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Last Updated : Dec 12, 2012 10:31 AM IST | Source: CNBC-TV18

Apar Industries can move to Rs 250: Rajen Shah

Rajen Shah, CIO of Angel Broking is of the view that Apar Industries can move to Rs 250. This company is basically into manufacturing of aluminium conductors, transformer oil, specialty oil and cables. Aluminium conductor contributes about 40%, transformer oil and specialty oil about 50% or so and cable about 10 percent to the total turnover.


Rajen Shah, CIO of Angel Broking is of the view that Apar Industries can move to Rs 250.


Shah told CNBC-TV18, "I had recommended Apar Industries at about Rs 102. The Sensex on that day was at 15,300 and today we are at about 19,300. So while the Sensex has moved about 26 percent, Apar has moved up about 50 percent in the past 12 months. The thing is that we see a further 66 percent upside in the stock from the current levels of Rs 150, our target is about Rs 250 in the next 18 months."


He further added, "This company is basically into manufacturing of aluminium conductors, transformer oil, specialty oil and cables. Aluminium conductor contributes about 40 percent to the total turnover, transformer oil and specialty oil about 50 percent or so and cable about 10 percent. It sort of enjoys market leadership in all segment in which it operates."


"The last 15-18 months have been terrible for every company associated with the power sector because of shortage of coal and related issues, the non-functioning of the government and fear on the part of government to address appropriately issues related to the power sector and all that and this has impacted the performance of all the power companies and all power ancillaries as well."


"The government has actually showed that it is now willing to act – the foreign direct investment (FDI) in retail in now a reality and this shows that the government is now determined to put this economy back on the growth track. So there is a significant re-rating of infrastructure, construction and power sector on the cards. I think there will be a significant re-rating of stocks in infra, power and construction space. Last week I had recommended Reliance Infrastructure and this time we look at Apar Industries."


"In the first six months Apar’s sales has gone up by 43 percent and profitability by about 78 percent and this is despite the transformer oil segment not doing too well because of the dismal health of the State Electricity Boards. Despite that it has reported a half yearly EPS of about Rs 12 and the management expects this good trend to continue in the next six months."


"This year they should end with Rs 23 earnings and probably this could go up to about Rs 27-28 in 20013-14 when the sentiment for this industry as well as orders from Power Grid starts flowing in. So at Rs 27-28 kind of earnings if you give it a 9-10 kind of PE multiple the stock has all the potential to go up to at least Rs 250."


"We need to keep in mind that 18 months back Templeton picked up 10 percent stake in this company at Rs 220. The other interesting fact about this company is that promoters along with eight entities own 91 percent of its equity. So the floating stock in the market is hardly 9 percent which is about Rs 55 crore."

“I would like to remind that about two-three years back there was a company which we had highlighted on your channel, Advanta India. Similarly 93 percent of its equity was cornered by the promoters along with about eight players. So the floating stock was very low and when it started moving up - in February Advanta India was Rs 220 and now it is at Rs 880. So when action starts in this kind of stocks, the re-rating is huge. So Apar Industries could be one stock where the downside is very low and the upside could be very huge."

Disclosure: We hold Apar Industries in our PMS. No holding in Oriental Hotels.

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First Published on Dec 12, 2012 10:07 am
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