Thread by @ValueEducator

Detailed Thread on #apollopipes

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Topics Covered :

1. Company overview
2. Management
3. APL Apollo Tubes Ltd
4. Products
5. Margins
6. Plants
7. Distribution
8. Marketing
9. Revenue mix
10. Company’s Key Focus Areas
11. Future Capex

12. Financials
13. EBITDA Margins

1. Company Overview
Apollo Pipes is among the top 10 leading piping solution providing companies in India. Headquartered at Delhi, the Company enjoys strong brand equity in the domestic markets. With more than three decades of experience

in the Indian PVC Pipe Market, Apollo Pipes holds a strong reputation for high quality products and an extensive distribution network.

2. Management
i) Mr Sanjay Gupta, Chairman, is an entrepreneur with an experience over three decades in various steel industry segments and he has spearheaded the Company’s growth. He is serving as Chairman and Managing Director of APL Apollo Tubes Limited, one of the leading

manufacturing Companies in the Steel & Iron Pipe segment of India. He was behind APL Apollo’s dominance in Steel pipes segments. Under his leadership, APL Apollo Tubes revenue grew from 1392 cr to 13063 cr in 10 years.

ii) Mr Sameer Gupta, MD, has graduated from Shri Ram College of Commerce, Delhi University. He joined the family business at an early age and established the PVC Pipes unit business. Under his able leadership, the Company continues to

reach newer heights, nurturing the values of hard work, commitment to quality, excellence & growth.

3. APL Apollo Tubes Ltd
APL Apollo Tubes Limited (APL Apollo) is one of India’s leading branded steel products manufacturers. Headquartered at Delhi NCR, the Company runs 10

manufacturing facilities churning out over 1,500 varieties of MS Black Pipes, Galvanised Tubes, Pre-Galvanised Tubes, Structural ERW Steel Tubes and Hollow Sections to serve industry applications like urban infrastructures, housing, irrigation,

solar plants, greenhouses and engineering.

4. Products
HDPE - Used for gas and fluid transfer, also as a replacement for Steel pipes. It is a part of agri segments. The HDPE pipes are mainly supplied to governmental contracts and agri uses.

It contributes around 9% of the revenue

UPCV -
UPVC plumbing pipes are made of Unplasticized Polyvinyl Chloride, a low maintenance and low-cost material that is widely used in buildings for distribution of potable water, or water

transfer in bathrooms, kitchens, sink, laboratories, etc. It is used in both agri and buildings categories.

CPVC
CPVC (chlorinated polyvinyl chloride) is a strong and rigid thermoplastic material that is used for hot and cold potable water applications in

residential construction. Because of its makeup, CPVC is immune to damage from highly chlorinated domestic water and has a higher temperature tolerance than PVC.

Bath Fittings - These products range from faucets, hand and head showers, health faucets, cisterns, seat covers,

allied products and other bathroom accessories. These products have better margins of around 15-20%

Water storage tank
Water storage tanks, namely Apollo Life, is the new addition to the company's product portfolio in 2020. It is the fastest growing product of the company.

This product was already being sold by existing dealers, who were very much keen regarding the same product being introduced by the company.

PPR
Introduced PPR segment in Q1 FY23 with a complete range of pipes and fittings products in major demand from north India and are

receiving good response from distributors. Very few players dominate this space, with a market of about 14 billion INR. Company is targeting 100cr in 2-3 years from this product. PPR is comparatively expensive than other polymers. The product is even higher in quality than CPVC.

In some cold regions, even CPVC fails. And it is only PPR which is used. Even in Europe PPR is widely used and accepted.

5. Margins
Margins for irrigation and agriculture applications based products is less than 10% whereas for building products is around 15%. Bath Fittings products give margins of around 15-20%. Water tanks give margins over 25%. CPVC pipes and fittings

also give a better margin of approximately 20%.

6. Plants
Apollo Pipes has a total capacity of 125200 MTPA. Company has 2 plants in UP in Dadri (more than 60000 MTPA) and Sikanderabad (initial capacity of 3000 MTPA in 2000), to cater the strong north market for the company.

Company has 1 plant each in Ahmedabad (initial capacity of 10000 MTPA), Bangalore(12000 MTPA), and Raipur (7200 MTPA) to distribute in Western, Southern and eastern markets. Company also has 4 machines of Water storage tanks each with a capacity of 1200 MTPA.

Company is currently planning capacity expansion in northern India, where the company market is deeply penetrated. In other regions it is increasing footholds, and thereby improving capacity utilization before making any additional expansion.

7. Distribution network
Apollo pipes has 600 to 700 direct channel partners who are supplying its products to at least 25000 retailers. Company enjoys a dominant presence in North India, 60-70% of its channel partners are from this region.

Company is planning dealers addition of 10-15% every year to have a pan India presence. Company is shifting its strategy towards increasing the number of dealers and retailers who are attached with the distributors,

so the distributors have confidence that the Company is working with them for the post sales.

8. Marketing
Apollo Pipes have recently appointed Tiger Shroff and Raveena Tandon as their brand ambassadors. Company launched a social media campaign during Q3 FY 2022, which has

generated strong responses on social media platforms. Company launched a TV commercial during the Q1 FY 23 which garnered good response. This will help the company strengthen its brand position in the market. Company also gives extra incentives to its distributors and

influencers (plumbers). Apollo Pipes also gets brand leverage from APL Apollo Steel Tubes, which is a leading player in Steel Pipes with revenue of 13063 cr.

9. Revenue Mix
Company Earns 55% of its Revenue from Building products and remaining from Agri Products. This mix was 35-65 three years ago. Revenue share for Value Added products is 35%. The Company's Plan is to increase this share to 50% in the next two years. The company is

increasingly focused on Building segments which give higher Margins.

10. Company’s Key focus areas
Company’s key focus areas are
a) Strengthen foothold in existing markets of North and West and South India
b) Undertake a phase-wise capacity expansion at the existing

facilities over the next few quarters.
c) Register solid growth in sales – targeting revenue growth of around 25%+
d) Penetrate and establish footprint into neighbouring markets in Central and Eastern India.
e) Improve utilization at the existing manufacturing plants at

all facilities.
f) Undertake various brand building exercises and establish stronger brand recall in the established markets of North and Western India.

11. Future Capex
Apollo is planning to expand further in North India, where its market is already deeply penetrated. In other

regions is increasing footholds, and thereby improving capacity utilisation before making any additional expansion. Any Capex, which will be incurred, will have three checks. One, Capex in a year will not exceed 30%, 35% of the company's EBITDA. Second, any organic

Capex will be funded from internal cash flows mostly, without stretching much of the balance sheet. Third, incremental Capex which will take place, will be mostly towards the value-added products and where ROCs or IRRs will be upwards of 25%, 30%.

12. Financials
Apollo pipes revenue grew 27% CAGR to 784cr in FY22 from 241cr in FY17 in 5 years. Company is expecting revenue of 1000 cr this fiscal, almost doubling its revenue in 2 years. Company is targeting revenue at 30% CAGR for next three years and targeting 2000 crore

revenue. Volume has increased 13% CAGR in five years to 53849 MT

EBITDA and EBITDA Margins

EBITDA improved to 93 crores from 31 crores in the last 5 years. Its EBITDA Margin is around 11%. It is expected that margins will improve because of
a) Falling PVC prices;
b) Increasing focus on value added product;
c) Branding expenditure;
and

d) operating leverage with increasing utilisation level at its plants. EBITDA per tonne is 14000 per tonne for Q1 FY23. Company is targeting an EBITDA per tonne of 20000 in two years.

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