How do you see the quarterly results of APL Apollo tubes for the Dec-20 quarter?

APL Apollo Tubes reported a 78% growth in Q3 PAT on the back of a bigger sales thrust in the quarter. APL Apollo Tubes reported 23% growth in total sales revenues in the Dec-20 quarter on a yoy basis at Rs.2,601 crore. APL Apollo reported a 1% volume growth in its core business of steel tubes but the real boost to the top line growth was largely driven by better price realizations in the midst of robust demand and buoyant global metal prices.

Operating profits for the group were up by 53.3% at Rs.206 crore. The sales revenues growing faster than the cost components led to better fixed cost absorption during the quarter. As a result the OPM expanded from 6.35% in the Dec-19 quarter to 7.92% in Dec-20 quarter. During the same period, the PAT margin improved from 3.93% in Dec-19 to 5.72% in Dec-20 quarter as the operational efficiencies got transmitted to the bottom line.

What was the key trigger for this boost? For example, during the quarter, there was a 48% fall in interest costs and that helped shore up the PAT. The company’s return on capital employed or ROCE improved from 18.4% in FY20 to 24.8% in 9-M FY21 and that is a big jump in capital efficiency.

During the quarter, there was also an effect of deleveraging that was visible. There was also clear impact on debt servicing and on working capital management. The net debt to equity ratio as of Dec-20 was down to 0.1X compared to 0.6X in Mar-20. Even the working capital days came down sharply from 25 days in FY20 to just about 8 days in FY21.