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Our view

Apar Industries Ltd (APR) reported highest?ever quarterly revenue, led by growth across Conductors segment (up 103% YoY), Transformers & Specialty Oils (up 38% YoY) and Cables (up 89% YoY). Conductors revenue growth was largely driven by improved share of higher value products and exports (54% vs 29% in 3QFY22). Margins expanded by 360bps YoY owing to higher gross margins. Going forward management expects strong traction in India on the back of a capex?oriented budget, focus on railways, defence outlay, etc. On the international front, markets such as North America, Europe, Australia, GCC, etc. are expected to witness robust demand as well.

We like the company given its global leadership position, robust prospects of value? added products, strong positioning across product categories and consistent dividend pay?out. At CMP, the stock is trading at a P/E of 13.5x/11.7x/10.4x and EV/EBITDA of 7.0x/5.7x/4.9x for FY23E/24E/25E. We upgrade the stock from SELL to ADD factoring in a) higher share of exports and b) rising premiumization within domestic market. We roll forward our target multiple to FY25E with a revised TP of Rs1,955.

Result Highlights

* Sales came in at Rs39.4bn (up 77% YoY) above YSLe of ~Rs34.2bn led by strong growth in Conductors segment (up 103% YoY), Transformer & Specialty oil segment (up 38% YoY) and Cable segment (up 89% YoY)

* As RM inflation has softened, gross margin expanded by ~300bps YoY to 25.5% in 3QFY23

* EBITDA came in at Rs3.5bn (YSLe Rs2.5bn), with EBITDA margin coming in at 8.8% (~360bps YoY expansion) primarily led by gross margin expansion  

* PBT grew by 211% YoY to Rs2.3bn mainly due to robust operating performance despite a 267% YoY growth in Interest cost at Rs940mn

*PAT came in at Rs1.7bn (vs YSLe of Rs1.3bn)

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