Accumulate Apar Industries; target of Rs 700: SPA Securities

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SPA Securities' report on Apar Industries

Apar is 3rd largest manufacturer of Conductors and 4th largest manufacturer of transformer oil in the world. In conductors business, its market share stands at 23% in domestic market with installed capacities of 1.8lac MT. It is the largest manufacturer and exporter of conductors from India. In case of specialty oils, its market share stood at 45% with 5.4lac KL installed capacity (including 1lac KL capacity overseas at Sharjah). In FY’18, Conductors business formed 44% of revenue & Specialty oil, 37%. It entered cables business through inorganic route by acquiring Uniflex Cables in 2008 and 19% revenue contribution. Revenue base has been very well diversified with export @ 36% of revenue in FY’18.

Outlook

We estimate earnings to compound at 22% annually over FY'18-'20 led by strong tailwinds from domestic power T&D sector as well as robust growth in overseas business. Apar's strong global positioning in conductors as well as specialty oil business and robust growth in earnings of cables business (through successful turnaround of Uniflex Cables that it had acquired in 2008) leads us to recommend ACCUMULATE on the stock with PT of Rs 700 ( 13x FY'20 E EPS).

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