Key highlights of the 3QFY26 Result
Best-ever quarterly performance with the highest sales volume, EBITDA and PAT APL Apollo Tubes (APAT) during 3QFY26 reported 7.0%/36.5%/42.9% YoY increase in Net Sales/EBITDA/PAT at Rs 5,815 cr/472 cr/Rs 310 cr respectively. Sales volume for 3QFY26 stood at 9,16,976 metric tonnes (MT), its highest ever quarterly sales volumes, up 10.7% YoY/7.2% QoQ.
Strategy capacity expansion plan: The company is on track to expand its production capacity from 5 Mn ton to 8 Mn ton by FY28. The expansion will be facilitated via 4 greenfield projects (Gorakhpur: 0.2 Mn ton, Siliguri: 0.3 Mn ton, Bhuj: 0.3 Mn ton, New Malur: 0.6 Mn ton), 1 brownfield expansion in Raipur (0.6 Mn ton) and additional 1.0 Mn ton through debottlenecking. The capex required for this feat is guided to be around Rs 1,500 cr (Rs 1,300 cr for Greenfield & Brownfield expansion and Rs 200 cr for Debottlenecking) spread over the next 2 years, and shall be funded completely through internal accruals. Accompanying this growth vision, is the plan to increase the total capacity to 10 Mn ton by FY30.
Foray into Super Specialty segment: The incremental 2 Mn ton capacity (to reach 10 Mn ton capacity by FY30 from 8 Mn ton in FY28) will be dedicated towards the Super Specialty segment with a view to cater to the EV, Aerospace, Petrochem, Heavy Engineering and O&G industries. The segment is known to command EBITDA per ton in the range of Rs 10,000 – 15,000. The company is actively evaluating JV targets globally and talks are underway with Japanese, Korean, European and American majors. Further details around the project are expected to be shared in the coming 12 months.
Guidance: The company has guided volumes to grow by 20% YoY in 4QFY26 and full year FY27/FY28 respectively. However, we have assumed volume growth of 12.3%/17.8%/20.4% YoY for FY26E/FY27E/FY28E, resulting in total volumes of 3.5 Mn ton/4.2 Mn ton/5.0 Mn ton, respectively. With this, we believe the EBITDA/t to touch Rs. 5,178/Rs. 5,523/Rs. 5,881 for FY26E/FY27E/FY28E. We expect Sales/EBITDA/PAT CAGR of 18.5%/35.1%/41.9% for FY25-FY28E.
Maintain BUY- Target Rs 2,491/-
We believe the valuation still looks attractive for long-term investors on the back of (a) Large growth drivers such as Construction, Railways, Airports and Solar, (b) Increase in Value-added product mix, (c) Higher exports, and (d) Increasing HRC capacity, narrowing the price gap between patra and primary HRC. We roll forward our FY28 estimates and value the stock at Rs 2,491, implying an upside of 26.3% from CMP of Rs 1,972, based on FY28E P/E multiple of 32.0x.
