Apollo Pipes Ltd
NSE:APOLLOPIPE

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Apollo Pipes Ltd
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Earnings Call Transcript

Earnings Call Transcript
2024-Q4

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Operator

Ladies and gentlemen, good day, and welcome to the Apollo Pipes Limited Q4 FY '24 Conference Call hosted by Icarus Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aman Agarwal from Icarus Securities. Thank you, and over to you.

A
Aman Agrawal
analyst

Thank you, Mara. Good morning, everyone. On behalf of Icarus Securities, I welcome you all to the Apollo Pipes Q4 '24 and Full Year FY '24 Earnings Conference Call. So management side, we have with us Mr. Sameer Gupta, Chairman and Managing Director; Mr. Arun Agarwal, Joint Financing Director; Mr. Ajay Kumar Jain, the Chief Financial Officer; and Mr. Anu Gupta, Group Chief Strategy Officer. I'm straightaway hand over the call to management of Apollo Pipes for their opening comments.

S
Sameer Gupta
executive

Thank you. Good morning, everyone, and thank you for joining us on our full year FY '24 earnings call to discuss the operating and financial performance. It was an exciting year for Apollo Pipes [indiscernible] We got a direction to double our capacity by FY '26, plus we added 2 value-added products in our portfolio, which is PVC and uPVC profile.

On the organic front, we continued this 20% plus sales volume for FY '24 as the inventory to expand our capacity with full of some of the bidding pipeline in West India, Hassan moldings at a price which we believe is very reasonable. And investment of INR 120 crores straight away it gave us footprint in West India with a capacity of 60,000 tonnes and potential revenue of INR 800 crores in 3 years.

We kickstarted our greenfield [indiscernible] expansion with a total CapEx of INR 120 crores, which will add 30,000 tonnes to our overall capacity. With this plant, we will have a pan-India presence. As we are aggressive in our sales strategy, we are keeping EBITDA margin targets around 10%, so as to keep gaining market share, with almost 2 lahks 80,000 tonnes capacity becoming live in the next 18 months, we have a stage set for 25% sales volume driver for next 3 to 4 years.

We spent INR 135 crores in CapEx in FY '24 and investment INR 120 crores in Kishkisan acquisition. We will spend further INR 200 crores in FY '25 and INR 50 crores in FY '26. I'm glad to share that our balance sheet remains debt-free despite some commitments. Our finance and sales teams have worked want us to improve working capital cycle to 33 days.

So our operating cash flow to EBITDA improved to 65% from 40% levels in the past. We expect this to sustain going forward. As far as Q4 FY '24 is concerned, the performance was slightly below our own expectations, mainly due to decline in project sales. Our Home Construction segment increased 15% on Y-o-Y basis.

We look forward to achieving revenue growth of 25% to 30% [indiscernible] in the next 4 years. We are also confident of hitting 25% to 30% of ROC despite these proposed investments supported by working capital efficiencies. This is from our side. Now we have had to take questions. Thank you.

Operator

[Operator Instructions] We have the first question from the line of Pajan Shah from Molecule Ventures. .

U
Unknown Analyst

Am I audible?

Operator

Yes, you are loud and clear. Please go ahead.

U
Unknown Analyst

Yes. Okay. Sir, my first question would be on PVC pipe, as you have said that we have launched this new product I just wanted to know like very few companies are making this product and being expected in this product. So while we have selected this product and what are the -- what we envision for this product? And how potential the market trend will be?

A
Arun Agarwal
executive

This product goes into water supplied pipelines. And as of now, only 7 months futures in the country are costly and there's a good demand for this sector and this is a replacement of [indiscernible].

U
Unknown Analyst

You said replacing [indiscernible].

A
Arun Agarwal
executive

Yes, yes.

U
Unknown Analyst

Okay. So just wanted to know more about this. So what would be the difference between the price of the [indiscernible] previously price pipe?

A
Arun Agarwal
executive

Come again?

U
Unknown Analyst

I just wanted to understand the difference difference between the pricing of the PVC prices and the [indiscernible] prices?

A
Arun Agarwal
executive

So look, as far as pricing are concerned, this is a price even formation, and this is related to the business. There is a substantial [indiscernible]die what we can say.

U
Unknown Analyst

Okay. Okay. So potentially, just wanted to know if we are focusing on this product, how potential we are trying to capture in terms of revenue? And what would be the EBITDA potential for this product?

S
Sameer Gupta
executive

So EBITDA portion should be somewhat around 25%. And this is not a very high-volume product. So it's a low-volume product. So top line could be with all the lines in -- while running the top line would be somewhere around INR 120 crores, INR 140 crores.

U
Unknown Analyst

And this would be achievable in FY '25 or FY '26?

S
Sameer Gupta
executive

FY '26. Full planning will be FY '26. We are online as [indiscernible].

U
Unknown Analyst

My next question would be on the holding as we have seen we are targeting a revenue of INR 900 crores. So -- and -- so just wanted to know how you are targeting and what are the plans we are envisioning for this target? And how will potentially go [indiscernible]?

S
Sameer Gupta
executive

So Gunjan, if you look at Kisan Holdings, the current capacity of that company is around 60,000 tonnes, okay? And at current PVC prices, it can generate that revenue, INR 800 crores, INR 900 crores, the number which we gave. Okay? It is just that for the last 4, 5 years, the company was not running to its full utilization because of the working capital constraints and all the long-term loans which -- when bad NPAs, et cetera, with the banks, so company was struggling on that account. When we acquired the company, we clear all the loans, right? Now there is a clean slate for the company to utilize its capacity of 60,000 tonnes.

In terms of the market positioning, the brand positioning, the SDU range, the quality of plant and machinery, we found everything convincing that if given the broker platform, this brand can generate that kind of revenue. At peak, it did achieve INR 500 crore kind of revenue, right, and that was like 3, 4 years back. And of course, the strength of what that brand carries in the Western Indian market with support from a group like Apollo, we are -- we were highly convinced that this is going to get achieved over the next 2 to 3 years.

And just to add on your question of like first question on that why we go into this PVC space, I mean Apollo being the sixth-largest PVC company, we are following the trends of what the new trends which the industry is following, right, which the industry is coming up with. So we found this opportunity in old PVC segment, which is replacement of total iron pipes. This was a theme that PVC industry emerge in India, with the conversion of iron steel pipes, right? So our balance sheet size gave us the opportunity to invest that much of capital into a new technology, right?

We took that, I would say, calculative risk, right? And based on the based on the feedback, what we are getting from the potential clients. So we are very excited with this new product line. And yes, as a group, it's a close to start slow right? But once we get convinced, once we take the success, then we will go super aggressive in putting up our new lines.

So right now, what we can say is that the investment which we put in this line in this product is with a calculative risk so that the ramp-up, even if it takes time, it doesn't drag on our balance sheet or cash flows. But the good news is that the feedback -- initial feedback has been pretty solid from the potential clients, and we are already looking to ramp up this business with addition of more lines over the next 2 to 3 years.

U
Unknown Analyst

Got it, sir. Just wanted to -- 2 question on how -- what size of investment we have done in PVC?

S
Sameer Gupta
executive

So if you see like we have added 2 new products to our portfolio. One is uPVC. And second is a window profile, which is in the home improvement segment. put together in these 2 products, we are going to invest between INR 150 crores to INR 200 crores in next 1.5 years.

U
Unknown Analyst

Okay. And capacity if you can give any on capacity?

S
Sameer Gupta
executive

Actually also that is in our presentation, which we uploaded on the stock exchanges. Altogether, we are adding 11,500 tonnes of -- for these 2 new products.

Operator

We have the next question from the line of Jenish Karia from Antique Stockbroking.

J
Jenish Karia
analyst

So firstly, the question is on Kisan Holdings. So current 60,000 tonnes capacity, what would be the current utilization level? Where do we see it in the next 2 to 3 years? And with the INR 30 crore inclusion that we are doing for capacity enhancements and improvements, what will the potential capacity 2 to 3 years down the line for Kisan?

S
Sameer Gupta
executive

So if you look at the current run rate, it is around 25,000 tonnes, okay, March 24, which they closed. Our target for FY '25 this year is around 35,000 to 40,000 tonnes and then take it up to around 55,000, 60,000 tonnes by FY '26, right? And then there will be some minor capacity additions, right, processes improvement, line improvement which may require INR 30 crores, INR 40 crores of investment, but that will come from internal cash flows, which the company with the business will start generating now onwards.

J
Jenish Karia
analyst

Okay. So do we see a 10,000, 15,000 tonnes capacity addition with that CapEx in Kisan?

S
Sameer Gupta
executive

Yes. So target is to take capacity, which is right now 60,000 tonnes to 80,000 tonnes by March 26.

J
Jenish Karia
analyst

Okay. And secondly is on the tax okay. So what is the tax status currently? Will it be a tax acting NTT in the next 2 years with the profits are going in? What is the EBITDA target for Kisan entity? I understand you have done a 10% guidance in FY '21, but for the next 2 years, any clarity?

S
Sameer Gupta
executive

Regarding taxes for the next 3 years, we don't see any cash outflow as of now as per our calculations. There are, say, broad forward losses and all. Number two, regarding the EBITDA target of voting, we expect by late of, say, Q4, Q3 of '26, we should be hitting 10% plus EBITDA in the company.

J
Jenish Karia
analyst

Great. So next is on the working capital is for '24 the base was sharply down, but normally, on as an entity used to keep 100, 110 days of inventory and higher working capital. So do we -- can to streamline in Apollo in FY '25 itself or it will happen over a period of time?

S
Sameer Gupta
executive

It will happen over a period of time. Yes, you are right that the used to carry a higher inventory. But with the higher sales, obviously, the number of the inventory or the material cycle will come down, as well process, not an event like, yes.

J
Jenish Karia
analyst

[indiscernible].

S
Sameer Gupta
executive

So going forward, by FY '26 and rating which would be the working -- NWC should be less than 60 days.

J
Jenish Karia
analyst

Next is on the pole entity level. What is the current mix of agri or agri product?

S
Sameer Gupta
executive

So the housing Plumbing segment accounts for around 55% and 45% is agri.

J
Jenish Karia
analyst

Okay. And sir, just in in your opening remarks, you had mentioned that the FY '21 volume performance was a below expectation because of lower project is that this is -- that the commentary of other type players was not in line is not in the similar line. So what are we doing separately or differently or which region was impacted because of low predictors? Any color on that front?

S
Sameer Gupta
executive

So it was only Q4 of FY '24, which was soft, okay, not for FY '24. In Q4 FY '24, the project sales not in the building materials segment, but in the Agri and water transportation segment, where the sales were down, not in the building material project sales.

J
Jenish Karia
analyst

Sir, just last one, bookkeeping question. What is the plant-wise capacity if you can just provide in FY '24, that would be helpful.

S
Sameer Gupta
executive

So see, FY '24, the total capacity, including Kisan, for the company was around 216,000 tonnes.

J
Jenish Karia
analyst

Yes. If you can break it up to Dadri plant, the Raipur plant and Bangalore.

Operator

Can the management hear us?

[Technical Difficulty]

Ladies and gentlemen, we have the management back. So you may go ahead.

J
Jenish Karia
analyst

Yes. So I just wanted, if you could just build down the capacity within the Dadri plant, Bangalore plant and Raipur plant.

S
Sameer Gupta
executive

So this, of course, because of data sensitivity, we are not giving you exact numbers. But what I can tell you is that the total capacity was 216,000 tonnes, right, as of March 24, Kisan was 60,000 tonnes out of this, right? Now out of 216,000, 45% is in north, okay, around 100,000 tonnes is in North. And balance is in south, which is, say, 40,000 tonnes and rest in Raipur.

Operator

We have the next question from the line of Ashish from Invesco.

U
Unknown Analyst

A few questions. I mean. So looking at the number delivery from maybe the leaders that we saw and our numbers in terms of same growth clearly in the past 18 months, we have had challenges on despite having capacities, there has been kind of a struggle between volumes and margins. So could you explain, I mean, what challenges are we facing fierce competition, difficulties in getting things through in terms of delivery of volume growth. So if some qualitative aspects can be shared, I mean, we'll have a better picture of how things are shaping further.

S
Sameer Gupta
executive

See barring second half of FY '24, okay, the performance has been pretty on the expected lines, okay? If we look at the business plan, what we built, okay, 2 years back. So from 45,000 tonnes, we came to 65,000 tonnes and from there, around 80,000 tonnes for the full year, okay? And this is what we have been guiding for around 25% volume growth, right? And FY '24 will be put to 32%, right? So yes, there is a slight miss because of the second half, which was weaker for us.

And the reason for that was like we said that the project sales in the agri side, that's where the traction was pretty solid in the last 2 years. But then a lot of completion comes in, right? And then the people go aggressively bid at low prices and they also start their working capital. So as a company, we are -- we always have this clarity in our minds that we don't want to lose. We don't want to deploy too much capital for the government-based projects, right, and in their low margin. So we just took a back seat there, okay? And that's why there's 3%, 4% lift in the overall growth for the full year.

As far as the trade sales is concerned or the home improvement segment is concerned, the numbers in terms of distributor addition, SKU addition and ramp up, we are pretty much on track. And the margins, yes, we have been pretty vocal about it that as management, we took -- there's -- I mean, we adopted the strategy to go highly aggressive on sales, right, and slightly compromise on the margins, which we were in 12%, 13% at EBITDA level range. Now we are at 10% EBITDA level range because as you can see, we have invested heavily into building capacities in the last 2 years and the amount of CapEx, what we are going to incur over the next 2 years, right, almost INR 500 crores CapEx plan, which we initiated in the beginning of FY '24. So idea is to build capacities, right, which come with a lot of upfront fixed costs, right? So that's why the margins will appear low optically, right?

And then when you gain market share, you compete against strong peers, okay, so you need to give -- offer more sweeteners to your clients, which we are doing. All in all, what we believe is that we are in the super expansion phase, right, for our company. Our gross block acute to be like INR 200 crores INR 50 crores, INR 300 crores 2, 3 years back, it will be almost INR 800 crores in the next 2 years, okay? So first is to persist to build such capacity, right? And then spend on brand, right, which could consume this much of capacity in terms of market pull, right? So that's what we are doing.

We appointed [indiscernible] last year as well, okay? And yes, at 10% EBITDA margin, idea is to hit 25%, 30% ROCE, okay? So that's that's what our ultimate objective is that for next 2, 3 years, we continue to grow by 25%, 30% CAGR volume, revenue, EBITDA, CAGR and PAT and hit 25%, 30% ROC with all the investments, which right now are going into the business.

U
Unknown Analyst

So I mean, just as a business, I understand the point that given the kind of white spaces, you may say, of the geographical patches that you needed to cover who are not focused. As a company, it makes all sense to look at making it a national player. But in the overall kind of chase for doing all that, if I look at the profits have even state for the past 3 years, and that's as an investor things look a bit difficult because stock price doesn't move. So all past is okay, but as you said that the endeavor is to grow at 25-odd-percent on all levels still pack. But given the depreciation of fixed costs that will come upfront. Even now, given the expansion phases still on, how do you see the overall profit delivery going ahead because now we are at that 10% margin base that we talked about we might be at a high level of the 13%, 15% 2 years back. Now that correction has happened. Do you really think that -- I wouldn't have to the numbers in that detail right now, but adverting to your expectations is FY '25, '26, '27 going to be a bit more linear compared to the only top line delivery and nonprofit growth that we've seen for the past 2, 3 years?

S
Sameer Gupta
executive

So see -- I mean, I'll put it in this way. If you look at my existing business, right, -- it generated INR 100 crore EBITDA, okay, for FY '24. Now there are 3 new engines what we have plugin. One is Kisan, who is going to generate INR 800 crores, INR 900 crore revenue with INR 100 crore EBITDA in the next 3 years, right? This is Indian demand where we have -- around 55% controlling stake. Then the second engine is these 2 new super value-added products, which is uPVC pipe window profile, right? This investment of around INR 150 crores to INR 200 crores in the next 2 years. These 2 businesses -- these 2 new products will generate around INR 100 crores EBITDA booked together, okay? So 100 plus 100, 200.

And then my existing business, 100 will grow at like, say, 10%, 15% year-on-year, plus the warranty plant, which will add to it, right, around INR 40 crores, INR 50 crores EBITDA will come from there. So if you see, I have -- I mean, as a management, we have formulated the strategy to take this EBITDA from INR 100 crores to INR 400 crores at a group level. Out of which Kisan may own INR 55 crores or INR 100 crores, right? So from INR 100 crores to INR 350 crores kind of EBITDA number in the next 3, 4 years is what we have taken the direction, right? And we have already started putting investments there, right? Around INR 150 crores we put last year, INR 200 crores will come this year, right, a INR 100 crores next year.

So yes, I mean, there will be some mismatch, right, because of fixed costs, which come upfront, okay, high depreciation, et cetera. But one thing I would like to highlight is that we have ensured that my profitability doesn't get hit because of high intra cost. So we're not borrowing to fund this CapEx, right? This is all from equity infusion or the operating cash flow, right? And with the working capitalization, what we have been able to achieve in FY '24, sustaining that, I mean, even like -- despite this CapEx, we may have surplus cash on the books, right? So the point is, yes, I mean taking EBITDA from 100 to 400, right, in 3 to 4 years' time line, it will have its exposed upfront, right, the high depreciation cost.

But yes, I mean, the target seems very, very clear and achievable okay, and I would say that last 2 years have been like pretty bad for the industry like we did PAT of INR 49 crores in FY '22, right, '23 was washed out because of inventory write-downs for the industry, right? And FY '24. again, I mean -- because at that year, we were doing margins of 13%, 14%, but now we are at a margin of 10%. So I guess from FY '24, we have seen the worst, right, in terms of like every quarter, you will see like a new line getting added, new products getting added is contributing to my numbers. So revenue by 100% will increase quarter-on-quarter now onwards, right? And in no quarter, I can go below 10% EBITDA margin, right?

So I would say that FY '24 has seen a base in terms of the margins and the profitability, okay? And now next 2, 3 years, as we grow 25%, 30% revenue CAGR, it will definitely translate into a superior earnings growth. But yes, I mean, it may not match for next few quarters, right? But the vision, the target is very, very clear.

U
Unknown Analyst

Okay. If I may continue this one, the only point I'm trying to make is that theoretically, the entire plan looks to be pretty good. Problem is that most of the players in your industry are pretty aggressive. And as you said that margin compromise do take place because you have your volume growth targets in mind. So I mean, should we take it as a certain that this 10% EBITDA margin wouldn't be a downside in the near term plus the volatility in the raw material cost in this the product segment that you are. I mean, keeping that in mind, is that [indiscernible] margin that one should look at?

S
Sameer Gupta
executive

Definitely, yes. And let me tell you one thing that once we do INR 3,000 crores top line, margin by default will come at 15%. That's what the -- that's how the businesses generate margin. Okay. Right now, INR 1,000 crore, I'm at 10%. Even if I do the same pricing, but because of my strength in sourcing raw materials, because of my operating leverage because of my utilization levels for my mills, right, INR 3,000 crores on same infrastructure, right, will give you superior margins. So what we know is that you generate revenue and margins will come on their own.

U
Unknown Analyst

Okay. And then Kisan, basically, 55% stake that we have. So what is the plan? Because I would suggest that over a period of time, you would like to take full control probably. So if you could elaborate on that, how the mapping of this overall plan is, it will be helpful to us.

S
Sameer Gupta
executive

So right now, the focus is to bring that business back on track, right and generate INR 800 crores, INR 900 crores kind of top line with 11%, 12% into margins, right? So idea is to do that first, right? Because we have held on to the existing management, okay? So we are supporting them to achieve these numbers. Let's see how the performance comes in the next 2, 3 years and then we'll revise the plan to what to do further.

U
Unknown Analyst

Any thoughts at all in this -- to this management in the sites?

S
Sameer Gupta
executive

So Apollo Pipes and Kisan, yes, I mean, as a group, we have always grows. So we are working towards that.

Operator

We have the next question from the line of Utkarsh Nopany from BOB Caps.

U
Utkarsh Nopany
analyst

First, I need a few data points. So these are different in the stand-alone and consolidated revenue because of consolidation of Kisan Molding. So can you please provide the standalone and consol sales volume data separately for March quarter? And what is the agri and non-agri pipe sales on mix for Kisan and Apollo pipe separately for FY '24? And what is the share of B2B and retail sales mix for us in FY '24?

S
Sameer Gupta
executive

So I guess you ended up asking too many questions we couldn't note down but let go one by one. So how many days of consolidation? There was almost 6 [indiscernible] so within -- as far as the number goes, so there is a INR 10 crore of top line addition and around 38 bottom line addition in the control results. So it is event, so -- that's okay. So [indiscernible] of consolidation. Any implication further clarification on that?

U
Utkarsh Nopany
analyst

Yes, sir. The [indiscernible] crores the consolidated volume or the stand-alone sales volume? .

S
Sameer Gupta
executive

Stand-alone sales volume for colon is around 977.1 [indiscernible] 80,440 for stand-alone.

U
Utkarsh Nopany
analyst

And what would be the console volume?

S
Sameer Gupta
executive

81,235.

U
Utkarsh Nopany
analyst

Okay. And sir, what is the agri and non-agri sales volume mix for Kisan and Apolo pipe for FY '24?

S
Sameer Gupta
executive

So for Apollo pipes, I have told earlier as well, 55% is non-agri, 45% is agri. And for Kisan, it will be 30% building materials and 70% agri.

U
Utkarsh Nopany
analyst

Okay. And sir, what would be the share of B2B and retail sales mix for Apollo Pipe in FY '20?

S
Sameer Gupta
executive

So we are always 10% B2B. That's what we are maintaining. And you want to know for Kisan also?

U
Utkarsh Nopany
analyst

Yes, that would to be helpful, sir.

S
Sameer Gupta
executive

Kisan is also saying 15%, 20% B2B.

U
Utkarsh Nopany
analyst

Then my next question is like our gross margin has fallen down to multi-quarter low level in this March quarter. And for project sales got impacted then by our gross margin has been impacted so sharply by 280 bps on a quarter-on-quarter basis? And what would be the gross margin outlook for Kisan and Apollo pipes for FY '23?

S
Sameer Gupta
executive

So if you see that my raw material margin or gross margin is around INR 32,000 a tonne, okay? And -- so there are like 2 things, right? Project sales when we say that they are down, right? It's not that project sales, which were earlier, they were of low margin. We said that the new projects, the new orders were coming at low margins. That's why we were not taking those orders, okay? So whatever work we take, we ensure that these are high margins, right? We never take any order which are low margin orders. So whatever mix we had earlier, they were for better margin, high-margin orders, right? But now we are going slow on those orders because we are not getting that design margins. because you have to invest your working capital here. So to get the desired ROC, you need to have a better margin than what you get in trade, right? My trade is like low working capital cycle business. over there, I can go for a 9% margin. But for project business, which carries a risk. So I need to ensure that they are at 30% margin.

U
Utkarsh Nopany
analyst

Okay. So what would be the gross margin outlook for Kisan and Apollo Pipes separately for FY '23?

S
Sameer Gupta
executive

So see, I mean, the target for both the businesses, we said is 10% EBITDA margin, right? Kisan also, we are seeing 10%, 11%. Apollo right now is 10%, 11%, and it will maintain that. So the gross margin will also be kind of same. We'll have to see Kissan's cost structure, but we look at this business at the EBITDA level. So we can assume that both businesses will generate 10%, 11% EBITDA margin.

U
Utkarsh Nopany
analyst

Okay. And sir, like earlier, we plan to reduce the share of agri pipe sales mix for us. So whether the acquisition of Kisan Molding is not likely to derail our earlier plan of reducing agri price mix going forward and would also dilute our margin profile as we are targeting only 10% EBITDA margin for Kisan molding by compared to our historical stand-alone EBITDA margin of 12%.

S
Sameer Gupta
executive

Okay. So there are 2 things. One is that when you say that the sales or nonagri will come down, it is a mix, right? Because my building material portfolio will grow faster than the agri portfolio. So the mix will keep on improving towards the building material side. But India being the avian structure, right? So there's always a good demand for agri culture pipes, right? And the industry itself is 40%, 50% agriculture base, right? So as a segment, we will always keep on selling our products in that category. That is one part of it.

Second, Kisan right now is 70% agri not because there are lines or they don't have products to sell in the building materials space. Because they didn't have money to spend on the brand to go aggressive in the building material space. So they were selling agri pipes, which is like more easy to sell, okay? So now that they have the relevant working capital in place, they will be able to spend on brand, so they will expand the portfolio or they will increase their sales more towards building the blending material side of it. So Kisan also on INR 1,000 crores, we will expect them to be like, if not is 45% nonagri and 55% at -- and colo on stand-alone basis will be 7% building material and 30% equity in next year when we achieve this INR 3,000 crores top line.

U
Utkarsh Nopany
analyst

Okay. And sir, on the branding part, whether we are thinking of continuing with the Kisan brand, focus on building our plan to consolidate this plant to Apollo?

S
Sameer Gupta
executive

So right now, we believe that Kisan brand is strong enough to drive the targets what we have set for the next 3 years.

U
Utkarsh Nopany
analyst

Okay. And sir, lastly, after the acquisition of majority control of Kisan Molding. There's any regulatory event to come out with a tenor for accretion of another 25% stake in Kisan?

S
Sameer Gupta
executive

No.

Operator

Okay. We have the next question from the line of Udit from Yes Securities..

U
Udit Gajiwala
analyst

So firstly, on stand-alone numbers for the volume that you mentioned, so the guiding that you are maintaining is 25% [indiscernible] so will that be excluding Kisan or including the Titan volumes that you are aiming at 35,000 and 50,000 respectively, [indiscernible]?

S
Sameer Gupta
executive

So 22%, 23% is without Kisan on stand-alone basis and 30% will be with Kisan.

U
Udit Gajiwala
analyst

Okay. So going ahead, the 25% volume CAGR on the base of 8,500 odd stand-alone numbers, so that is a 25% growth on that number? Or do you any include the Kisan number that you expect?

S
Sameer Gupta
executive

Can you repeat, please?

U
Udit Gajiwala
analyst

So on FY '24 stand-alone exit run rate of the volume and your guidance of 25% volume growth. So should we build in 25% on the stand-alone or including Kisan number?

S
Sameer Gupta
executive

Without Kisan, 25%.

U
Udit Gajiwala
analyst

And 35,000 tonnes and 50,000 that you are expecting in the next 2 years to a would be something add on?

S
Sameer Gupta
executive

That's right. That's right. So we are not changing our guidance, right? Before Kisan, we said that as a company, we want to continue to grow at 25% CAGR. So we continue to do that.

U
Udit Gajiwala
analyst

Right? So with this enhanced capacity and of course, 55%, 54% contribution from Titan's overall performance was an additional boost. And that's the correct understanding, right?

S
Sameer Gupta
executive

Definitely, yes.

U
Udit Gajiwala
analyst

Understood. And considering that Kisan, you will continue with that brand name. So will that be the key also for the building material side because they are Apollo holds a better brand. So will that SKUs be in Apollo brand? Is that the plan?

S
Sameer Gupta
executive

So that strategy is being formulated as you see, right? We are working on a few options, right? We're talking to outlines taking feedback from them. So I guess in the next 6 months, we'll be better positioned to come out with the definitive strategy how to brand the building material space for the Western markets.

U
Udit Gajiwala
analyst

Got it. And in terms of number of dealers, if you could split how much did we exit for Apollo in FY '24? And how much does Kisan have? And what is the target for '25? What will be the net addition that you would like to?

S
Sameer Gupta
executive

So Apollo's exit run rate will be around 700, 750, okay? And Kisan should be around 200.

U
Udit Gajiwala
analyst

So 900, 950. What would be the plan to add dealers in '26 -- '25, '26.

S
Sameer Gupta
executive

See, it's a continuous process, right? I mean, Kisan obviously, will have to add much more, right? Maybe they'll have to increase number of dealer by 50%, right? And as far as Apollo is concerned, we are going aggressive in these other markets, okay? And Eastern markets with [indiscernible] will have to add a lot of new dealers. So I guess, I mean, we could be around 800 at Apollo pipe levels and 300 at Kisan level.

Operator

We have the next line of Jatin Chawla from RTL Investments.

U
Unknown Analyst

My question is on this new segment that you're planning to enter the PVC during vendor profile. So if you could just talk about broadly like the PVC price, is there a plan to kind of shift from 1 segment to another? Or what is the market size today for this product? And what sort of share are you kind of targeting?

S
Sameer Gupta
executive

So see, I mean, there is no market size mapping, which has been done for uPVC windows or doors, okay? But what we know is that there is an emerging trend in the construction sector. whether it is private construction or government-led housing construction, the developers, the contractors, the architects, -- they are going after the alternative window or profile over banstructure, which are available today. uPVC, of course, finishing is cost-wise the and aesthetics is right, it offers a better proposition compared to wooden structures in many cases, right? So there is like this emerging market, which is coming up, right? And Apollo being a strong brand in the construction materials segment. So we thought that it's a good strategy to get into this product segment where right now there are a limited number of players right? And we know the market leader who started this business a few years back, has reached to a very handsome scale. So there is a big opportunity which we see going forward in this segment. And we took feedback from a lot of contractors, a lot of architects, a lot of developers before we took this call to get into this segment. And we have -- we are also appointing our dedicated team for this business.

U
Unknown Analyst

The selling and distribution will be done with code that you would have to appoint a different distribution network for them?

S
Sameer Gupta
executive

No, it's a separate channel, which will get built.

U
Unknown Analyst

So given that a separate channel has to be created, it is a new product, if I work back the numbers that you were kind of giving for the 2 new products that you are targeting INR 100 crores EBITDA in 3 years. And for PBC, 120 crores of revenue and 25% EBITDA for, let's say, INR 25 crores, INR 30 crores EBITDA there, it seems for this product targeting INR 50 crores INR 70 crores of EBITDA which seems a little bit aggressive. If you could just say in terms of what revenue and margins are you expecting in 3 years to get on whether this understanding of INR 60 crores, INR 70 crores EBITDA over the next 3 years is right.

S
Sameer Gupta
executive

So uPVC, if you see -- I mean, what Arun said was the number which you gave was for FY '26, right? That's like 2 years. In 3 years, uPVC will be generating much more revenue than that number, okay? So what I can say is that out of this INR 100 crores EBITDA from these 2 products, INR 60 crore could come from uPVC and the INR 40 crores could come from a window profile, which we give is not an aggressive number at all.

U
Unknown Analyst

And this is also a higher margin product like will be 20% plus?

S
Sameer Gupta
executive

No, not as high as the uPVC.

U
Unknown Analyst

Got it. And so for the next 3 years on the core satellite business, you said that you're looking to maintain margins at 10%. So is there a plan to get back to the earlier 12%, 13% margins after that? Or do you plan to kind of run the company and focus only on volumes and maintain margins at 10%?

S
Sameer Gupta
executive

[indiscernible]

Operator

We have the next question from the line of Piyush Khandelwal from Bank of India.

P
Piyush Khandelwal
analyst

Sir, just I mean correlating or especially last quarter commentary on volume growth and this quarter execution. Last quarter, I said that the volume growth was low because there was lower demand, there were other things. This quarter, I mean, you're saying about the project and the press release also mentioned about China stock in detections. But firstly, on the project side, if I look at orders are already in hand, let's say, at least 3, 4 months earlier than our execution. I mean last quarter, you said that you're confident of growing at least 20%, 30% of the volume growth, and you'll help the earlier Q4, the highest volume growth that I've done. So I mean, why is this so much of -- I mean, decom in your commentary and execution. And this -- is that correlated with other players? I mean, I understand about the project side. But if I look at which are the in focus players, the project side is not that much, they are also reporting very good numbers. So I mean, is it really the project business, which is hitting? Or is it the higher competitive intensity which is getting into the picture? Because if that is the case, that will not go away in 1 or 2 quarters, it will continue at least the next couple of quarters.

S
Sameer Gupta
executive

So you see, I mean, we said it very categorically that second half of FY '24 has been soft for us, okay? Q3 demand was weak in the industry right because of weak Diwali, et cetera, right, which impacted the sales. Now in Q4, we were highly optimistic that we will cover up the sales because because normally what happens is that these government projects, right, normally -- there is a lot of execution which takes place for the March quarter, right, government contractors, they try to finish as much as they can during the end of the fiscal year. So when we were having -- like when we were having this call, right, in January, so we thought that there will be good orders, which will come in like Feb-March, okay, which we will secure, and we will do the execution. And whatever revenue loss we did in Q3 that we will be able to cover for Q4. Orders were there, right? But the problem is that the competitive intensity was more in government side than trade side. rate side, always a strong brand. So we are there to compete against any other players. I'm not scared. Okay. But in government, I don't want -- because of my commitment towards CapEx, right? And my own strategy to rationalize my working capital. I do not want I don't want to get my WC stuff right to get stuck for government projects, right? So we took a conscious call not to go aggressive during late first, early March, right, to take orders and secured because there are contractors who want to finish work right down in the market giving orders left price center, right? But then the conditions which we did not like. And we said, okay, let's go. Let it go.

P
Piyush Khandelwal
analyst

All right. But if I look at -- I mean especially this interest pending the circa, especially this will also be challenging in the first quarter because first quarter is almost election, all the first 2 months. So that 25% guidance you are giving for the Apollo stand-alone, does that also is just because of this and maybe 15%, 20% is a more realistic expectation?

S
Sameer Gupta
executive

Sort of Q1 [indiscernible], right?

P
Piyush Khandelwal
analyst

That's what I'm asking, is 15%, 20% is a more real estate expectation for us?

S
Sameer Gupta
executive

See, we did 22% for fact even with such a bad Q3 and Q4, right? So yes, I mean, we are saying 25% for full year, that is factoring in that Q1 is going to be soft because of election, et cetera, right? But we know our product pipeline. We know our dealer channel sitting light on our stock, right? We know when to gain momentum sales, right, then uPVC will start, right? For us, window profile also will start towards the end of the year, some sales will come there, right? My Varanasi plant, right? So we have a lot of levers pens. We have a lot of egos to deliver this 25% gather.

P
Piyush Khandelwal
analyst

Just 1 data point out of this 80,000 tonnes that have done in the stand-alone business, what will be this project contribution that you're talking about where you not participate?

S
Sameer Gupta
executive

So for the full year, it could be 10%, but for second half, it will be even lower. For Q4, it will be like even lower.

P
Piyush Khandelwal
analyst

And this greater rate for a full year, just 10%?

S
Sameer Gupta
executive

Full year to decline.

P
Piyush Khandelwal
analyst

10% [indiscernible] decline over?

S
Sameer Gupta
executive

Yes. all right.

P
Piyush Khandelwal
analyst

Another question is on this Kisan position, which you've done. So the brand name of Kisan will continue, you'll change the brand name? How does that going to work?

S
Sameer Gupta
executive

So for next 1, 2 years, we think Kisan is strong enough to drive sales to INR 800 crores is ratio strategy change for me. So we'll see, we'll evaluate, right? But Kisan has that strength to drive the sales.

Operator

We have the next question from the line of Keshav Lahoti from HDFC Securities.

K
Keshav Lahoti
analyst

I want to get a color more on Q4 and how is the Q1 going because normally our understanding is Q4, the demand was strong. Even if the project sales, which is just 10% of your revenue was weak. Still, we see sub 10% volume growth in Q4. So it has to do something more than project sales also.

S
Sameer Gupta
executive

Hello. For Q4, the project contribution was less than 10%. It was in low single digits.

K
Keshav Lahoti
analyst

Yes. So normally, you grew by 25% this quarter, it's like 10%. So there is a 15% growth mismatch, which has happened in Q4 when the demand was strong, so 5% could be attributed to project. The remaining 10% has to do something other than Project 2? And how is the Q1 shaping up?

S
Sameer Gupta
executive

Do you know what was my contribution in Q4 last year, right? It was like high double digit kind of right? So the project business declined very sharply, right, in Q4. If you're comparing Q4 of FY '23 and Q4 of FY '24, the project sales -- the project revenue declined very sharply, okay? So what I can tell you is that the trade sales, we grew at a decent number for the Q4, right? And because of my lower project sales contribution, the performance of years ago.

And as far as Q1 is concerned -- 1 is concerned. April, it's been like 1.5 months right into the quarter. The run rate is okay. Of course, because of elections, et cetera, projects having like even the private projects, things are moving slow. And our channel passes clients, even they are the cautious talking at high levels because because you don't -- everyone like let the election is all come and then we see how things move. So I guess after first week of June, after first week of June, the sales momentum will pick significantly.

K
Keshav Lahoti
analyst

Got it. And what is the project is bifurcation between government and private?

S
Sameer Gupta
executive

And just to add to it, like turbines is having general election, right, in 7 phases, right, abates is an important market for us, okay, and the main market for us. So our sales got disrupted like 7x for this election, right? But that's okay. Like I said, we'll cover it up. We'll cover it up from -- after the first week of June -- sorry, go ahead.

P
Piyush Khandelwal
analyst

Okay. So what is the project sales bifurcation between private and government?

S
Sameer Gupta
executive

Private projects. We don't do directly our dealers sell to all the developers, right? So I don't know what you mean by government and private private. Is it selling to very and DLF, et cetera?

P
Piyush Khandelwal
analyst

Yes.

S
Sameer Gupta
executive

Yes. So that's our dealers who sail.

P
Piyush Khandelwal
analyst

Okay. Got it. So this 10% is entirely government, what do you say 10%?

S
Sameer Gupta
executive

Of course, yes.

K
Keshav Lahoti
analyst

Got it. What has been your expense for this year? And what are your plans going forward?

S
Sameer Gupta
executive

Expense remain around 1.5%, 4% to 2% of the top line.

K
Keshav Lahoti
analyst

And will it remain at in is good? Is it going to increase?

S
Sameer Gupta
executive

There'll be a slight increase or a slight increase in FY '25 to 2%, 2.25%.

P
Piyush Khandelwal
analyst

Got it. Last question, what was the dealer addition and dealer addition for this year?

S
Sameer Gupta
executive

Around 50, we would have added new dealers. 57 to be precise.

Operator

We have the next question from the line of Kunal from Kitara Capital.

U
Unknown Analyst

I just wanted to ask the asset turnover ratio in the Thailand pipe and window profiling business. How much each individually are we putting the INR 150 crores to INR 200 crores. And how much revenue are we in both and EBITDA margins in both the business?

S
Sameer Gupta
executive

Hello, so Kannan, this is slightly sensitive data, okay, because these are new products. But broad-based, like I said, INR 200 crores is not going to get invested. So 60%, 70% out of this in uPVC and rest in Reston window profiles, okay? uPVC OBC, the asset turn is 1.5x, right? And then vendor profile we set is around 5x.

U
Unknown Analyst

Okay. And EBITDA margins?

S
Sameer Gupta
executive

uPVC RNG clarified around 25%. And window profile -- I mean, based on all the expenses of business development branding, we should touch like low double digit.

Operator

That was the last question. I would now like to hand it over to the management for closing comments.

S
Sameer Gupta
executive

On behalf of the management, [indiscernible] for the patient hearing. We hope we were able to explain your concerns. You may contact for any other further clarifications required. Thank you once again for joining the call.

Operator

Thank you. On behalf of Apollo Pipes Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

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