Buy Apar Industries target of Rs 696: Prabhudas Lilladher

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.

Outlook

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).