APL Apollo Tubes Surges on Strong Q2FY26 Results, Beating Estimates with Upgraded Outlook

APL Apollo Tubes, a major manufacturer of structural steel tubes and pipes, announced strong financial results for the second quarter of fiscal year 2026 (Q2FY26), outperforming profitability estimates. The company's Earnings Before Interest, Tax, Depreciation, and Amortisation (Ebitda) per tonne stood at ₹5,228, exceeding Nuvama's estimate of ₹4,900. This improvement was attributed to enhanced gross margins, a higher contribution from value-added products, and reduced Employee Stock Option Plan (ESOP) costs. The company also launched its new ‘SG Premium’ product line. Utilization levels at key facilities, including Raipur and Dubai, improved significantly.

**Impact**: The strong quarterly performance and positive outlook are expected to boost investor sentiment towards APL Apollo Tubes, potentially driving stock appreciation. The company's strategic focus on premium products and capacity expansion positions it favorably for future growth in the infrastructure and construction sectors. Rating: 7/10.

**Difficult Terms**: * **Ebitda**: Earnings Before Interest, Tax, Depreciation, and Amortisation. A measure of a company's operating performance before accounting for financing, taxes, and non-cash charges. * **ESOP**: Employee Stock Option Plan. A benefit allowing employees to purchase company stock at a predetermined price. * **Nuvama**: A financial services company providing analysis and research on equity markets. * **Secondary steel players**: Companies that primarily trade or process steel products from primary manufacturers, often offering them at competitive prices. * **HRC**: Hot-Rolled Coil. A type of steel sheet or strip that is processed at high temperatures. * **ktpa**: Kilotons per annum. A unit used to measure industrial production capacity. * **CAGR**: Compound Annual Growth Rate. The average annual growth rate of an investment over a specified period, assuming profits are reinvested.

The management remains confident in achieving 10-15% volume growth for FY26, with an expected Ebitda per tonne in the range of ₹4,600-₹5,000. Nuvama analysts responded by raising their EPS estimates for FY26, FY27, and FY28 by 4%, 3%, and 2% respectively, maintaining a 'Buy' rating and lifting the target price to ₹2,093. Revenue increased by 9% year-on-year, with volumes growing a strong 13% year-on-year, indicating robust demand despite softer realisations from lower Hot-Rolled Coil prices. APL Apollo anticipates a stronger second half of FY26 and is on track to expand its total production capacity from 5 million tonnes to 7 million tonnes over the next two to three years through expansions in Gorakhpur, Siliguri, and Dubai.