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Informist, Monday, Oct. 28, 2024

By Alina Geogy

MUMBAI - Structural steel tubes and pipes manufacturer APL Apollo Tubes Ltd. is expected to report a sharp decline in its consolidated net profit for the September quarter. The company's consolidated net profit in Jul-Sept is expected to fall 47.3% on year and 44.7% on quarter to INR 1.07 billion, according to the average of estimates from nine brokerages.

The National Capital Region-headquartered company's net sales are expected to rise 7.7% on year to INR 49.88 billion, according to the average of nine estimates. On a sequential basis, the top line is seen rising just 0.3%. The company's revenue is expected to rise on year led by higher sales volume, but these gains would be partially offset by lower sales realisation, brokerage firm Axis Securities said. The revenue growth would be flat sequentially due to a sharp correction in the price of steel and lower sales realisation.

APL Apollo Tubes has already reported record high sales for the September quarter, with total sales volume of steel tubes at 758,267 tonnes, up 12.4% on year. For Jul-Sept last year, the company had reported a consolidated net profit of INR 2.03 billion on revenues of INR 46.30 billion.

Brokerage estimates for APL Apollo Tubes' consolidated net profit are in the range of INR 748 million to INR 1.67 billion, with Nuvama Wealth Management's estimate at the lower end of the band and Axis Securities' at the higher end. As for the net sales, estimates are in the range of INR 47.42 billion to INR 53.25 billion. The estimate by ICICI Securities was the lowest, while that by Nuvama was the highest.

MARGINS

The company is expected to report earnings before interest, tax, depreciation, and amortisation of INR 1.98 billion for the September quarter, as per an average of estimates by eight brokerage firms. These estimates for EBITDA are in the range of INR 1.52 billion to INR 2.77 billion. ICICI Securities expects the company to post its lowest EBITDA since June quarter last year on sharp compression in spreads, despite higher volumes.

Axis Securities expects EBITDA to decline on account of inventory build-up as traders de-stock amidst falling steel prices and higher other manufacturing expenses related to higher overhead costs as the Raipur and Dubai plants ramp up. The company's EBITDA is expected to decline on year on account of inventory losses and heavy discounting during the quarter, Motilal Oswal Financial Services said.
 

The company's EBITDA per tonne is expected to decline sharply in the September quarter, with Nuvama and YES Securities expecting the largest on-year fall of 58% to INR 2,000. Motilal Oswal expects the metric to fall 52% on year, while Axis expects it to fall 24% on year. This decline has been was attributed to inventory losses, higher fixed costs for new plants, and lower contribution from value-added products compared to a quarter ago, according to IDBI Capital Market Services. ICICI Securities expects EBITDA per tonne to be constrained by a sharp fall in prices of hot rolled coil steel, higher discounts to push volumes, and higher other expenses. While sales volume rose over 12% on year, it has come at the cost of profitability, it said.

APL Apollo Tubes is set to announce its Jul-Sept earnings Tuesday. Market participants would monitor the company’s volume guidance, IDBI Capital said. They should also watch out for its demand outlook for Oct-Mar, margin guidance, and update on capacity expansion at Siliguri and Gorakhpur plants, the brokerage said. Monday, shares of the company closed at INR 1,449.05, down 1.7%, on the National Stock Exchange.

Following are the Jul-Sept earnings estimates for APL Apollo Tubes based on estimates compiled by Informist from nine brokerage firms:

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Edited by Vandana Hingorani

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