Add Apar Industries Ltd For Target Rs. 3,738 By Yes Securities
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Bright prospects for conductors and cables
Conductors plant visit: Key takeaways
* Started in 2013, the Silvassa conductor plant has a monthly production of ~7,000 tons, and current capacity utilization of ~80%
* The plant manufactures conventional ACSR conductors and premium AAAC, ACCC and HTLS conductors which find application in T&D. As a 100% exportoriented unit, it caters to key markets of US, Australia, Scandinavia, and to an extent, Africa. The other two strategically located facilities in Odisha cater to the domestic market
* Manufacturing process involves melting of aluminum ingots for casting into rods, which are further processed into wires of varying levels of thickness based on customer specifications. Alloy conductors involve additional steps in the form of ageing and annealing, where the conductor is subjected to temperatures of 160OC and 400OC respectively to increase strength and ductility
* The average life of a conductor is ~30 years. The company enjoys healthy replacement demand and premiumization in India as reconductoring is taking place in urban areas marked by limited right of way, and erecting new poles and towers entail additional costs. Apar has a dedicated team to reconductor live lines to ensure minimal disruption
* As HTLS conductors are used for renewable installations, demand for premium conductors would be buoyant going forward. Notably, the company has supplied 4,000km worth of HTLS conductors to renewable energy projects in Rajasthan
* The fact that US is investing in overhauling its infrastructure, coupled with growing renewable energy capacity, augurs well for Indian players like Apar and Sterlite. Notably, Chinese imports to the US have tapered off significantly in the wake of geopolitical tensions, and the situation is unlikely to reverse in the near to medium term. As US lacks any meaningful bauxite reserves, and also given high labour costs, the possibility of the US onshoring conductor manufacturing is minimal
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