Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Apollo Pipes Ltd (BOM:531761, Financial) managed to surpass Q2 FY 25 sales volume despite industry-wide declines.
- The company reported an improvement in gross margins due to contributions from higher interest and depreciation costs.
- Apollo Pipes Ltd (BOM:531761) is on track to complete its CapEx by June 2025, which will increase its annual capacity to nearly three lakh metric tons.
- The company expects a 35% revenue growth over H1, driven by a pickup in construction activity and government infrastructure projects post-elections.
- Apollo Pipes Ltd (BOM:531761) is expanding its product lines, including OPVC and UPVC doors and windows, which will strengthen its presence in the housing building material segment.
Negative Points
- The quarter was challenging due to heavy monsoons, low government spending on water infrastructure, and a 17% fall in PVC prices.
- Profitability was negatively impacted by lower revenue growth and mild inventory losses.
- Higher interest and depreciation costs further pressured net margins.
- The balance sheet was slightly strained due to heavy CapEx and higher inventory buildup owing to lower sales value.
- Channel partners are hesitant to restock due to uncertainty in PVC resin price movements, affecting inventory levels.
Q & A Highlights
Q: What was the impact of government projects on the decline in sales volume for Q2?
A: Anubhav Gupta, Chief Strategy Officer, explained that the contribution from government infrastructure projects, which typically accounts for 40-45% of revenue, declined by 30% this quarter, significantly impacting Apollo Pipes' standalone volume data.
Q: What is the current status of inventory levels with distributors?
A: Anubhav Gupta noted that channel partners are cautious about restocking and are monitoring PVC resin price movements before making decisions. Inventory losses were mild, under INR 5 crore, due to strategic raw material purchasing.
Q: How is the company planning to expand its OPVC segment given the supply constraints?
A: Sameer Gupta, Chairman and Managing Director, stated that they are focusing on quality by procuring machines from a Spanish company, Moic, and have lined up three machines. They are not currently considering local suppliers due to quality concerns.
Q: What is the expected revenue growth for FY 25, and how will it be split between Apollo Pipes and Kisan?
A: Sameer Gupta mentioned that they expect a 35% revenue growth for FY 25, with Kisan contributing around 25% to the total revenue. The growth will be driven by both existing and new product lines.
Q: What are the expectations for working capital and debt levels by the end of FY 25?
A: Anubhav Gupta indicated that they aim for around 40 days of net working capital. If H2 performs as expected, with a 35% revenue growth over H1, these targets should be achievable, and the company plans to be debt-free by FY 26.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
