Apar Industries (APR IN)

Rating: ACCUMULATE | CMP: Rs6,069 | TP: Rs6,890

January 31, 2024 Decent quarter ex-US with healthy profit growth
Q3FY24 Result Update Quick Pointers:

☑ Change in Estimates | ☑ Target |  Reco  Ex-US sales grew 17.2% YoY (28.3%/24.1% YoY in Conductors/Cables).

Change in Estimates  Conductors order book stood at Rs60.8bn (domestic Rs28.9bn; exports
Current Previous Rs31.9bn), with premium products contributing 40.1%.
FY25E FY26E FY25E FY26E
Rating ACCUMULATE ACCUMULATE
Target Price 6,890 5,776 We revise our FY24/25/26E EPS estimates by 17.6%/6.6%/9.8%, factoring in
Sales (Rs. m) 1,90,808 2,24,408 1,83,228 2,12,156 strong outlook in the Conductors segment. Apar Industries (APR) reported
% Chng. 4.1 5.8
EBITDA (Rs. m) 15,729 18,948 14,554 17,277
revenue growth of 1.9% YoY, while EBITDA margin expanded by 138bps YoY.
% Chng. 8.1 9.7 Although US demand remained sluggish due to inventory de-stocking,
EPS (Rs.) 201.9 259.4 189.4 236.2
% Chng. 6.6 9.8
enquiry levels are picking up with improvement expected in FY25. On the
other hand, strong domestic demand continues to offset weak US sales. APR
stands to benefit from transition from ACSR to AL-59 alloy conductors given
Key Financials - Consolidated
Y/e Mar FY23 FY24E FY25E FY26E
better margin profile and higher technology barriers in making AL-59
Sales (Rs. m) 1,43,522 1,61,567 1,90,808 2,24,408 conductors. Meanwhile, transformer oils will be the main growth driver in
EBITDA (Rs. m) 12,270 15,193 15,729 18,948 Specialty Oil segment owing to strong electricity demand, healthy order
Margin (%) 8.5 9.4 8.2 8.4
books of global transformer OEMs and APR’s market leading position. Cables
PAT (Rs. m) 6,377 7,967 8,111 10,419
EPS (Rs.) 166.6 198.3 201.9 259.4 business outlook is also healthy with growing demand for elastomeric cables
Gr. (%) 148.5 19.0 1.8 28.5 from wind, solar, railway, defence, mining, etc.
DPS (Rs.) 40.0 59.5 60.6 77.8
Yield (%) 0.7 1.0 1.0 1.3
RoE (%) 32.3 26.4 19.9 22.0
We believe APR’s focus towards value-added products and strong traction in
RoCE (%) 49.4 41.8 32.2 34.0 exports business will continue to drive strong topline & profitability in the
EV/Sales (x) 1.6 1.4 1.2 1.0 long run. The stock is currently trading at a P/E of 30.1x/23.4x FY25/26E. We
EV/EBITDA (x) 18.7 15.3 14.9 12.4
PE (x) 36.4 30.6 30.1 23.4
roll forward to Dec-25 and maintain an ‘Accumulate’ rating with a revised TP
P/BV (x) 10.4 6.4 5.6 4.8 of Rs6,890 (Rs5,630 earlier) valuing Conductors/Cables/Specialty Oil
segments at 27x/33x/12x Dec-25E (25x/32x/12x Sep-25E earlier) owing to a
robust business outlook across segments.
Key Data APAR.BO | APR IN
52-W High / Low Rs.6,388 / Rs.1,358
Sensex / Nifty 71,140 / 21,522 Strong revenue growth ex-US driven by Conductors and Cables: Consolidated
Market Cap Rs.244bn/ $ 2,933m
Shares Outstanding 40m revenue grew 1.9% YoY to Rs40.1bn (PLe: Rs38.5bn) due to inventory de-stocking
3M Avg. Daily Value Rs.709.06m by US customers. Global sales growth ex-US was 17.2% YoY (28.3%/24.1% YoY
in Conductors/Cables). Revenue mix for the quarter stood at Conductors ~47%/
Shareholding Pattern (%) Speciality Oil ~30%/ Cables ~22%. Gross margin increased by 48bps YoY to 25.9%
Promoter’s 57.77 (PLe: 24.8%). EBITDA grew 18.0% YoY to Rs4.1bn (PLe: Rs.3.4bn). EBITDA
Foreign 10.97
Domestic Institution 18.62 margin expanded by 138bps YoY to 10.1% (PLe: 8.9%) led by lower other
Public & Others 12.64 expenses (down 141bps YoY as a % of sales to 14.0%). PAT jumped 28.1% YoY
Promoter Pledge (Rs bn) -
to Rs2.2bn (PLe: Rs1.7bn) driven by a strong operating performance and higher
other income at Rs210mn (vs Rs66mn in Q3FY23), despite higher interest
Stock Performance (%)
expenses (up 20.1% YoY to Rs1.1bn).
1M 6M 12M
Absolute 0.3 57.3 331.7
Relative 1.8 46.3 261.1 Conductors EBITDA/MT continues to remain strong: Conductors revenue grew
4.1% YoY to Rs19.9bn, with 13.8% YoY volume growth and 42.0% contribution
Amit Anwani from premium products. Specialty Oils revenue was flat at Rs12.4bn with 7.6%
[email protected] | 91-22-66322250 volume growth. Cables revenue was also flattish at Rs9.2bn. Conductors EBITDA
Shirom Kapur post forex came in strong at Rs41,530/MT due to premiumisation and higher
[email protected] | 91-22-66322344
exports. Specialty Oils EBITDA post forex came in at Rs8,157/KL due to better
pricing and lower average inventory cost. Conductors EBIT margin came in at
10.5% (down 82bps YoY); Specialty Oils margin came in at 8.7% (vs a low base of
1.7% in Q3FY23); and Cables margin came in at 10.6% (down 37 bps YoY).

January 31, 2024 1

 Apar Industries

Better operating profitability and higher other income drive PAT growth of 28.1% YoY
YoY gr. QoQ gr. YoY gr.
Y/E March Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24 9MFY24 9MFY23
(%) (%) (%)
Revenue 39,389 40,886 37,730 39,260 40,132 1.9 2.2 1,17,122 1,02,670 14.1
Total Revenues 39,389 40,886 37,730 39,260 40,132 1.9 2.2 1,17,122 1,02,670 14.1
Expenditure 35,957 36,647 34,269 35,762 36,081 0.3 0.9 1,06,112 94,605 12.2
as % of sales 91.3 89.6 90.8 91.1 89.9 90.6 92.1
Consumption of RM 29,377 29,820 28,475 29,793 29,738 1.2 (0.2) 88,006 77,268 13.9
as % of sales 74.6 72.9 75.5 75.9 74.1 75.1 75.3
Employee Cost 515 700 657 724 729 41.5 0.8 2,109 1,505 40.1
as % of sales 1.3 1.7 1.7 1.8 1.8 1.8 1.5
Other expenditure 6,065 6,127 5,137 5,246 5,614 (7.4) 7.0 15,997 15,832 1.0
as % of sales 15.4 15.0 13.6 13.4 14.0 13.7 15.4
EBITDA 3,432 4,239 3,462 3,498 4,050 18.0 15.8 11,010 8,065 36.5
Depreciation 261 273 272 282 288 10.6 2.4 842 771 9.3
EBIT 3,171 3,966 3,189 3,216 3,762 18.6 17.0 10,167 7,294 39.4
Other Income 66 107 139 188 210 216.7 11.9 536 233 129.8
Interest 940 791 696 1,031 1,128 20.1 9.4 2,855 2,264 26.1
Extra ordinary items - - - - - - -
PBT 2,298 3,282 2,632 2,373 2,844 23.7 19.9 7,848 5,264 49.1
Total Tax 599 855 657 629 667 11.4 6.1 1,953 1,314 48.7
PAT 1,699 2,428 1,975 1,744 2,176 28.1 24.8 5,895 3,950 49.2
(Profit)/loss from JV's/Ass/MI - (0.2) (0.4) (5.0) (0.8) (6.2) - -
PAT after JV 1,699 2,427 1,974 1,739 2,176 28.1 25.1 5,889 3,950 49.1
Adjusted PAT 1,699 2,427 1,974 1,739 2,176 28.1 25.1 5,889 3,950 49.1
Adjusted EPS 42.3 60.4 49.2 43.3 54.2 28.1 25.1 146.6 98.3 49.1

Margins (%) Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24 bps bps 9MFY24 9MFY23 bps
Gross 25.4 27.1 24.5 24.1 25.9 48 178 0.0 0.0 (0)
EBITDA 8.7 10.4 9.2 8.9 10.1 138 118 9.4 7.9 154
EBIT 8.1 9.7 8.5 8.2 9.4 132 118 8.7 7.1 158
EBT 5.8 8.0 7.0 6.0 7.1 125 104 6.7 5.1 157
PAT 4.3 5.9 5.2 4.4 5.4 111 99 5.0 3.8 118
Effective Tax rate 26.1 26.0 25.0 26.5 23.5 (260) (304) 24.9 25.0 (7)
Source: Company, PL

Specialty Oil & Lubricants segment witnessed strong improvement in EBITDA (post forex) to Rs8,157/KL
YoY gr. QoQ gr. YoY gr.
Segmental Performance Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24 9MFY24 9MFY23
(%) (%) (%)
Conductor
Volume (MT) 44,538 49,489 45,565 54,074 50,695 13.8 (6.2) 1,50,334 1,10,642 35.9
Revenue 19,120 21,210 17,742 19,433 19,855 3.8 2.2 57,029 48,990 16.4
EBITDA Adj 2,270 2,820 1,770 2,110 2,110 (7.0) - 5,990 4,350 37.7
EBITDA margin (%) 11.6 13.5 10.0 10.9 10.6 (98) (23) 10.5 8.9 162
EBITDA Adj. (Rs/MT) 49,942 58,006 38,740 39,007 41,530 (16.8) 6.5 39,966 39,232 1.9
Speciality Oil & Lubricant
Volume (KL) 1,26,731 1,31,132 1,30,654 1,33,788 1,36,329 7.6 1.9 4,00,771 3,55,450 12.8
Revenue 12,450 11,790 11,980 11,986 12,442 (0.1) 3.8 36,409 34,890 4.4
EBITDA 270 460 780 660 1,140 322.2 72.7 2,580 2,030 27.1
EBITDA margin (%) 2.2 3.9 6.5 5.5 9.2 699 366 7.1 5.8 127
EBITDA Adj. (Rs/KL) 1,645 3,697 6,035 4,562 8,157 395.9 78.8 6,428 5,670 13.4
Cables
Revenue 9,210 9,430 9,668 8,823 9,240 0.3 4.7 27,731 23,210 19.5
EBITDA Adj. 1,090 1,170 1,100 980 1,067 (2.1) 8.9 3,147 2,280 38.0
EBITDA margin (%) Adj 11.8 12.4 11.4 11.1 11.5 (29) 44 11.3 9.8 153
Source: Company, PL

January 31, 2024 2

 Apar Industries

Cables segment accounts for ~54% of SoTP

Segmental Target Targeted
Valuation Value /
PAT multiple Value
basis Share
(Rs mn) (X) (Rs mn)
Conductors Segment 3,654 P/E 27 98,658 2,578
Cables Segment 4,331 P/E 33 142,931 3,735
Speciality Oil Segment 1,842 P/E 12 22,109 578
Total Target (Rs. Mn) 263,698 6,890

Source: Company, PL

Conference Call Highlights

 Revenue growth was subdued at 1.8% YoY owing to fall in US sales due to
inventory de-stocking by US customers. However, strong domestic demand
partly offset the drop in US volumes, with global sales ex-US up 17.2% YoY.

 Enquiry levels are picking up in US – which is the first good sign that FY25 will
see improvement.

 Freight costs have gone up due to re-routing of ships in Red Sea, causing 15-
day delay in US shipments and even greater impact in Europe and West Africa.

 Conductors volume grew 13.8% YoY with good domestic demand for
aluminium & HTLS conductors and rods. However, ~11% decline in aluminium
prices led to revenue growth of only 3.8% YoY. EBITDA/MT (post forex) was
high at Rs41,530 on the back of premiumisation and higher share of exports.

 Premium products contributed 42% to conductor sales (HEC ~18.4%)

 Order book stood at Rs60.8bn (40.1% share of premium products) with

inflows of Rs19.0bn in Q3. ~25% of order book is executable after FY25.

 Management expects ~15% volume growth in FY25 and long-term

EBITDA/MT of Rs28,500+. Current capacity of ~205k MT will expand to
225-230k MT by FY25-end, in line with expected volume growth.

 AL-59 alloy conductors have become the standard product over ACRS, as
they reduce cost of ownership of transmission lines owing to their lower weight.
APR has less competition in AL-59 due to higher technology barriers.

 Specialty Oil EBITDA (post forex) grew strongly to Rs8,157/KL on the back
of better pricing and lower weighted average cost of inventory (due to shipment
delays) which will rise in Q4. Long-term guidance of Rs5,000-6,000/KL.

 Global transformer oil volume rose ~16% YoY and should grow in double
digits going forward, while overall segment volume will grow at ~5%.

 Lubricants revenue/volume rose 18%/5% YoY to Rs2.8bn/17,945 KL.

 Expect Cables segment to grow at ~25% CAGR over next few years with
growing electricity usage. APR is a major player in wind energy, hence it stands
to benefit from government scheme to upgrade old wind farms.

 Rs2.25bn out of planned Rs3bn capex in FY24 has been spent. Going forward,
expect Rs3bn annual capex with a large portion to be spent on greenfield
expansion and de-bottlenecking in Conductors and Cables segments.

January 31, 2024 3

 Apar Industries

Financials
Income Statement (Rs m) Balance Sheet Abstract (Rs m)
Y/e Mar FY23 FY24E FY25E FY26E Y/e Mar FY23 FY24E FY25E FY26E

Net Revenues 1,43,522 1,61,567 1,90,808 2,24,408 Non-Current Assets

YoY gr. (%) 54.0 12.6 18.1 17.6
Cost of Goods Sold 1,07,088 1,20,976 1,43,443 1,68,254 Gross Block 14,827 18,327 20,827 23,827
Gross Profit 36,434 40,591 47,365 56,154 Tangibles 14,814 18,314 20,814 23,814
Margin (%) 25.4 25.1 24.8 25.0 Intangibles 14 14 14 14
Employee Cost 2,205 2,779 3,015 3,546
Other Expenses 21,960 22,619 28,621 33,661 Acc: Dep / Amortization 5,320 6,566 8,085 9,854
Tangibles 5,320 6,566 8,085 9,854
EBITDA 12,270 15,193 15,729 18,948 Intangibles - - - -
YoY gr. (%) 124.0 23.8 3.5 20.5
Margin (%) 8.5 9.4 8.2 8.4 Net fixed assets 9,507 11,762 12,742 13,973
Tangibles 9,494 11,748 12,729 13,960
Depreciation and Amortization 1,043 1,245 1,519 1,769 Intangibles 14 14 14 14

EBIT 11,226 13,947 14,209 17,178 Capital Work In Progress 991 1,091 1,091 1,091
Margin (%) 7.8 8.6 7.4 7.7 Goodwill - - - -
Non-Current Investments 67 42 42 42
Net Interest 3,055 3,910 3,977 3,990 Net Deferred tax assets (217) (217) (217) (217)
Other Income 375 614 611 741 Other Non-Current Assets 1,153 1,939 2,480 3,142

Profit Before Tax 8,546 10,652 10,844 13,929 Current Assets

Margin (%) 6.0 6.6 5.7 6.2 Investments 501 8,501 5,501 3,501
Inventories 25,756 30,100 36,593 43,652
Total Tax 2,168 2,684 2,733 3,510 Trade receivables 32,256 37,182 44,957 53,489
Effective tax rate (%) 25.4 25.2 25.2 25.2 Cash & Bank Balance 5,301 6,540 7,379 8,346
Other Current Assets 6,008 6,980 8,777 10,323
Profit after tax 6,377 7,967 8,111 10,419 Total Assets 82,177 1,04,863 1,20,803 1,39,017
Minority interest - - - -
Share Profit from Associate - - - - Equity
Equity Share Capital 383 402 402 402
Adjusted PAT 6,377 7,967 8,111 10,419 Other Equity 21,981 37,539 43,217 50,510
YoY gr. (%) 148.5 24.9 1.8 28.5 Total Networth 22,364 37,941 43,619 50,912
Margin (%) 4.4 4.9 4.3 4.6
Extra Ord. Income / (Exp) - - - - Non-Current Liabilities
Long Term borrowings 1,514 1,814 1,814 1,664
Reported PAT 6,377 7,967 8,111 10,419 Provisions - - - -
YoY gr. (%) 148.5 24.9 1.8 28.5 Other non current liabilities - - - -
Margin (%) 4.4 4.9 4.3 4.6
Current Liabilities
Other Comprehensive Income - - - - ST Debt / Current of LT Debt 1,528 1,528 1,528 1,528
Total Comprehensive Income 6,377 7,967 8,111 10,419 Trade payables 52,066 58,430 68,482 79,311
Equity Shares O/s (m) 38 40 40 40 Other current liabilities 4,488 4,934 5,144 5,385
EPS (Rs) 166.6 198.3 201.9 259.4 Total Equity & Liabilities 82,177 1,04,863 1,20,803 1,39,017
Source: Company Data, PL Research Source: Company Data, PL Research

January 31, 2024 4

 Apar Industries

Cash Flow (Rs m) Key Financial Metrics

Y/e Mar FY23 FY24E FY25E FY26E Year
Y/e Mar FY23 FY24E FY25E FY26E

PBT 8,546 10,652 10,844 13,929 Per Share(Rs)

Add. Depreciation 1,043 1,245 1,519 1,769 EPS 166.6 198.3 201.9 259.4
Add. Interest 1,553 3,910 3,977 3,990 CEPS 193.9 229.3 239.7 303.4
Less Financial Other Income 375 614 611 741 BVPS 584.4 944.5 1,085.9 1,267.4
Add. Other 794 - - - FCF 117.7 130.4 105.8 155.1
Op. profit before WC changes 11,936 15,807 16,339 19,688 DPS 40.0 59.5 60.6 77.8
Net Changes-WC (2,763) (4,284) (6,858) (6,946) Return Ratio(%)
Direct tax 2,190 2,684 2,733 3,510 RoCE 49.4 41.8 32.2 34.0
Net cash from Op. activities 6,983 8,839 6,749 9,232 ROIC 49.5 57.0 34.0 33.2
Capital expenditures (2,467) (3,600) (2,500) (3,000) RoE 32.3 26.4 19.9 22.0
Interest / Dividend Income - - - - Balance Sheet
Others (222) (8,000) 3,000 2,000 Net Debt : Equity (x) (0.1) (0.3) (0.2) (0.2)
Net Cash from Invt. activities (2,689) (11,600) 500 (1,000) Net Working Capital (Days) 15 20 25 29
Issue of share cap. / premium - - - - Valuation(x)
Debt changes (67) 300 - (150) PER 36.4 30.6 30.1 23.4
Dividend paid (574) (2,390) (2,433) (3,126) P/B 10.4 6.4 5.6 4.8
Interest paid (1,200) (3,910) (3,977) (3,990) P/CEPS 31.3 26.5 25.3 20.0
Others - 10,000 - - EV/EBITDA 18.7 15.3 14.9 12.4
Net cash from Fin. activities (1,841) 4,000 (6,410) (7,265) EV/Sales 1.6 1.4 1.2 1.0
Net change in cash 2,453 1,239 839 967 Dividend Yield (%) 0.7 1.0 1.0 1.3
Free Cash Flow 4,505 5,239 4,249 6,232 Source: Company Data, PL Research
Source: Company Data, PL Research

Quarterly Financials (Rs m)

Y/e Mar Q4FY23 Q1FY24 Q2FY24 Q3FY24
Net Revenue 40,886 37,730 39,260 40,132
YoY gr. (%) 35.7 22.0 21.4 1.9
Raw Material Expenses 29,820 28,475 29,793 29,738
Gross Profit 11,066 9,255 9,467 10,393
Margin (%) 27.1 24.5 24.1 25.9
EBITDA 4,239 3,462 3,498 4,050
YoY gr. (%) 144.3 45.8 54.8 18.0
Margin (%) 10.4 9.2 8.9 10.1
Depreciation / Depletion 273 272 282 288
EBIT 3,966 3,189 3,216 3,762
Margin (%) 9.7 8.5 8.2 9.4
Net Interest 791 696 1,031 1,128
Other Income 107 139 188 210
Profit before Tax 3,282 2,632 2,373 2,844
Margin (%) 8.0 7.0 6.0 7.1
Total Tax 855 657 629 667
Effective tax rate (%) 26.0 25.0 26.5 23.5
Profit after Tax 2,428 1,975 1,744 2,176
Minority interest - - - -
Share Profit from Associates - - (5) (1)
Adjusted PAT 2,427 1,974 1,739 2,176
YoY gr. (%) 193.8 61.2 69.4 28.1
Margin (%) 5.9 5.2 4.4 5.4
Extra Ord. Income / (Exp) - - - -
Reported PAT 2,427 1,974 1,739 2,176
YoY gr. (%) 193.8 61.2 69.4 28.1
Margin (%) 5.9 5.2 4.4 5.4
Other Comprehensive Income - - - -
Total Comprehensive Income 2,427 1,974 1,739 2,176
Avg. Shares O/s (m) 38 38 38 40
EPS (Rs) 63.4 51.6 45.4 54.2
Source: Company Data, PL Research

January 31, 2024 5

 Apar Industries
Price Chart Recommendation History

(Rs)
No. Date Rating TP (Rs.) Share Price (Rs.)
6075
1 09-Jan-24 Accumulate 5,776 5,950

4648 2 26-Oct-23 Accumulate 5,630 5,165

3 05-Oct-23 Accumulate 5,499 5,393
3221
4 28-Sep-23 Accumulate 5,418 5,486
1794 5 29-Aug-23 Accumulate 5,418 5,047
6 01-Aug-23 Accumulate 4,100 3,782
367
Jan - 23
Jan - 22

Jan - 24
Aug - 21

Jul - 22

Jul - 23
Feb - 21

7 06-Jul-23 BUY 3,725 3,493

8 14-Jun-23 BUY 3,725 2,993
9 09-May-23 BUY 3,832 3,056
10 11-Apr-23 UR - 2,695

Analyst Coverage Universe

Sr. No. Company Name Rating TP (Rs) Share Price (Rs)
1 ABB India Accumulate 4,984 4,753
2 Apar Industries Accumulate 5,776 5,950
3 Bharat Electronics Accumulate 143 184
4 BHEL UR - 195
5 Carborundum Universal BUY 1,408 1,132
6 Cummins India Hold 1,811 2,005
7 Engineers India BUY 166 199
8 GE T&D India UR - 585
9 Grindwell Norton BUY 2,604 2,283
10 Harsha Engineers International Accumulate 415 395
11 Hindustan Aeronautics BUY 2,266 2,996
12 Kalpataru Projects International BUY 740 737
13 KEC International Hold 645 612
14 Larsen & Toubro BUY 3,437 3,501
15 Praj Industries Accumulate 611 540
16 Siemens Accumulate 4,359 4,020
17 Thermax Hold 2,771 3,200
18 Triveni Turbine Accumulate 450 407
19 Voltamp Transformers Hold 7,619 7,910

PL’s Recommendation Nomenclature (Absolute Performance)

Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly

January 31, 2024 6

 Apar Industries

ANALYST CERTIFICATION
(Indian Clients)
We/I, Mr. Amit Anwani- MBA (Finance), Mr. Shirom Kapur- BSc, Passed CFA Level III Research Analysts, authors and the names subscribed to this report, hereby certify that all of
the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be
directly or indirectly related to the specific recommendation(s) or view(s) in this report.

(US Clients)
The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately
reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is or will be directly related to the specific
recommendation or views expressed in this research report.

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January 31, 2024 DN: c=IN, st=Maharashtra,

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Date: 2024.01.31 08:48:34 +05'30'