Accumulate Apar Industries; target of Rs 4100: Prabhudas Lilladher

Prabhudas Lilladher's research report on Apar Industries

Apar Industries (APR) reported strong quarterly performance with revenue growth of ~22% YoY and EBITDA margin expansion of 150bps YoY. Conductors demand from domestic market is likely to remain robust with several TBCB project under tendering and adoption of high efficiency AL-59 conductor vs conventional ACSR conductors earlier. Near term slowdown is expected in select export markets such as USA and Europe due to excess inventory and normalizing supply chain, however medium to long term outlook continues to remain strong for overall exports. Cables business likely to continue with its growth momentum and report 25-30% revenue CAGR over next couple of years, driven by growth in elastomeric cables (renewables, defence etc) and focus on expanding B2C segment with enhancing distribution and geographical reach.

Outlook

The stock is currently trading at PE of 24.7x/19.9x FY24/25E. We revise our estimates by 4.7%/3.7% for FY24/25, factoring in better margins in cables segment and healthy conductor’s outlook with revised SoTP to Rs4,100 (Rs3,725 earlier). However, given the recent sharp run up in stock price, we change rating to ‘Accumulate’ from Buy, maintaining long term positive view.