“Apollo Pipes is in expansion mode and the various growth plans undertaken will push up the company’s manufacturing capacity to 1,00,000 mtpa by the end of the current fiscal year ending March 2021,” says Sameer Gupta, Managing Director. He adds that this rise in production capacity will lead to a substantial improvement in sales and earnings, going forward.

Reviewing the performance of the company during Q2 FY21 as well as the first halfyear, Mr Gupta says that in the September 2020 quarter, sales grew 28% to Rs 123.3 crore but PAT jumped 63% to Rs 9.5 crore. Sales volume grew 19% to 12,268 tonnes from 10,306 tonnes. For the first six months, sales rose 1% to Rs 215.81 crore but PAT fell 26% to Rs 11.51 crore.

Pointing out that “we have reported an encouraging performance during the quarter, led by a robust uptick in consumption in the domestic market,” Mr Gupta adds, “Our sales volume grew by 19% to 12,268 mtpa, driven by a healthy contribution from the cPVC, HDPE pipe and value-added product segment of fittings. Cost optimization measures and improved contribution from the highmargin fittings segment further resulted in a better gross margin performance during the quarter.”

According to him, from an operational standpoint, “the company’s existing manufacturing facilities at Dadri, Ahmedabad and Tumkur are operating at steady utilization levels and we remain confident of further improving it to optimal levels in the quarters ahead. I am also happy to share that the plan to operationalize our greenfield facility at Raipur is advancing well and we remain on track to commission this facility by March 2021. We are also progressing on our brownfield expansion plans at the three plants of Dadri, Ahmedabad and Bengaluru. In addition, our newly launched product Apollo Life – a water storage tank — is seeing strong acceptance in the domestic market and accordingly, we are in the process of doubling the capacity for this product at our plant in Sikandarabad.”

INFRA THRUST

Mr Gupta notes, “On the whole, the planned capacity additions should enable us to deliver improved sales momentum, going forward. Looking ahead, the upcoming festivities and various pro-growth measures undertaken by the government, especially in the rural, infrastructure and agricultural space, should lead to better demand and consumption of our products in the domestic market over the medium-to-longer term. We are confident that once the macro situation normalizes, we should be able to deliver strong and sustainable growth, going forward.”

Volumes during the quarter were driven by healthy contributions from the cPVC, HDPE pipe and value-added product segment of fittings. In addition, improved sales from the new product category of water storage tanks further aided performance. The company witnessed increased demand momentum across product categories, which enabled it to record healthy improvement in sales during the quarter.

The company delivered an encouraging and healthy operational and financial performance during the quarter, led by an uptick in demand and consumption in the domestic markets. Apollo Pipes is getting good business from the building segment as it is gradually increasing its product range. Gross margins improved by 284 bps to 31.9%; EBITDA margins for the quarter stood at 13.9%, higher by 162 bps. The company is targeting the same gross margins going ahead.

Revealing that “PVC prices have peaked to an all-time high,” Mr Gupta adds, “The company feels that currently there is no margin pressure but we are cautious about it, and going forward it may impact margins. The company is mainly dependent on import of PVC but is procuring from domestic markets as well. Cost optimization measures along with increasing contribution from the value-added segment of fittings resulted in a healthy margin performance. The company also saw inventory gains during the quarter, which further resulted in higher margins.”

BOOSTING PLANTS

Mr Gupta notes, “The greenfield facility at Raipur is making steady improvement and the company remains on track to fully operationalise the plant by March 2021. The facility, with a proposed installed capacity of 7,200 mtpa, is strategically located and will help boost volumes in highpotential domestic markets in Central and East India. In addition, the company is undertaking staggered brownfield expansions at its existing facilities of Dadri, Sikandarabad and Tumkur, which are progressing as per schedule. On the whole, the company is aiming at a healthy capacity upgradation and is on track to achieve a total production capacity exceeding 100,000 mtpa by March 2021.”