Apar Industries Ltd “Powering Ahead”

Apar Industries was founded in the year 1958 and operates in the diverse field of electrical and metallurgical engineering. It is a US$ 850 million diversified Company and provides value added products and services in Power Transmission Conductors, Petroleum Specialties and Power & Telecom Cables.

The product portfolio of the company comprises of Speciality Oils & Lubricants, Aluminium & Alloy Conductors, Electric & Telecom cables, Automotive Lubricants, Thermoplastic Elastomers.

Q1 Results Update

The net sales of the company for Q1FY17 stood at Rs. 1077.20 crore against Rs. 1236.70 crore on a yoy basis, de-growth of 12.9%.

The Operating Income of the company for Q1FY17 stood at Rs. 1081.90 crore against Rs. 1243.90 crore on a yoy basis, de-growth of 13%.

EBITDA rose by 25.6% on a yoy basis and stood at Rs. 113.40 crore in Q1FY17 against Rs 90.3 crore.

PAT for Q1FY17 grew by 77.4% and stood at Rs. 45.60 crore against Rs. 25.70 crore in the same period last year.

Investment Rationale

• Market Leader in key Segments – Apar is amongst the Top 5 largest producer in conductors and specialty oils in the world and has 60% market share in power transformer oil and 40% in distribution transformer oil in India.
• Pioneer in Aluminum alloy rod and conductors in India and manufactures over 400 different types of Specialty Oils. It is a preferred supplier to over 80% of its specialty oil customers in the country and supplies conductors to all top global turnkey operators.
• Apar has recently launched India’s most advanced E-beam facility which will help in making superior cables.
• Driving growth through innovation – Pioneer in adoption of new technologies & development of value added products creating new market segments through in-house research & development programmes.
• The company has multi-year relationships with Indian and global majors and exports to 100 countries across the globe. For the FY16 34% of the total sales of the company was from exports. It is the largest Indian exporter for conductors.
• The company has a strong order book of Rs. 1606 crore as on June 30, 2016 with 36% export orders.
• The company has planned capex to expand power cable capacity to cater to increasing demand and improve profitability. The company’s new plant Orissa is expected to be operational by Oct 2016.
• With strong focus on 24×7 power for all, revival of Discoms through UDAY, amendments to the national tariff policy and strong capital expenditure in Transmission and Distribution (transmission projects worth Rs. 1 lakh Crores were launched in the year), India’s power sector is well poised for take-off. As the benefits of these measures gradually percolate down, Apar, with 70% of its revenue coming from the power sector, and a leading presence in India’s Transmission & Distribution (T&D) sector stands to strongly benefit. Also Transformer orders of around Rs. 13,070 Crores are expected to materialize in FY17.

Investment Opinion

Apar Industries share price made a recent high of Rs. 633.90 and is currently trading at Rs. 539 at a P/E of 11.99. The market capitalization of the stock is Rs. 2092.68 crore. We recommend buying the stock at its CMP of 539 for a target of 634.

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