Q2 Concall Notes
Institutional participants
Phillip capital
Ask investment manager
Fidelity investment
Antique stock broking
India infoline
HDFC mutual fund
GS investment
Stallion asset management
Enam holding
1.Shift to cash and carry model reduced debter days to 6 from 25 earlier(Lowest in building material industry).
2. Working capital requirement is reduced to 7 days.
3.Market share up from 40% to 50% due to rural push… rural sales is 55% of total volumes vs 40% last year.
4.Going forward our focus will remain on cost optimization , branding and introducing more value added products to drive growth and improve EBIDTA per tonne… August and September EBIDTA was around 4000 per tonne…… want to make it regular and then will think about achieving 5000 per tonne.
5.Total market size is 7 MTPA of which 1 MTPA is pre galvanized and 2-2.5 is from secondary material.
(tubes made from secondary material is 10000 Rs per tonne cheaper).
6.New value added products like door frames and planks are growing at 40-60% .
7.We are working on three more value added product
a)Coloured tubes
b)Heavy building material (10 MTPA market )
c)ILG (In line galvanising)… for electrical conduit.
8.Total capex is 80-90 Cr in H1 and branding cost is 8-9 Cr in this quarter.
9.Not looking at aquisition but will take a call for capex at Raipur after 2 quarters(Land is already available and company has given some advances for machines but put on hold due to covid).
10.Don’t want to fight in GI pipes with established players (Jindal, Tata and Surya Roshni )as this is not our focus area (water transportation )… want to grow in value added products in building material space.
11.We command premium over competitors due to strong brand image of apollo.
12.Currently 45% is value added … want to grow it at 40% CAGR … want to make it 75% of total volumes in next 4-5 years… don’t want to grow very high in commodity products.
13.We have currently 11 plants… we want to reduce this number to 8 by shifting machinery from 3 small plants.This will help us to reduce gross working capital from 40 to 30… want to become net negative at working capital level.
14.HRC prices were down by 3000 in July and up by 4000 in August and September.
15.Total capacity is 2.6MTPA including Tricoat and maximum production can be around 2.2-2.3MTPA.
16.Not interested in growing distributors but we are working on improving their margins.
17.Product distribution flows through three layers :-Distributor to Retailers (50k)to Fabricators(400k).
18.DFT is helping to improve service in commodity products and exclusive products (1.2L tonne per annum ) are making 15-20 %.
19.We have reduced inventory from 2L to 1.1 L .
20.Business was going as usual before covid and whenever we thought of changing it … there was a resistance from outside as well as within the organization that this may disturb things… But after covid everything was messed up… so we took a bold call that we will not do business this way… we shifted to cash and carry model… and slowly everyone accepted it … this has happened for entire building material industry.