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Informist, Saturday, Jan. 18, 2025

By Aman Aryan

MUMBAI – APL Apollo Tubes Ltd. is expected to post an on-year growth in its consolidated net profit for the December quarter after booking an on-year fall for the last four consecutive quarters. Strong growth in volumes would likely have driven the company's earnings for the quarter, analysts said. The company's overall sales of steel tubes rose 37.2% on year during the quarter, according to its quarterly business update.

APL Apollo is expected to report a consolidated net profit of INR 2.03 billion for the December quarter, up 22.4% on year, according to the average of estimates from six brokerage firms. The estimates for the consolidated net profit range from INR 1.86 billion by Axis Securities Ltd. to INR 2.12 billion by Elara Securities (India) Pvt. Ltd.

The tube-maker's consolidated revenue is expected to rise 26.6% on year to INR 52.88 billion for the December quarter, according to an average of estimates from six brokerage firms. Axis Securities Ltd. gave the lowest revenue estimate of INR 49.92 billion and Motilal Oswal Financial Services Ltd. gave the highest estimate of INR 58.12 billion.

While the industry suffered a slowdown in demand during the previous two quarters due to elections and an extended monsoon, the December quarter has likely seen a pickup in demand. The structural steel tube and pipe manufacturer reported its highest ever quarterly sales during the December quarter. The company's overall sales of steel tubes rose to a record 828,200 tonnes, according to its quarterly business update. In October, APL Apollo rolled back the INR-500-per-tonne discount it had given in the September quarter.

Although analysts continue to count on strong volume growth for the latest quarter to aid APL Apollo's earnings growth, the company's consolidated net profit had fallen 73.5% on year in the previous quarter despite booking a 12.4% volume growth. The company's management had earlier said a correction in steel prices had affected its earnings in the previous quarter. Sequentially, the company's revenue is expected to rise just 11%, but its consolidated net profit is expected to jump 276% on a low base. 

Falling steel prices would likely have hit the company's earnings growth for the December quarter also, as analysts expect the company's strong volume growth to be offset by lower sales realisation. However, the impact of the lower steel prices may not be as severe in the latest quarter as it was in the previous quarter, since the company has moved past its inventory losses, said Ajit Sahu, an analyst at IDBI Capital Markets Services Ltd. APL Apollo's consolidated net profit fell sharply in the previous quarter due to a sequential fall of INR 2,990 per tonne in the average hot-rolled coil steel price and inventory losses, Sahu said. 

The average price of hot-rolled coil steel, the most important raw material for the company, fell 5.3% sequentially to INR 47,792 per tonne in the December quarter. On a year-on-year basis, the average price was down 15%. While APL Apollo's earnings before interest, tax, depreciation, and amortisation per tonne for the December quarter is expected to double sequentially, it is seen down 17% on year, Axis Securities said in its earnings preview report. 

Systematix Shares and Stocks (India) Ltd. said its channel check showed slower offtake from engineering, procurement, and construction contractors due to lower government disbursals for key infrastructure projects. While the company's margin is expected to improve significantly due to record sales, it will still be partially offset by lower realisations, the brokerage said.

The company's EBITDA per tonne is expected to recover sharply in the December quarter due to higher utilisation and an expected restocking by channel partners, as steel prices appear to have bottomed out, IDBI Capital had said in its review after the company's September quarter earnings.   

The Delhi-based company will likely report a 144% sequential rise in EBITDA for the December quarter, according to an average of estimates from five brokerage firms. The analysts expect EBITDA for the quarter to rise 20% on year to INR 3.36 billion.  

IDBI Capital said it will watch for the outlook for demand for 2025-26 (Apr-Mar), EBITDA per tonne guidance, update on debt reduction, and overall utilisation levels. On Friday, shares of APL Apollo closed at INR 1,570.15 on the National Stock Exchange, up 1.4%. The company is scheduled to report its earnings for the December quarter on Monday.

Following are the Oct-Dec earnings estimates for APL Apollo Tubes Ltd. based on reports compiled by Informist from six brokerages in descending order by the estimate of net profit (in INR million): 

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Edited by Akul Nishant Akhoury

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