The stock of APL Apollo Tubes Ltd rose around 4% on Friday, hitting a new 52-week high of ₹2,070.60. The Street cheered its December quarter (Q3FY26) earnings and upbeat management commentary which signaled better earnings growth visibility.
Among the highlights, volumes rose 11% year-on-year to 917,000 tonnes, which is the highest quarterly volume ever. This was despite muted demand conditions across the steel tube industry during the quarter due to construction restrictions in Delhi-National Capital Region amid high pollution and amid a slowdown in government infrastructure spending.
Higher volumes show that APL Apollo continues to gain market share and that demand for its products remains healthy. A major reason behind this volume growth was Apollo Z products, including rustproof and coated tubes.
These products accounted for 56% of the incremental volume during the quarter. The management has revised its Q4FY26 volume growth guidance upwards from 10-15% to 20%. Q4 is seasonally strong for volumes, and this guidance implies volume of 1mt, 11.3% higher sequentially, for the quarter, said Antique Stock Broking Ltd. It expects 20% volume growth in FY27, driven by expansion into new geographies and a smart dual-brand strategy.
Thanks to robust volumes, consolidated Ebitda at ₹472 crore, rose 37% year-on-year. A favourable product mix pushed Ebitda per tonne meaningfully higher from ₹4,173 in Q3FY25 to ₹5,146 in Q3FY26. Operating margin inched higher to 8% in Q3FY26 from 6%.
Moreover, the management raised FY26 Ebitda per tonne guidance to around ₹5,500 from ₹4,800-5,000 earlier, led by operating leverage benefit, higher value-added sales and lower freight costs, which should lead to ₹100-200 per tonne savings.
The APL Apollo brand continues to command a premium, while its SG brand at L1 pricing helps capture price-sensitive demand, without diluting overall margins. Apollo Z products are value-added in nature. While they usually have lower selling prices, they earn better Ebitda per tonne compared to the company’s average products because they face less competition and carry better margins.
APL Apollo commands around 55% market share in the structural steel tubes segment, plus it is among the lowest-cost producers in the segment. This cost advantage comes from a combination of economies of scale, efficient operations, and backward integration, which smaller competitors cannot replicate easily.
Further, its aggressive expansion plan also lends confidence. Currently, it has an installed capacity of 5 million tonnes and is operating at a healthy 89% utilisation level, and the management intends to double capacity to 10 million tonnes by FY30. As capacity scales up, fixed costs get spread over higher volumes, making the cost advantage even stronger and making it even harder for new companies to enter and compete meaningfully in this segment.
In this backdrop, earnings estimates have been upgraded. “We alter our FY26E/FY27E/FY28E Ebitda estimates by +5%/+14%/+15% based on higher Ebitda/tonne and volume growth assumptions,” said Systematix Shares and Stocks (India) report dated 23 January.
Even so, the stock trades at a price-to-earnings multiple of 38 times, showed Bloomberg data, which is expensive given the cyclical nature of the steel-linked business. In the last one year, the stock has gained around 30%, indicating that the positives of the dominant market position and capacity push may be largely factored in.
