Prabhudas Lilladher's research report on Apar Industries
Apar Industries (APR) reported a robust quarterly performance driven by healthy exports growth, increasing contribution of premium products, price pass through and volume growth. Conductor segment reported a volume growth of 4% YoY, while it was flat for Speciality oil segment (down 0.5% YoY). Speciality oil segment margins are likely to be impacted in Q3FY23 owing to higher inventory cost and expected to normalize from Q4FY23. On volume front, given the strong conductors volume growth in H1FY23 (up 29% YoY to 66,104MT) management has revised upwards its guidance for conductor volumes from ~1,30,000MT to ~1,40,000MT for FY23. Cables business is likely to clock strong revenues of Rs30bnfor FY23 and thereafter grow at ~25-30%, driven by healthy demand for Low Duty Cables, Elastomeric cables from Railways, defense & renewables and strong exports growth. We believe APR’s focus towards value added products and exports business likely to benefit in long run and aid profitability going forward. We revise upwards our EPS estimates by 18.3%/30% for FY23/24, factoring in increasing contribution from premium products, expanding international footprints, strong outlook for cables business and management focus on profitable growth.
Outlook
The stock is currently trading at PE of 16.2x/13.2x/11.2x FY23/24/25E. We roll forward our TP to FY25E with revised TP of Rs1,834 (Under Review earlier), valuing it at PE of 14x FY25E and assign BUY rating on stock.
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