Apar Industries may see 35-40% gains from current levels, says Rajesh Jain of Independent Market Strategist.
Jain told CNBC-TV18, “Apar Industries, like a lot of infrastructure plays has see-sawed for two reasons; increasing input costs and second slowdown in order book accretion. Apar was also suffering from that and if you look at the last quarter numbers, there has been a contraction in margins, simply because most of the sales were for the low margin orders which were acquired during the recessionary period. But going forward, the stock has seen some good news in terms of an order of a Power Grid, the company also has acquired orders from Adani, Reliance, several independent power producers. So the outlook certainly looks much brighter. It has a Rs 1250 crore order book as of now, and has acquired orders in the last couple of weeks and going forward expects to get a lion’s share of Rs 2000 crore expected from Power Grids. So that is the volume upside on the stock.”
He further added, “The margins were squeezed because of the lower realizations in some of the orders in the last couple of quarters. Going forward the realization picture looks much better. The specialty and the transform of business are going to witness some headwinds in terms of higher based oil prices given the spurt in crude oil. But the business enjoys certain tax gifts because of its manufacturing location, and going forward we have also seen the potential of high realizations out there. So I expect that business to continue to maintain its volume growth rate. The conductors business has been showing like I mentioned 25% volume growth and coupled with better realizations, we should see the stock deliver an EPS close to 35% in FY12. And on the basis of that I think safe 35%-40% appreciation from the current levels is possible in the stock.”
“The big upside would of course be the Uniflex cables turn around. This was a company that Apar acquired a couple of years ago and working to make a profitable. If infrastructure sector does pick up particularly the power sector, then I think the orders traction at profitable margins would increase and that should also help the turn around for Uniflex. I think that is the big surprise uptake into the stock which is not factored in the price target. So overall it is a play on the power sector growth and the transformer in specialty oils business.”
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