline in PVC prices like I mentioned that there is underlying inventory of PVC always in the books, in our plants.
— Sameer Gupta
That is very helpful and Sir could you please throw some light on why have the PVC prices corrected so sharply like what are the key reasons as per you that the PVC prices have soften what is your view for the next six months, eight months.
— Shrenik Jain
Sir, first question with the PVC prices coming down do not the smaller players also become more competitive and so in a price sensitive market that perhaps quality is not a high criteria for purchase those markets will still be difficult to crack for organized players your views on that.
— Aasim Bharde
So this market has been growing slowly as more product awareness comes into play what we believe is that this 100 Crore number what we have set for ourselves should not be much of a challenge like how we have tackled water tanks or how we have tackled bath fittings in last two years CPVC anyways is a great success story for us.
— Sameer Gupta
So see I mean we have witnessed volume decline Q-o-Q basis in Q1.
— Sameer Gupta
Otherwise for some of the industry has, the volume in industry have fallen quite significantly in Q1, but we could arrest it to around 12% decline.
— Sameer Gupta
Q&A — 11 exchanges
Q
Thank you Sir for the opportunity. My question is related to our strategy to work that our APL group is known for the innovations and when we see APL Apollo Tube that in the market they always enjoy some of the product where they have monopolistic situations. So I would like to know that whether we also enjoy this kind of situation in any product category.
Sameer Gupta
See, if you look at our track record for last four, five years when our focus went into the PVC pipe industry right from like below 200 Crores business we have made this business 2000 Crores in four years time period and we have made it a PAN India company with almost 1500 SKUs with expansion of capacities, expansion of distribution network, and getting into consumer brand pool for our products. So what we are trying to create here is the very solid platform for the plumbing solutions which started from agri pipes four, five years ago, but now we are a complete building material plumbing solut
Q
Good morning, thank you for the opportunity. I just missed this number, you said value-added products is how much 30%, 35% did I get the number right.
Sameer Gupta
Yes, 30%, 35% which is value-added and if you add 20% more on the building material PVC pipe. So that will make our contribution from building material at 55%. And what is the definition of value-added products here is this what for margin or ROC any benchmark. So they are superior both in terms of margin and ROC. So our blending EBITDA per ton last year was around 18000 per ton. So value-added products are above 28000, 29000 per ton. Sorry what I am trying to ask is how do you define value-added products any particular margin. My EBITDA per ton above 28000 per ton on any product category is v
Q
Good morning Sir. My first question is we have the target of doubling our FY2022 revenues in next three years that is by 2025 should hit 1500 to 1700 Cr. So my question is on what basis are we targeting such values, means, do we have any some existing order book or otherwise and simultaneously on the capacity utilization side we do have the current utilization level of 43% to 44% so what makes us to believe that we shall achieve the 75% utilization by the end of financial year 2025 that is as per our target of 70% volume growth year-on-year, means, basically are we having some existing order b
Sameer Gupta
Apollo Pipes does not work on order book basis because our business is 95% B2C, we have a network of 600 distributors who buy products from us on daily basis, our strong safety and service services those distributors on daily basis and those 600 distributors sell their goods to more than 20000, 25000 retail touch points. So we do not work on order book basis, the guidance what we have given of doubling our revenue over the next three years is based on three factors. One is the capacity to be able to produce that much, our current capacity of 125000 ton is capable of giving us the number of 120
Q
Good morning and thank you for the opportunity. Is it possible to get a geographical spread of revenues broad spread in 1Q.
Sameer Gupta
So Bhargav no change in that even in Q1, I mean, the North is contributing around 70% so it continues to do that, I mean, this was not the perfect time to ramp up our South and Eastern facilities, but I guess once the prices stabilize the contribution will start inching up from here as well. Secondly if you look at the few of the results which pipe companies have reported the three-year volume CAGR seems to be either negative or flat at best. Now that prices have corrected and become more affordable and monsoon has also been strong what is your sort of view on the industry growth in the medium
Q
Hi! Sir, thanks for the opportunity. My first question is regarding the value-added products. So as you just alluded that storage currency comes in value-added products. So versus other players have been highlighting that it is more of a product basket, product storage tanks, and the margins are lower than pipes. So could you throw light on the margins for storage tanks as you said it is a value-added product?
Sameer Gupta
So, yes, water tanks is part of our value-added products when we started this business two years ago the margins were pretty high and they still are high it says that we need to ramp it up at all our plants. So we are putting up a capacities, so some supply chain we have to bring some efficiencies which we are. So the scale is very small today once it goes to like sub 100 Crores kind of product segment then the margins will be much, much higher than what we are making today. But I think as Achal has asked about the EBITDA per kg of our value-added products you added it is 28 per kg above. So t
Q
Hi! Morning. Sir, first question with the PVC prices coming down do not the smaller players also become more competitive and so in a price sensitive market that perhaps quality is not a high criteria for purchase those markets will still be difficult to crack for organized players your views on that.
Sameer Gupta
In fact, we will be or large organized player will benefit because the PVC prices are coming down because when the prices go up and some of these segment is very, very price sensitive. So the people switch to low grade, low quality organized sector, but now that the overall PVC prices are coming down so even the large, organized players become competitive against smaller players. So it is the opposite phenomena which is happening. And because I would presume even for the smaller guys PVC is getting cheaper or is it the case that PVC supply is still an issue for smaller players because they can
Q
Hi! Thanks, good morning. I just wanted to know what kind of a Capex we are planning out for this year in the North region that you were earlier talking about and what kind of sort of volume we can expect from there.
Sameer Gupta
If you look at our current turnover on gross block it is around four to five times so all our incremental capacities will achieve same four to five times turnover may be slightly higher because the new capacity is highly focused towards value-added products where we have better realization. So yes, assuming four to five times of asset turnover one is that and second we would be spending around Rs.1.5 billion over the next three years to build the capacity, the new capacity. Just on the value-added product you said and the internal accruals comes. 70%, 80%, value added and 20%, 30% we have to p
Q
Hi! Sir, thank you for the opportunity. My first question is what is the normal inventory days for PVC and CPVC resin.
Sameer Gupta
You mean the raw material. Yes. It should be around like the raw material will be around 20, 25 days. What is the average inventory holding cost for PVC and CPVC versus the resin. Inventory cost as a... Holding cost. What is holding cost our working capital is internally funded when you get on the books. So there is no holding cost to whole inventory. Okay thank you.
Q
Sir I was asking with so many other incumbent players who have been in this industry for so much longer what have we done in terms to gain market share are we pricing our products competitively or have we done a better job in terms of approaching the last mile better what have we done in terms of that.
Sameer Gupta
So I guess I did addressed this question earlier as well I am doing it again it is not just one factor when we approach any client we go with a complete package we offer them a complete package. So it starts right from APL Apollo brand one of the leading brands in the building materials space one. Second will be some extra sweeteners to the client so that he starts doing business with us yes our margins inherently are lower than our competitors, the top five competitors. So this explains because we offer an additional discount sweetener to our clients. Third part of the package will be the SQ
Q
Thank you for the opportunity. In the short-term that we were impacted due to the destocking phenomenon in the industry wide. So is there any color that like we can have like the June scenario what is the April and May in terms of monthly run rate or something and how the situation has been in the July or in the, and improvement are we seeing on the ground.
Sameer Gupta
So see I mean we have witnessed volume decline Q-o-Q basis in Q1. So we believe that Q1 should be bottoming out because the price crash was 2025 per kg and in July although it is like more brutal because it took three months for PVC prices to come down by 2025 per kg but in July itself it has come down by that much. So I guess we do believe that we should be doing at least similar kind of revenue run rate in 2Q as well but let us see I mean how things move up from 2Q for example I am just saying for the sake of that if the prices start going up then 2Q could be much better than Q1 because all
Q
Thank you for joining the call. For any further query you may get in touch with us. Thank you once again and take care.
Opening remarks
Pranav Mehta
Thanks Anju. Good morning everyone and welcome to the call with the management of Apollo Pipes Limited. From the management side we have Mr. Sameer Gupta, MD; Mr. Ajay Jain, who is the CFO; and Mr. Anubhav Gupta, who is the Chief Strategy Officer. Without wasting time, I will hand over the call to Mr. Sameer Gupta for his opening remarks. Yes Sir, over to you.
Sameer Gupta
Thank you. Good afternoon everyone and thank you for joining us on Q1 FY2023 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 first quarter ended June 30, 2022. To begin with, I am pleased to unveil the performance which has been next. The growth looks robust on Y-o-Y basis albeit low base last year. However the sequential performance is leads Q- on-Q due to massive correction in PVC resin prices. This created height uncertainty in minds of our channel partners who went for these talking modes. The PVC resin prices have been corrected by 18% in Q1 FY2023 and are further down by 17% in the July month so far. The current levels are fairly near to pre-COVID levels in dollar terms, which suggests that the correction may be arrested. This should instill confidence in our channel partners which will enlist for this in incoming
Ajay Jain
Good morning everyone. I will briefly cover the financial performance during the quarter and full year ended June 30, 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 218.9 Crores as against 137.6 Crores in the Q1 FY2022 higher by 59% Y-o-Y. Sales volume for the quarter stood at 14406 metric tons reporting a growth of 38% as against 10402 metric tons in Q1 FY2022. On the profitability front EBITDA for the quarter improved by 15% Y-o-Y to 20 Crores versus 17.4 Crores in Q1 FY2022. EBITDA margins which stood at 9.2% in Q1 FY2023 was lower by 352 bps Y-o-Y. During the quarter higher depreciation and financial costs impacted net profit. Depreciation cost stood at 6.4 Crores in Q1 FY2023 as against 5.7 Crores in Q1 FY2022. Financial cost was higher by Rs.1.1 Crores during Q1. Net profit for the quarter stood at 8.8 Crores remained