Apollo Pipes held a conference call on July 27, 2021 to discuss the results for the quarter ended June21 and way forward. Mr. Sameer Gupta – Managing Director and Mr. Ajay Kumar Jain – CFO of the company addressed the call.

Highlights of the Concall

• Sales volume declined marginally by 2% in Q1FY22 YoY to 10,402 tonne per annum (tpa) due to country wide pandemic and sluggish domestic demand. However, cost-optimization measures and improved contribution from the high-margin fittings segment resulted in a better gross margin performance during the quarter.

• Furthermore, expansion of portfolio improved reach in newer geographies and the addition of new brownfield capacity assisted the volume growth. Over the next few quarters the company anticipates this sales performance to strengthen led by improving demand, product extension in markets and improved utilization level.

• The company has successfully completed all its brownfield manufacturing expansions across facilities located at Dadri, Sikandrabad and Tumkur

• The Greenfield facility at Raipur, Chattisgarh which would have an installed capacity of 7200 tonne per annum is delayed due to second wave of COVID. However, the company expects to start this facility from next month, i.e August 2021.

• The company has already doubled the capacity for water storage tank to address the increased demand for this product at its current manufacturing facility at Sikandarabad (Dadri) in November 2020 and 1 Unit at Tumkur location. The product launch is in-line with the company's growth strategy to improve its product offerings across the value chain that efficiently leverages the ‘APL Apollo' brand reach and recall.

• Water storage tank is highly fragmented industry, which will give potential for Apollo pipes to emerge as a leading brand. Margins are superior in this segment. The company is confident that this product along with its other value added products will enhance its reach and strengthen sales going forward.

• The company had earlier planned sales from water storage tank business to be around 5% of total turnover which it expects now to be around 10% of total turnover by FY23

• The company plans to address the untapped and high potential market of eastern and central India as well once it complete the optimization of increased capacities

• Ebitda margin stood at 12.7% in Q1FY22 as against 6.7% in Q1FY21. Going forward, the company anticipates EBITDA margins to normalize from quarter two onwards

• The company is targeting a capex of 20-25% of Ebitda level per year over the next two years, unless and until the company get into a good very good opportunity to diversify its business.

• Current capacity is sufficient for reaching sales of around Rs 1200-1300 crore sales

• The company sells around 90% of its products through B2C models led by distributors.

• The company is targeting a sustainable gross margin of around 30-40% and Ebitda margin of 13-15%

• The company is targeting a high double digit growth in volumes for next two years with revenue growth target of 30-40%