Buy Apar Industries Ltd For Target Rs. 878 - Yes Securities
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Stellar performance across segments
Our view
Apar Industries Ltd (APR) reported highest‐ever quarterly revenue, primarily led by the Conductors segment (up 80% YoY). Conductors revenue growth was largely driven by improved share of higher value products (51% vs 36% in Q4FY21) while volumes grew by 9% YoY. Other segments such as Specialty Oils and Lubricants (up 29% YoY) and Cables (up 54% YoY) too witnessed healthy growth. Margins expanded by 26bps/57bps YoY/QoQ owing to operating leverage. Going forward management expects strong traction in India on the back of a capex‐oriented budget, focus on railways, defence outlay, etc. On international front, markets such as North America, Europe, Africa, GCC, etc. are expected to witness robust demand as well.
Given its global leadership position, robust prospects of value‐added products, strong positioning across product categories and consistent dividend pay‐out. We expect revenue/PAT CAGR of 17.3%/28.1% over FY21‐24E. At CMP, the stock is trading at a P/E of 9.7x/9.4x and EV/EBITDA of 4.2x/3.9x for FY23E/24E. We revise our FY23/FY24 EPS estimates upward by 8%/7% respectively while maintaining our BUY rating with a TP of Rs878 based on 12x FY24E EPS.
Result Highlights
* Sales came in at Rs30.1bn (up 59% YoY) above YSLe of ~Rs26.8bn primarily led by strong growth in Conductors segment (up 80% YoY), Transformer & Speciality oil segment (up 29% YoY), Cable segment (up 54% YoY).
* Due to steep rise in raw material price and freight charges, gross margin contracted by ~150bps YoY to 22.2% in Q4FY22
* EBITDA came in at Rs1.7bn (YSLe Rs 1.4bn), with EBITDA margin coming in at 5.8% (~30bps YoY expansion) despite lower gross margin and rise in other expenses.
* PBT grew by 75% YoY to Rs1.1bn mainly due to robust operating performance despite a 104% YoY growth in Interest cost at Rs458mn.
* PAT came in at Rs826mn (vs YSLe of Rs745mn) mainly due to strong operating performance.
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