Accumulate Apar Industries; target of Rs 10,399: Prabhudas Lilladher

Prabhudas Lilladher's research report on Apar Industries

We revise our FY25/26E EPS estimates by +6.1%/+4.1% factoring in better profitability in Conductors. Apar Industries (APR) reported 6.5% YoY revenue growth and 19bps YoY increase in EBITDA margin to 9.4%. Although export sales are down YoY, inquiry levels are picking up in US & Europe with traction expected to accelerate from H2FY25 onwards. Chinese competition has increased; however, higher duties in the US on aluminum conductors & cables from China will make Indian products more competitive. Meanwhile, the domestic market continues to remain robust with record addition in transformation & substation capacities estimated in FY25 led by transition to renewable energy. Transformer oils & automotive oils should sustain double digit growth, with Apar continuing to gain market share in these segments. We are positive on APR owing to of 1) robust T&D capex driving demand across segments, 2) focus on premium conductors in domestic market, 3) healthy traction in elastomeric cables used in renewables, defence and railways, and 4) market leadership in the growing T-oils business. The stock is trading at a P/E of 42.4x/32.6x FY25/26E.

Outlook

We maintain ‘Accumulate’ rating with a revised SoTP-derived TP of Rs10,399 (Rs8,877 earlier) valuing Conductors/Cables/Specialty Oil segments at 40x/43x/17x FY26E (35x/40x/ 15x FY26E earlier) owing to continued strong tailwinds across segments.

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