Apar Industries Q1 Results Review - Future Performance Largely Factored In: Yes Securities

Yes Securities Report

Apar Industries Ltd. reported a decent set of numbers with revenue growth of 22% YoY aided by healthy performance across all segments viz. conductors (up 15% YoY), transformers and specialty oils (up 12% YoY) and cables (up 52% YoY).

Conductors revenue growth was entirely volume-driven on the back of improved share of higher value products and exports. Margins expanded by 150 basis points YoY led by operating leverage benefits.

In the near term, Apar Industries' management expects a transient dip in demand from key regions such as U.S. and Europe owing to easing of supply chains and expectations of interest rate cuts.

However, structural drivers remain intact and will play out over the medium to long term. In India, there is a continued strong traction in power transmission capex, railway infra spending and private capex recovery that will sustain demand for both conductors and cables.

We like Apar Industries given its global leadership position, robust prospects of value added products, strong positioning across product categories and consistent dividend pay-out.

At current market price, the stock is trading at a price/earning of 17.1 times/12.2 times and enterprise value/Ebitda of 9.6 times/7.0 times for FY24E/25E.

We upgrade our FY25 earnings estimates factoring in-

1. higher share of exports and

2. rising premiumization within domestic market.

Given the sharp run-up in the stock price, we downgrade it to 'Neutral' (previously 'Add') with a revised target price of Rs 4,022 as we believe that the positives are largely priced in.

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