APL Apollo Q1 FY27: Volumes dipped, but margins stayed firm

APL Apollo Tubes opened FY27 with a mixed quarter. Reported volumes were lower than management expectations, but profitability held up, supported by better spreads and product mix.

On a consolidated basis for Q1 FY27 (quarter ended June 30, 2026), the company reported sales volume of 744,823 tons, down 6 percent year on year and down 19 percent quarter on quarter. Revenue rose 8 percent year on year to Rs 56.1 billion. EBITDA increased 11 percent year on year to Rs 4.1 billion, while EBITDA per ton improved to Rs 5,522, up 18 percent year on year. Net profit also grew 11 percent year on year to Rs 2.6 billion.

Management described the quarter as one where volumes were impacted by a softer macro environment and specific operational disruptions, but pricing power and improving mix helped protect spreads.

What drove Q1 FY27 performance

In the earnings call, the company broke down the volume decline versus Q4 FY26 into several drivers.

The first was disruption in UAE operations due to geopolitical conditions, which management said reduced volumes by about 25,000 tons quarter on quarter. The second was a decline in SG Premium brand volumes because the price gap versus secondary material was high, limiting the company’s ability to compete aggressively in that price band without sacrificing profitability. The third was an energy crisis in India, which hurt some categories such as rust-proof pipes and roofing products, with management indicating another 25,000 to 30,000 tons of impact. Finally, the company pointed to high inflation and elevated commodity prices that delayed purchases by EPC contractors and real estate developers, and also led to destocking by channel partners.

Despite lower tonnage, management said it focused on maintaining profitability in an uncertain demand environment. It highlighted that gross profit per ton increased by about Rs 1,000 quarter on quarter, supported by pricing discipline. This helped keep EBITDA per ton flat sequentially at around Rs 5,500, even as operating leverage weakened.

Financial summary (consolidated)

Note: Revenue and profit numbers are converted from Rs million in the presentation into Rs crore.

Cash flow and balance sheet: net cash, but a weak quarter for cash generation

APL Apollo ended Q1 FY27 with net cash of about Rs 14.1 billion, compared with Rs 15.3 billion at the end of FY26. Net working capital days were reported at zero, consistent with FY26.

However, the quarter saw weak reported cash generation. Operating cash flow for Q1 FY27 was negative at Rs 0.3 billion and free cash flow was negative at Rs 2.9 billion. The cash flow statement shows inventory increased by Rs 4.6 billion during the quarter and other working-capital items also moved unfavourably, more than offsetting EBITDA.

The company’s cash flow bridge also indicates capex of about Rs 2.16 billion during Q1 FY27. Management reiterated that capex is intended to be funded through internal cash flows and emphasized that the balance sheet remains net cash.

Strategy and capacity: moving from 5 Mn tons to 8 Mn tons by FY28

A key theme in the presentation is readiness for the next leg of growth. The company reported existing capacity of 5 million tons of structural steel products and outlined a plan to reach 8 million tons by FY28.

The expansion plan includes 2 million tons of greenfield and brownfield capacity across the East (Gorakhpur and Siliguri), the South (Malur), and a western coastal location. In addition, the company targets 1 million tons of incremental capacity through debottlenecking, plant modernization, and replacing conventional mills with faster and more efficient mills.

On the earnings call, management gave additional near-term colour. It said the Gorakhpur plant is a 200,000-ton facility and should start around September. Siliguri was discussed as the next capacity addition. Malur was described as a major upcoming value-added plant of about 1 million tons.

Management also linked the expansion plan to a shift in portfolio mix. It stated that value-added products currently represent about 65 percent of the overall basket and expects this to move toward 75 to 80 percent as the new capacities ramp.

Demand drivers: housing, infrastructure, and a growing structural tube market

The presentation provides an application mix based on FY26 revenue. Housing accounted for 64 percent, commercial buildings 19 percent, infrastructure 13 percent, and others 4 percent.

On the market opportunity, the company highlighted that structural steel tubes represent about 6 percent of India’s steel market in FY26, lower than several other regions. It assumes this share increases to 8 percent by FY31, alongside growth in India’s total steel consumption from 168 million tons in FY26 to 225 million tons by FY31E.

Using these assumptions, APL Apollo estimates the structural steel tube market in India could grow from 10.0 million tons in FY26 to 18.3 million tons in FY31E, implying a 13 percent CAGR. It expects HR coil based steel tubes to grow faster than sponge iron tube volumes, citing quality, cost efficiency of blast furnace-based HR coil, new upstream HR coil capacity in India, and pollution concerns in unorganised sponge iron melting.

The company also outlined a solar structures opportunity. Based on its slide, annual solar installations by 2030 are estimated at 33.3 GW, translating into an annual addressable market for APL Apollo products of about 830,000 tons by 2030 across tubes and certain coated sheet products. In the concall, management said solar could contribute around 4 to 5 percent of total volumes over the next two to three years.

Management commentary and guidance

Management maintained its FY27 guidance in the concall. It reiterated volume growth guidance of 15 to 20 percent for FY27 and stated confidence in achieving 20 percent or more EBITDA growth versus FY26 on an absolute basis.

It also guided that EBITDA per ton should remain in the range of Rs 5,000 to Rs 5,500 through the year, while acknowledging quarter-to-quarter variability based on volume recovery and pricing actions.

On near-term momentum, management said July volumes improved materially versus the Q1 run-rate, with month-on-month growth around 20 percent. It also described a recovery path for UAE volumes, though it noted logistics disruptions and pricing impacts.

Takeaways

APL Apollo’s Q1 FY27 results underline a familiar pattern for cyclical building materials: volumes can move sharply with dealer stocking cycles and macro uncertainty, but spreads and brand pricing power can provide stability when management chooses to prioritize profitability.

For investors, the next few quarters will likely be shaped by two variables management itself emphasized: normalization in channel inventory and the evolving gap between primary steel and secondary material. Beyond the near term, the company’s focus is on scaling capacity toward 8 million tons by FY28 and pushing the portfolio toward a higher share of value-added products, with an aim to keep EBITDA per ton resilient while growing absolute EBITDA.