Buy Apar Industries; target of Rs 3725: Prabhudas Lilladher

Prabhudas Lilladher's research report on Apar Industries

We recently interacted with the management of Apar Industries ltd (APR), where they reiterated the strong demand outlook for Conductors and Cables segments, while maintaining modest stance on Speciality oil segment. Mgnt. guided 1) exports and product premiumisation will be key growth drivers in coming years, 2) Conductors division likely to witness strong traction for its conventional conductors from export markets, while domestic market will be driven by product premiumisation, 3) Cables segment, on the other hand, will continue with its growth momentum driven by strong growth in Elastomeric/E-beam cables from renewables & defence sector and growth in B2C business and 4) Speciality oil segment, is expected to witness decent growth in Transformer oil (~33% segment contribution) while growing modestly in white oil & auto lubricants. We believe, APR’s focus towards value added products and strong traction in exports business will drive strong topline and profitability in the long run. Hence, we expect revenue/PAT CAGR of 16.5%/5% from FY23-25E, amid high PAT base.

Outlook

The stock is currently trading at PE of 20.5x/16.3x FY24/25E. We maintain ‘Buy’ rating on stock with SoTP based TP of Rs3,725 (Rs3832 earlier) valuing Cables/Conductors/Speciality oil business at PE of 25x/21x/9x on FY25E EPS.