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Apollo Pipes Ltd

| Q4 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤11th May 26

Summary : Apollo Pipes aims for aggressive 35% revenue CAGR by FY31 through capacity expansion and market share gains, despite past PVC volatility and competitive pressures.

Management Perspective positive : Management stated they are 'pretty bullish on FY27 now,' 'very confident of delivering 35% revenue CAGR,' and 'bullish on our volume numbers' despite past challenges.

Concall Report Analysis & Insights

Business Overview

  1. FY26 was a challenging year due to PVC price volatility and demand slowdown.
  2. Company crossed 1 lakh ton annual sales volume, with standalone sales up 7%.
  3. Consolidated EBITDA declined 30% due to inventory write-downs and aggressive pricing.
  4. Targeting 35% revenue CAGR to reach INR5,000 crores by FY31, supported by new plants.
  5. Kisan Mouldings aims for INR1,000 crores revenue with 10-12% EBITDA margin, with future merger planned.

Future Growth Prospects

  1. Targeting 35% revenue CAGR and INR5,000 crores revenue by FY31.
  2. Planning a new INR1,000 crores capacity plant in South India by FY28 end.
  3. Expanding into allied products like windows and bath fittings.
  4. Leveraging group network and renewed brand ambassador for market penetration.
  5. Expecting over 20% growth in the CPVC segment for FY27 due to Lubrizol tie-up.

Management Insights

  1. FY26 was a 'roller coaster' year, but the team successfully navigated PVC price fluctuations.
  2. Aggressive pricing strategy was adopted to maintain dealer confidence and gain volume.
  3. Management is bullish on FY27, targeting INR400 crores+ revenue for Q1.
  4. Confident in achieving 35% revenue CAGR with new plants and allied product expansion.
  5. Channel inventory is currently low, with expected pick-up from May/June.

Signs of Skepticism

  1. PVC price outlook remains 'very uncertain,' with management 'not very much bullish about the prices.'
  2. Aggressive 35% revenue CAGR target seems ambitious given past demand slowdown and competitive pressure.
  3. Reliance on 'group synergies' and 'guidance' lacks specific, quantifiable details for execution.
  4. Timeline for Kisan Mouldings merger is vague, mentioned as 'next few investor calls.'
  5. Government infrastructure spending remains low despite 'promises' of release and kickstart.

Risk Factors

  1. PVC prices experienced significant volatility in FY26, with uncertain outlook for next few months.
  2. Demand remained impacted by slowdown in private real estate and government infrastructure.
  3. Competitive intensity increased, leading to aggressive pricing and margin pressure.
  4. Channel inventory was high at March end, potentially impacting April sales.
  5. Monsoon season post-July/August could pressure demand in Q2.

Good To Know

  1. Q4 FY26 revenue was approximately INR350 crores.
  2. NSR for Q4 FY26 was INR110 per kg.
  3. Current PVC procurement cost is around INR84-85 (Reliance) and INR79 (local trade).
  4. Import duty exemption ends June 30, 2026, with 8.25% duty expected to return.
  5. FY27 capex guidance is approximately INR100 crores.

Key Drivers

  1. Targeting 35% revenue CAGR by FY31.
  2. New South India plant capacity addition.
  3. Leveraging group network for sales.
  4. Aggressive market share gain strategy.

Key Analyst Discussions

Competitive Environment

  1. Competitive intensity increased significantly, leading to price wars among top players.
  2. Larger, organized players are aggressively pricing, causing clean-up of smaller, unorganized players.
  3. Management believes industry will benefit from low base after 2-3 years of flat volume growth.
  4. Strategy is to gain market share from smaller, weaker unorganized players.
  5. Leveraging brand ambassador and group dealer network to counter competition.

Market Trends & Consumer Behavior

  1. Demand scenario is encouraging, with rural outperforming urban in recent months.
  2. Agri demand is good due to season, and construction projects are rushing to closure.
  3. PVC price outlook is uncertain, expecting pressure for next few months, with 2-4% volatility.
  4. Channel inventory is currently low, expecting pick-up from May/June.
  5. Destocking occurred due to declining prices, but channel stock is now very low.

Financial Highlights

  1. Gross margin deteriorated due to aggressive pricing, new business costs, and inventory write-downs.
  2. Minimal inventory gains despite sharp PVC price increase due to clearing existing stock.
  3. Targeting INR400 crores+ revenue for Q1 FY27, expecting double-digit volume growth.
  4. Working capital cycle increased to 45-46 days in FY26, targeting below 35 days for FY27.
  5. FY27 capex guidance is INR100 crores for brownfield expansion and Kisan plant capacity.

Product Composition

  1. Sales split: 60-65% plumbing construction, 35% agri and government infrastructure.
  2. CPVC segment grew 10-12% in FY26, expecting over 20% growth in FY27.
  3. Water tank segment growing 20-30%, window profiles ramping up.
  4. Window profiles contribute about 1.5% to total sales, primarily in North and South India.
  5. Demand uptick in base products like UPVC pipes and fittings will drive FY27 volume growth.

Strategic Considerations

  1. Kisan Mouldings strategy: target INR1,000 crores revenue, with future merger into Apollo Pipes.
  2. Market share target: 3-3.5% in 3-4 years from current 2-2.5% of INR55,000 crore market.
  3. South India plant: land acquisition in 1 year, plant operational 18 months after land finalization (FY28 end).
  4. Distributor strategy: focus on strong, large dealers to support 35% annual growth.
  5. Aggressive pricing adopted 4-5 months ago is now positively impacting volume numbers.