PL Stock Report: Apar Industries (APR IN) - Q2FY24 Result Update – Premiumization and exports drives performance - Accumulate

Apar Industries (APR IN) - Amit Anwani - Research Analyst, Prabhudas Lilladher Pvt Ltd.

Rating: ACCUMULATE | CMP: Rs5,165 | TP: Rs5,630

Q2FY24 Result Update – Premiumization and exports drives performance

Quick Pointers:

• Strong exports growth (up ~26% YoY), product premiumization and volume growth across segment drives revenue growth of ~21% YoY.
• Conductors EBITDA/ton continues to remain strong at Rs39,007/ton, driven by product mix and higher exports contribution.

We revise our FY24/25/26E by 15.8%/2.7%/1.7%, factoring in strong H1FY24 performance and strong cables & conductor’s outlook in domestic & exports market. Apar Industries (APR) reported strong quarterly performance with revenue growth of ~21% YoY and EBITDA margin expansion of 193bps YoY. Demand for premium conductors continues to remain strong in domestic market from TBCB and re-conducting space. During Q2FY24, improved re-conducting execution capabilities resulted in higher productivity. Export of cables to US and European markets may witness volume sluggishness in near term owing inventory de-stocking of excess inventories by distributors amid normalizing supply chain, however medium to long term outlook continues to remain strong for overall exports. Cables business likely to continue with its growth momentum, driven by strong growth in elastomeric cables (for renewables, defence etc.) which is up ~40%+ in H1FY24 and focus is on expanding B2C segment by enhancing distribution and geographical reach.

We believe APR’s focus towards value added products and strong traction in exports business will continue to drive strong topline & profitability in the long run. The stock is currently trading at PE of 29.1x/26.4x/21.6x FY24/25/26E. We maintain ‘Accumulate’ rating with revised TP of Rs5,630 (Rs5,499 earlier) valuing Conductors/Cables/Speciality Oil segment at 25x/32x/12x Sep25E.

Strong volume and exports growth drives performance: Consolidated sales grew 21.4% YoY to Rs39.3bn (PLe ~Rs38.3bn) comprising of Conductors/ Speciality Oil/ Cables ~49%/~31%/~22% of total sales. EBITDA grew 54.8% YoY to Rs3.5bn (PLe Rs3.6bn) with EBITDA margins expanding by 193bps YoY to 8.9% (PLe ~9.3%), owing to lower other expenses as % of sales (13.4% vs 15.7% in Q2FY23). PAT grew ~69% YoY to ~Rs1.7bn (PLe ~Rs1.9bn), led by strong operational performance and higher other income (up 53.5% YoY to Rs188mn) despite higher interest expenses (up 44.9% to Rs1bn).

Healthy growth witnessed in Conductors and Cables: Conductors segment reported a growth of 35.1% YoY to Rs19.4bn driven by strong volume growth (up 79% YoY) and exports growth (up 1.6x YoY). Cables reported a 15.8% YoY growth to Rs8.8bn driven by 18% YoY growth in exports. Specialty oil segment revenue grew 1.9% YoY to ~Rs12bn with volume growth of 16% YoY.