APL Apollo Tubes maintains margins as value-added capacity expansion supports growth

Investment View and Valuation

Motilal Oswal Financial Services Ltd. reiterated its Buy rating on APL Apollo Tubes in its August 3, 2026 Q1 FY27 results update. The broker believes the company’s growth outlook remains robust, supported by rising structural-tube adoption in housing and infrastructure, along with expansion into solar infrastructure and data centres.

Motilal Oswal estimates an 11 per cent volume CAGR over FY26-FY28E and forecasts revenue, EBITDA and adjusted PAT CAGRs of 17 per cent, 18 per cent and 21 per cent, respectively, over the same period.

Q1 FY27 Financial Performance

APL Apollo Tubes reported consolidated revenue of Rs 5,600 crore in Q1 FY27, up 4 per cent year-on-year but down 11 per cent quarter-on-quarter. Revenue was above Motilal Oswal’s estimate of Rs 5,040 crore.

Total sales volume declined 6 per cent year-on-year to 7,44,823 tonnes. The decline included an approximately 25,000-tonne loss at the Dubai plant due to geopolitical supply-chain disruptions. The SG Premium rust-proof segment was also affected by an approximately 25,000-tonne impact from energy shortages and a wider primary-secondary steel price differential. Elevated input costs, channel destocking following steel-price increases and subdued construction demand further weighed on volumes.

Despite negative operating leverage, Q1 FY27 EBITDA rose 11 per cent year-on-year to around Rs 410 crore, in line with the broker’s estimate. EBITDA per tonne was maintained at Rs 5,522, compared with Rs 4,683 in Q1 FY26 and Rs 5,525 in Q4 FY26, aided by better pricing and management’s focus on profitability. Adjusted PAT increased 11 per cent year-on-year to around Rs 260 crore, also in line with estimates.

Management Guidance and Margin Outlook

Management retained its FY27 volume-growth guidance of 15-20 per cent and expects absolute EBITDA to grow by more than 20 per cent. EBITDA per tonne is expected to remain in the Rs 5,000-5,500 range during FY27.

Management expects demand and performance to improve significantly in 2HFY27, supported by favourable macro conditions. Monthly volume is expected to reach roughly 3,35,000-3,50,000 tonnes during August and September.

EBITDA per tonne could moderate as volumes recover. However, a rising contribution from value-added products is expected to improve EBITDA margins by about 100-200 basis points over time. Management is targeting EBITDA per tonne of Rs 6,000-7,000 for APL Apollo and roofing products, around Rs 500 for SG products, and Rs 6,000-7,000 from the UAE ramp-up.

Capacity Expansion and Value-Added Products

APL Apollo Tubes plans to expand capacity from the current 5 million tonnes to 8 million tonnes by FY28. The expansion comprises 2 million tonnes of Greenfield and Brownfield capacity, along with 1 million tonnes of debottlenecking. New capacities are expected to come on stream from 2HFY27.

• Gorakhpur is expected to start in September 2026.
• Siliguri is expected to start in Q4 FY27.
• The 1 million-tonne Malur plant is expected to start by December 2027.

Malur will focus entirely on value-added products. Management expects value-added products to account for more than 75 per cent of the portfolio by Q4 FY28, supporting more stable volumes and margins.

UAE volumes had recovered to 10,000-12,000 tonnes per month in July. Management expects a return to the historical monthly run rate of 24,000-25,000 tonnes by September if raw-material supply normalises.

Broker Estimates

Motilal Oswal raised its FY27E and FY28E revenue estimates by 8 per cent to Rs 28,175 crore and Rs 31,587 crore, respectively. EBITDA estimates were retained broadly unchanged at Rs 2,153 crore for FY27E and Rs 2,504 crore for FY28E.

FY27E adjusted PAT was retained at Rs 1,448 crore, while FY28E adjusted PAT was raised by 4 per cent to Rs 1,758 crore.

Key Pressure Points

• Weak construction demand and channel destocking.
• Primary-secondary steel-price gaps affecting SG Premium economics.
• Energy-related supply issues affecting the SG Premium segment.
• Geopolitical disruption to UAE operations and supply chains.
• Potential moderation in EBITDA per tonne as volumes recover.