Air carrier Captain reported receiving a low altitude warning from ATC during an unstable approach in visual conditions. The pilot performed a go-around and returned for a landing.

Narrative

We were setup for and briefed the SNDIA 4 RNAV Arrival followed by the RNAV (RNP) Y Rwy 21. About 30 NM from ABQ airport approach control gave a heading to fly and said to expect the visual approach Rwy 21. I elected to use the final portion of the briefed RNAV approach as reference for the visual approach. We were cleared for the visual approach at an approximately 5 NM right base for Rwy 21. I did not set TDZE in the altitude window and selected Approach instead of utilizing LNAV/VNAV. Without benefit of reasonable flight director guidance; I descended to approximately 6400 feet (1000 feet AGL) as I was visually maneuvering to wings level on final. When rolling wings level I recognized I was not in a good position to land (low on PAPI; otherwise stable) from this approach and initiated a Go Around. Tower called soon after Go Around initiation to give a low altitude warning. The Go Around was uneventful and we were vectored for another visual approach to Rwy 21 that culminated in a successful landing.If I was in the same situation again I would initiate the Go Around sooner. I know that I was behind on this approach. Though I was comfortable that the aircraft was visibly clear of obstacles on final; I allowed myself to descend to 1000 feet AGL too far from the Runway. I didn't have much time to discuss; once we were told to expect the visual approach; but I could have done more to prepare for a successful approach. I told the FO that I would utilize the RNAV for reference. But; I should have also reiterated how I intended to use LNAV/VNAV and would remove Baro mins from the PFD and set TDZE instead.