APL Apollo Tubes Reports Robust Q3 Performance with Record Volumes and Profitability
APL Apollo Tubes Ltd delivered an impressive performance in the December quarter of fiscal year 2026, with the stock surging around 4% to hit a new 52-week high of ₹2,070.60 on Friday. The company's strong results and optimistic management commentary have boosted earnings growth visibility, leading to positive reactions from investors and analysts alike.
Record Volumes and Market Share Gains Despite Industry Challenges
In Q3FY26, APL Apollo achieved its highest-ever quarterly volume of 917,000 tonnes, marking an 11% year-on-year increase. This growth is particularly noteworthy given the muted demand conditions in the steel tube industry during the quarter, driven by construction restrictions in the Delhi-National Capital Region due to high pollution and a slowdown in government infrastructure spending. The volume surge underscores the company's ability to gain market share and maintain healthy demand for its products.
A key driver of this volume growth was the success of Apollo Z products, including rustproof and coated tubes, which accounted for 56% of the incremental volume. The management has revised its Q4FY26 volume growth guidance upward from 10-15% to 20%, indicating strong seasonal performance ahead. Analysts at Antique Stock Broking Ltd project that this could lead to volumes of 1 million tonnes in Q4, an 11.3% sequential increase, with expectations of 20% volume growth in FY27 fueled by expansion into new geographies and a smart dual-brand strategy.
Profitability Soars with Improved Margins and Upgraded Guidance
Thanks to robust volumes, APL Apollo's consolidated Ebitda rose 37% year-on-year to ₹472 crore in Q3FY26. A favorable product mix pushed Ebitda per tonne significantly higher from ₹4,173 in Q3FY25 to ₹5,146 in Q3FY26, while operating margins improved to 8% from 6%. The management has raised its FY26 Ebitda per tonne guidance to around ₹5,500, up from ₹4,800-5,000 earlier, citing benefits from operating leverage, higher value-added sales, and lower freight costs that could save ₹100-200 per tonne.
The company's dual-brand strategy, with the premium APL Apollo brand and the price-sensitive SG brand at L1 pricing, helps capture diverse demand without diluting overall margins. Apollo Z products, though often with lower selling prices, offer better Ebitda per tonne due to less competition and higher margins, enhancing profitability.
Dominant Market Position and Aggressive Expansion Plans
APL Apollo commands around 55% market share in the structural steel tubes segment and is among the lowest-cost producers, thanks to economies of scale, efficient operations, and backward integration that smaller competitors struggle to replicate. The company currently has an installed capacity of 5 million tonnes, operating at a healthy 89% utilization level, and plans to double capacity to 10 million tonnes by FY30. This expansion is expected to further strengthen its cost advantage by spreading fixed costs over higher volumes, making it challenging for new entrants to compete effectively.
Earnings Upgrades and Valuation Concerns
In response to the strong performance, earnings estimates have been upgraded. A report by Systematix Shares and Stocks (India) dated 23 January revised FY26E, FY27E, and FY28E Ebitda estimates upward by +5%, +14%, and +15%, respectively, based on higher Ebitda per tonne and volume growth assumptions. However, the stock trades at a price-to-earnings multiple of 38 times, according to Bloomberg data, which is considered expensive given the cyclical nature of the steel-linked business. Over the last year, the stock has gained around 30%, suggesting that the positives from its dominant market position and capacity expansion may already be largely factored into the current valuation.
This analysis highlights APL Apollo's impressive operational achievements while cautioning investors about potential overvaluation in the stock market.
