Buy Apar Industries target of Rs 696: Prabhudas Lilladher
Prabhudas Lilladher is bullish on Apar Industries has recommended buy rating on the stock with a target price of Rs 696 in its research report dated Jun 01, 2021.
June 02, 2021 / 04:15 PM IST
An Edelweiss research report for Q4FY21 says road tonnage continued to improve, evident in e-way bill generation (up 6% QoQ) and improved core trucking rentals. “We estimate tonnage would increase by three–five percent for truckers. Asset-light plays Mahindra Logistics and TCI Express remain our preferred picks due to their ability to scale up/down as the environment demands,” the report said. Edelweiss is bullish on Blue Dart Express due to the pandemic-induced boom in e-commerce and its leaner cost structure. It has retained a ‘buy’ call on Mahindra Logistics, TCI Express and Blue Dart Express.
Prabhudas Lilladher's research report on Apar Industries
Apar Industries (APR) reported decent set of numbers led by strong recovery in transformer oil segment and lower interest cost. With economic activity witnessing a V-shape recovery, domestic revenues grew 12% YoY while export revenues de-grew 2.8% YoY. Lower interest expense led to boost in profitability. Conductors segment reported an EBITDA loss of Rs20mn owing to steep rise in RM, 2-3x jump in freight costs and delay in clearance from customers. Specialty Oil revenue grew 33% YoY driven by exports growth, market share gain and share of business from major key customers. Margins in the cable business were impacted by subdued demand environment and covid related challenges. Going ahead, management expects conductor segment’s margins to remain under pressure. We believe APR’s focus towards value added product would help de-risk itself from low margin traditional business and gain a market share given its superior product quality, first mover advantage and strong brand positioning both internationality and domestically. We expect revenue/PAT CAGR of 8%/18% over FY21-23E given 1) its global leadership position, 2) robust prospects of value-added products, 3) strong positioning across product categories and 4) consistent dividend pay-out.
The stock is currently trading at 9.7x/9.0x FY22E/23E and knowing lower interest expense in FY21, we have revised our estimates upwards by 10.4%/6.9% for FY22E/23E. Maintain ‘BUY’ rating on the stock with a revised TP of Rs696 (earlier Rs543).
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