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Analyst Meet / AGM
08-Aug-20
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Conference Call
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Apollo Pipes
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Targeting volume growth of around 25%+ CAGR over the next three years
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Apollo Pipes held a conference call on August 06,2020 to discuss the results for the quarter ended June20 and way forward. Mr. Sameer Gupta – Managing Director and Mr. Ajay Jain – CFO of the company addressed the call.
Highlights of the Concall
- The company saw strong recovery in volumes in May-June 2020. Q1FY21 volume growth was 9% QoQ to 10633 tonne driven by steady demand revival witnessed across CPVC and PVC pipes and value added products. However it was down 24% compared to Q1FY20
- EBITDA margin was impacted during the quarter due to negative operating leverage and decline in PVC prices/inventory devaluation
- Depreciation rose 31% to Rs 3.35 crore on account of newly added capacities
- Newly acquired plant of Bangalore with a capacity of 12000 tonne has started contributing to its performance. The company expects utilisation level to improve going forward on the back of various initiatives taken undertaken.
- The company has launched Apollo Life, a water storage tank as new product, which will strengthen its agricultural product division as an initiative towards Make in India Concept. It is currently available in five colours (Black, White, Yellow, Green & Blue) with capacity 500 and 2,000 Litres.
- The company is constantly working to strengthen its sales team, dealers and distribution network and building brand presence across existing and new high potential groth geographics
- The continuous efforts of the Government of India towards water management programs like pipe water drinking to all rural households, agriculture and irrigation should drive demand for pipe industry.
- Net cash stands at Rs 33 crore at the end of June quarter compared to Rs 128 crore at the end of March quarter. The company used the cash for our business requirements as it do not want to go for external debt during lockdown
- Current capacity utilization of all pipe plants is around 70-75%.
- July month sales are near about the company's precovid targets. The company is targeting the same in coming months as well
- Tank business contributed around Rs 30-40 lakh in sales. The company is targeting sales of Rs 15-18 crore per annum per machine for tanks and it is now targeting around four machines for this business in FY21- One in Bangalore, two in North India and one in Raipur.
- Normalized contribution from Agri pipes would be around 50-60% while balance 40-50% would be from building construction and other products.
- Operating cash flow during the quarter was Rs 13.55 crore
- Inventory loss during the quarter was Rs 5-6 crore.
- The company aims to improve utilization at the existing manufacturing plants at Dadri and Ahmedabad
- The company has planned capex of up to Rs 12-15 crore including land costs for Greenfield expansion in Raipur, Chhattisgarh. Land acquisition process has already been completed. This project will mainly deal with pipes and water storage tanks. Tank capacity would be 6 crore liters and pipe capacity would be 6000 tonne per annum New plant will help boost sales in Central and East India. All capex is to be funded from internal cash flows. It plans to start production by Q1FY22. The company expects payback period for this project to be within three year.
- The company is targeting a capex of Rs 30-40 crore per year apart from the Greenfield project. So for FY21 expected capex is around Rs 50 crore including Raipur plant. This includes maintenance capex of around 5-6% of total capex. In Dadri the company is doubling the capacity of fittings.
- The Indian PVC pipes and fittings market expected to register 15% CAGR during FY18 - FY26. The domestic plastic pipes industry size stands at around Rs. 31500 crore. Organized players account for around 60% market share.
- The company is aiming capacity upgradation to the tune of 90,000 MTPA by end of FY21 from current 84000 tonne capacity. The company is undertake a phase-wise capacity expansion at the existing facilities over the next few quarters
- The company is targeting solid volume growth of around 25%+ CAGR over the next three years.
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