APL Apollo Tubes Ltd:Annual Report 2023-24 Analysis

APL Apollo Tubes Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

APL Apollo Tubes Limited was established in 1986.

Headquarters Location and Global Presence:

Headquartered in Delhi NCR, India. Primarily focused on the Indian market, but also exports to select international markets.

Company Vision and Mission:

While the exact wording may vary, APL Apollo’s vision generally revolves around being the leading structural steel tube manufacturer, recognized for innovation, quality, and customer satisfaction. Their mission involves consistently delivering superior products and value to stakeholders.

Key Milestones in Their Growth Journey:

• 1986: Establishment of the company.
• Expansion of manufacturing capacity over the years.
• Introduction of innovative product lines like DFT (Direct Forming Technology) tubes.
• Strategic acquisitions to strengthen market position and expand product portfolio.
• Significant growth in revenue and market share.

Stock Exchange Listing Details and Market Capitalization:

Listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Market capitalization fluctuates based on market conditions.

Recent Financial Performance Highlights:

(Provide specific revenue, profit, growth rates, and key ratios from the latest available financial reports. E.g., “In FY23, APL Apollo reported a revenue of INR [amount] representing a growth of [percentage] year-on-year. Their EBITDA margin stood at [percentage].”)

Management Team and Leadership Structure:

The management team comprises experienced professionals in areas like manufacturing, finance, marketing, and sales.

Any Notable Awards or Recognitions:

(List any awards received for business performance, product quality, innovation, or sustainability practices.)

Their Products #

Complete Product Portfolio with Categories:

APL Apollo offers a wide range of steel tubes and pipes categorized as follows:

• Structural Steel Tubes: ERW (Electric Resistance Welded) steel tubes used in construction, infrastructure, and engineering applications.
• Galvanized Steel Tubes: Corrosion-resistant tubes suitable for plumbing, fencing, and various outdoor applications.
• Pre-Galvanized Steel Tubes: Steel tubes that are galvanized before manufacturing.
• Specialty Tubes: Hollow Sections, Square and Rectangular hollow sections, pre-coated tubes, and other specialized products tailored for specific applications.

Flagship or Signature Product Lines:

• Apollo DFT (Direct Forming Technology) Tubes: Known for superior strength and precision, reducing construction costs and enhancing structural integrity.

Key Technological Innovations or Patents:

• Direct Forming Technology (DFT): This technology allows for the direct production of hollow steel sections from coils, resulting in higher strength, dimensional accuracy, and cost-effectiveness.

Manufacturing Facilities and Production Capacity:

APL Apollo has multiple manufacturing facilities across India.

Quality Certifications and Standards:

(Mention certifications like ISO 9001, ISO 14001, and relevant industry-specific standards.)

Any Unique Selling Propositions or Technological Advantages:

• DFT Technology: Offers superior strength and precision compared to traditional tube manufacturing methods.
• Wide Product Range: Caters to diverse application needs across various industries.

Recent Product Launches or R&D Initiatives:

(Mention any recent product launches or ongoing research and development efforts aimed at improving product performance, expanding the product portfolio, or developing new applications.)

Primary Customers #

Target Industries and Sectors:

• Construction
• Infrastructure
• Agriculture
• Engineering
• Automotive
• Energy

Geographic Markets (Domestic vs. International):

Primarily focused on the Indian market. Exports to select international markets, particularly in neighboring countries.

Major Client Segments (agricultural, industrial, residential, etc.):

• Infrastructure Developers
• Construction Companies
• Fabricators
• Agricultural Equipment Manufacturers
• Automotive Component Suppliers
• Solar Power Project Developers

Distribution Network and Sales Channels:

APL Apollo utilizes a wide distribution network comprising dealers, distributors, and retailers across India. They also have a direct sales team catering to large institutional clients.

Major Competitors #

Direct Competitors in India and Globally:

• Tata Steel BSL
• Jindal Steel & Power
• Asian Tubes

Competitive Advantages and Disadvantages:

• Advantages: Wide product range, strong brand reputation, DFT technology, extensive distribution network.
• Disadvantages: Susceptibility to fluctuations in raw material prices (steel), dependence on the construction and infrastructure sectors.

How they differentiate from competitors:

• Technological superiority (DFT): Offers higher-strength and more precise products.
• Extensive product portfolio: Caters to diverse needs.
• Pan-India presence: Wide distribution network ensures availability.

Market Positioning Strategy:

APL Apollo positions itself as a premium brand offering high-quality, innovative steel tubes for diverse applications. Their strategy focuses on leveraging technological advantages and a strong distribution network to maintain market leadership.

Future Outlook #

Expansion Plans or Growth Strategy:

• Capacity expansion through new manufacturing facilities or upgrades to existing ones.
• Further expansion of product portfolio to cater to emerging needs.
• Increased focus on exports to international markets.

Sustainability Initiatives or ESG Commitments:

(Describe any initiatives related to reducing environmental impact, promoting sustainable manufacturing practices, or contributing to social causes.)

Industry Trends Affecting Their Business:

• Growth in infrastructure development and construction activities.
• Increasing demand for high-strength steel tubes.
• Adoption of sustainable building practices.
• Government policies promoting domestic manufacturing.

Long-term Vision and Strategic Goals:

APL Apollo’s long-term vision is to solidify its position as the leading structural steel tube manufacturer in India and a significant player in the global market. This involves continuous innovation, operational excellence, and a commitment to sustainability.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue from operations exhibited a CAGR of 18% (FY22-FY24).
• EBITDA demonstrated a CAGR of 12% (FY22-FY24).
• Net Profit after Minority Interest showed a CAGR of 15% (FY22-FY24).
• The share of value-added products in the sales mix increased from 56% in FY22 to 60% in FY24.
• EBITDA per ton improved from B4,368 in FY22 to B4,553 in FY24.
• Net working capital cycle decreased from 23 days in FY22 to 1 day in FY24.
• Capital expenditure (CAPEX) stood at B6.62 billion in FY24, compared to B9.98 billion in FY23 and B4.91 billion in FY22.
• Return on Equity (ROE) was 22.2% in FY24, compared to 23.5% in FY23 and 28.9% in FY22.
• Return on Capital Employed (ROCE) was 29.5% in FY24, compared to 29.2% in FY23 and 34.6% in FY22.
• Dividend payout increased from B138.67 million in FY22 to B152.64 million in FY24.

Business Segment Performance #

• The Building Material (Housing) segment constitutes 63% of sales mix, indicating strong performance in residential real estate.
• The Building Material (Commercial) segment contributes 19% to the sales mix.
• Infrastructure projects account for 13% of the sales mix.
• Apollo Structural, Apollo Z, and Apollo Galv categories contribute 68%, 27%, and 5% to the overall sales mix, respectively.

Major Strategic Initiatives and Their Progress #

• Capacity expansion to 5 million tons is planned within the next 12-18 months with an investment of B6 billion.
• Completed a 5-year CAPEX program of B26.72 billion, increasing capacity to 3.8 million tons as of March 2024.
• Aim to double revenue and increase EBITDA by 2.5 times by 2026.
• The Raipur facility, focused on innovative and super heavy structural products, has commenced operations.
• The Dubai facility has been commissioned to strengthen the global presence.

Risk Landscape Changes #

• The primary risks identified are demand risk, competition risk, capacity risk, cost risk, funding risk, people risk, safety risk, and sustainability risk.
• Mitigation strategies include diversification of customer base, focus on value-added products, cost optimization, and stringent working capital management.

ESG Initiatives and Metrics #

• DJSI (Dow Jones Sustainability Index) percentile increased from 80 in FY23 to 86 in FY24; the overall ESG score improved from 29 to 40.
• 28% of total energy consumption is from renewable sources. Excluding the new Raipur plant, renewable energy share for other APL plants stands at 41%.
• 5 plants are Zero Liquid Discharge (ZLD) compliant, with the goal to transition all facilities to ZLD by 2025.
• Water consumption decreased by 6% compared to the previous year, despite a 15% increase in production.
• Committed to reducing Scope 1 and 2 emissions by 25% by 2030.
• The company is aiming for a Net Zero target by 2050.
• Aim is to increase the renewable energy share from 37% in FY23 to 47% by 2030.

Management Outlook #

• Expects to leverage the ongoing construction boom in India, particularly in infrastructure and real estate.
• Plans to increase capacity utilization of newly commissioned facilities to enhance market share and profitability.
• Aims for a ROCE of 33-35% in the next two years as returns from recent investments materialize.
• The management is targeting a market share of 60%+, with a capacity of 5 million tons and 80%+ utilization.
• Intensify focus on ESG parameters to enhance sustainability credentials.

Detailed Analysis #

APL Apollo Tubes Limited: Financial Analysis #

Balance Sheet Analysis (Consolidated) #

3-Year Comparative Analysis of Assets, Liabilities, and Equity (₹ in Crore) #

Significant Changes in Major Line Items (>10% YoY) #

• Property, Plant and Equipment: Increased by ₹ 681.38 crore (29%) YoY, primarily due to capacity expansion projects and modernization efforts.
• Capital Work-in-Progress: Decreased by ₹ 170.99 crore (-45.7%) YoY, indicating a reduction in ongoing projects.
• Right to use assets: Increased by ₹ 17.88 crore (19.3%) YoY, owing to the increase in leasehold properties.
• Other Financial assets (Non-current): Decreased By ₹ 1.90 crore (-5.5%) YoY due to decrease in security deposit.
• Non-Current tax assets (net) Increased by ₹ 3.49 crore (53%) due to increase in Tax assets.
• Other Non-Current Assets: Increased by ₹ 13.80 crore (6.8%) due to increase in capital advances.
• Inventories: Increased by ₹ 158.06 crore (10.7%) YoY, reflecting higher production volumes and potential strategic stock building.
• Cash and Cash Equivalents: Increased by ₹ 222.47 crore (181.4%) YoY, indicating improved liquidity.
• Bank Balances other than Cash and Cash Equivalents: Decreased ₹ 227.34 crore (-98.9%) YoY.
• Other Financial Assets (Current): Increased by ₹ 583.32 crore (195.9%) due to increase in fixed deposits with more than 12 months maturity.
• Other Current Assets: Increased by ₹ 62.42 crore (23.1%) YoY, potentially due to higher prepaid expenses or advances to suppliers.
• Equity: Increased by ₹ 599.01 crore (19.9%) YoY, primarily due to retained earnings.
• Non-Current Borrowings: Increased by ₹ 378.38 crore (92.7%) YoY, indicating higher long-term debt financing.
• Other Non-Current Liabilities: Increased by ₹ 10.77 crore (9.1%) YoY, attributed to increase in deferred income.
• Current Borrowings: Decreased by ₹ 126.75 crore (-27.3%) YoY, reflecting a shift towards long-term financing.
• Trade Payables: Increased by ₹ 386.63 crore (24.1%) YoY, possibly due to increased business activity.
• Other Financial Liabilities (Current): Increased by ₹ 24.46 crore (68%) YoY.
• Other Current Liabilities: Increased by ₹ 9.99 crore (16.3%) YoY.

Working Capital Trends #

• Current Assets: Increased significantly from ₹ 2,557.77 crore in FY23 to ₹ 3,341.36 crore in FY24.
• Current Liabilities: Also increased from ₹ 2,180.25 crore in FY23 to ₹ 2,495.42 crore in FY24.
• Working Capital Cycle: Net working capital cycle, collapsed from 29 days in FY20 to just one day in FY24, setting an industry benchmark.

Asset Quality Metrics #

Asset quality cannot be fully assessed with available data. The major assets are property, plant, and equipment, inventories, and receivables.

• Trade Receivables: The allowance for doubtful debts is minimal, suggesting good receivable quality.

Debt Structure and Maturity Profile (₹ in Crore) #

• The Group has shifted towards longer-term debt, as evidenced by the increase in non-current borrowings and a decrease in current borrowings.

Off-Balance Sheet Items #

• Contingent Liabilities: Increased to ₹ 36.16 crore in FY24 from ₹ 27.16 crore in FY23.
• Corporate Guarantees: The Company has provided corporate guarantees on behalf of its subsidiaries.

Operating Performance #

Income Statement #

Revenue Breakdown #

• The Company operates primarily within a single business segment: the production of ERW steel tubes. Therefore, a segment-wise revenue breakdown is not applicable.
• Domestic sales constituted the major portion of revenue. Export sales account for 6% of the total revenue.
• Sales volume increased by 15% year-over-year, reaching 2.62 million tons.
• Revenue from operations grew by 12% year-over-year.

Cost Structure Analysis #

• Cost of materials consumed represents the largest expense, amounting to B 15,368.88 crore in FY24.
• Freight outward expenses are significant, indicating distribution costs.
• Employee benefit expenses stood at B 257.61 crore in FY24.
• Power and Fuel another significant cost amounted to B 256.98.

Margin Analysis #

• EBITDA margin improved by 26 bps to 6.6% for FY24.
• EBITDA per ton increased to B 4,553 in FY24 from B 4,481 in FY23.
• Net Profit margin for FY24 was 4%, a slight increase of 7.2 bps year over year.
• FY24 EBITDA and Net Profit increased by 17% and 14%, respectively, over the previous year.

EPS Analysis #

• Basic EPS for FY24 was B 16.36, compared to B 18.47 in FY23.
• Diluted EPS for FY24 was B 16.36, compared to B 18.45 in FY23.

Quarterly Trends #

• Q1 FY24 sales volume: 662k tons, a 56% YoY increase.
• Q2 FY24 sales volume: 674,761 tons, a 12% YoY increase.
• Q3 FY24 sales volume: 604k tons, unchanged YoY; revenue declined by 3% YoY.
• Q4 FY24 sales volume: 679k tons, a 4% YoY increase and 12% QoQ increase.
• Q1 FY24 revenue: B 45.4 billion, 32% YoY increase.
• Q3 FY24 revenue: B 41.8 billion, a 3% YoY decline.
• Q4 FY24 revenue: B 47.7 billion, a 8% YoY increase, 14% QoQ increase.
• Q1 FY24 EBITDA/ton: B 4,645, a 1% YoY increase.
• Q2 FY24 EBITDA/ton: B 4,817.
• Q3 FY24 EBITDA/ton: B 4,631, a 3% YoY increase.
• Q4 FY24 EBITDA/ton: B 4,132 ,a 17% YoY decline, 11% QoQ decline.
• Q1 FY24 Net Profit B 1.9 Billion, a 60% yoy increase.
• Q3 FY24 Net Profit B 1.7 Billion, a 2% Yoy decline.
• Q4 FY24 Net Profit B 1.7 Billion, a 16% YoY decline, 3% QoQ increase.

Cash Management: APL Apollo Tubes Limited - FY 2023-24 Analysis #

Cash Flow and Liquidity Analysis #

Operating Cash Flow (OCF) #

Consolidated OCF for FY24 was ₹1,111.56 crores, a significant increase from ₹691.26 crores in FY23. This indicates the company has been able to increase its profit and also was able to improve its working capital.

Investing Cash Flow (ICF) #

The Group reported a net cash outflow from investing activities of ₹(915.64) crores in FY24, compared to ₹(875.74) crores in FY23. This reflects their large CAPEX program.

Working Capital Management Efficiency #

The net working capital cycle improved significantly, decreasing to 1 day in FY24 from 5 days in FY23 and 29 days in 2020. This demonstrates superior efficiency in managing working capital, likely driven by the Company’s “cash and carry” business model.

Capex Analysis #

Total CAPEX, combining all business segments, for FY24 is not explicitly stated but includes investments and property, plant, and equipment expenditure. CAPEX, over a 5 years period, was ₹2,672. The company is planning for further expansion, aiming for 5 Mn Ton capacity in 12-18 months with ₹600 crore.

Dividend Trends #

The Board recommended a final dividend of ₹5.50 per share for FY24. The total dividend payout for FY24 was ₹138.67 crore, an increase from ₹87.60 crore in FY23.

Liquidity Position and Cash Conversion Cycle #

Liquidity Position #

The Company reported a net cash position of ₹18.5 crore as of March 31, 2024. Operating cash flow increased, and the Company maintains access to undrawn credit facilities.

Cash Conversion Cycle #

Not explicitly provided, but the net working capital cycle of 1 day suggests an extremely efficient cash conversion cycle.

Financial Analysis of APL Apollo Tubes Limited #

Profitability Ratios (3-Year Trends) #

• ROE has shown a slight declining trend over the past three years, from 24.8% in FY22 to 22.2% in FY24.
• EBITDA Margins have improved from 6.3% in FY23 to 6.6% in FY24.
• Net Profit Margins have shown a consistent trend in FY23 & FY24, although declined from FY22.

Liquidity Metrics #

• The current ratio improved from 1.17 in FY23 to 1.34 in FY24, indicating a stronger ability to meet short-term obligations.

Efficiency Ratios #

• Inventory Turnover Ratio has witnessed a decline in the current year.
• Trade receivables turnover ratio has increased significantly in the current year.

Leverage Metrics #

• The debt-equity ratio improved, with the company reporting net cash on its balance sheet.
• The interest coverage ratio decreased compared to previous year owing to higher capex spends.

Working Capital Ratios #

• Net Working Capital Cycle: Improved to 1 day in FY24 from 5 days in FY23 for the Standalone entity. Consolidated data not directly comparable due to differing business models of subsidiaries.

Comparisons with Industry Averages and Significant Deviations #

• Industry average ratios are not provided within the document, therefore a direct comparison is not possible. APL Apollo is considered a leader within the structural steel tubes sector. Significant deviations can only be highlighted from internal trends.

Segment Performance Analysis #

Revenue and Profitability Metrics with Growth Rates #

• Consolidated Revenue Growth (FY24 vs FY23): 12.08%, increasing from ₹16,165.95 crore to ₹18,118.80 crore.
• Standalone Revenue Growth (FY24 vs FY23): -2.94% decreasing from ₹ 14,279.29 crore to ₹ 13,858.81 crore.
• Consolidated EBITDA Growth (FY24 vs FY23): 18.56%, increasing from ₹1,068.73 crore to ₹1,267.04 crore.
• Standalone EBIDTA Growth (FY24 vs FY23): -9.15%, decreasing from ₹ 839.15 crore to ₹ 762.41 crore.
• Consolidated Net Profit Growth (FY24 vs FY23): 14.11%, increasing from ₹641.86 crore to ₹732.44 crore.
• Standalone Net Profit Growth (FY24 vs FY23): -11.37%, decreasing from ₹ 511.92 crore to ₹ 453.71 crore.
• Consolidated EBITDA Margin (FY24): 6.6%, up by 26.1 bps from 6.3% in FY23.
• Consolidated Net Profit Margin (FY24): 4.0%, relatively stable compared to 4% in FY23.
• Sales Volume Growth (FY24): Increased by 15%, from previous year.
• Value-Added Products Share in Sales Mix: Increased from 56% in FY2023 to 60% in FY2024.

Market Share and Competitive Position #

• Market Share: 55% in the structural steel tubes sector in India.
• Competitive Position: Leader in the Indian structural steel tubes market, largest producer. Only company in the sector that makes tubes with sizes going from 8x8 to 1000x1000 and thickness from 0.18 to 40 mm.

Key Products/Services Performance #

• Apollo Structural: 68% of sales mix, used in residential buildings, infrastructure, and commercial buildings.
• Apollo Z: 27% of sales mix, corrosion-resistant structural applications, strong demand in coastal markets.
• Apollo Galv: 5% of sales mix, used in galvanized structural, greenhouse structures, plumbing, and firefighting.
• Product range: 2500+ products.

Geographic Distribution and Market Penetration #

• Manufacturing Facilities: 11 manufacturing units across India (Sikandrabad, Malur, Bengaluru, Hosur, Raipur, Murbad, Hyderabad) and 1 in UAE.
• Distribution Network: 800+ distributors and 50,000+ retailers, with 29 branch offices and warehouses.
• International Presence: Exports to over 30 countries; new facility commissioned in Dubai to serve the Middle East market.

Segment-wise CAPEX and ROIC #

• Capex (FY24): ₹662 crore.
• Return on Capital Employed (ROCE) (FY24): 29.5%.
• Return on Equity (ROE) (FY24): 22.2%

Operational Efficiency Metrics #

• Capacity Utilization (FY24): 68.9%.
• Net Working Capital Cycle: 1 day (down from 29 days in FY20).
• Operating Cash Flow to EBITDA (H1 FY24): 76%.

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Capacity expansion to 5 Mn Ton in 12-18 months, with a longer-term goal of 10 Mn Ton by FY30.
  • New product development.
  • Increased focus on exports.
  • Market creation efforts focused on replacing conventional construction materials with structural steel tubes.
  • Aggressive marketing approach.
• Challenges:
  • Shortfall in achieving the FY24 sales volume target, attributed to weak demand, delayed commissioning of Raipur and Dubai plants, and a slowdown in construction activities.
  • Volatility in raw material prices (steel) impacting EBITDA per ton in Q1 FY24.
  • Elevated domestic steel prices in Q3 FY24, impacting sales volumes.