IGI Logo

Sanguine outlook for conductors and cables

We attended the analyst meet of Apar Industries. Management sounded optimistic on the back of strong infrastructure spending in domestic market, its diversified footprint in export market and high market share in key growth segments. The company continues to focus to stay within the top 3 position in each business segment. It expects continued benefit from higher premium conductor sales in the domestic market and standard product sales in premium export markets which augurs well from both revenue growth and margin standpoint. The key themes of renewable energy, electrification, decarbonization, infrastructure spending, China +1, 5G rollout, etc will translate into a strong opportunity pipeline for the coming 5-10 years.

Key highlights – Conductors segment

? There are strong tailwinds for the Conductors segment both in India and overseas because of the growing demand for electricity, push for renewable energy, existing power transmission infrastructure being outdated and inefficient

? The market potential for players like Apar is huge as the expected global T&D investment is to the tune of USD2.2trn for the next 10 years. Over the next 5 years, the global overhead conductor opportunity size is pegged at ~4.5 mn tons. The company sees healthy headroom to expand not only in its traditional markets of US, Europe, and Australia but also in developing economies such as Africa, Middle East, Latin America and SAARC countries

? In India, 80,000 ckm of transmission lines and 350,000 MVA of transformation capacity have been added in the last 5 years. By 2028, the government envisages an addition of a further 28,000 ckm of new transmission lines and 180,000 km of distribution lines. Notably, 18,000 ckm of existing transmission lines would be upgraded to improve the efficiency

? AT&C losses in India stand at ~30% currently (global average of ~17%) which is sought to be brought down to 20% by 2030. In order to achieve this, a lot of the old conductors have to be replaced by high efficiency conductors where Apar is the market leader

? Out of the current order book of ~Rs54bn, 50% is exports and the balance domestic portion largely consists of premium conductors (~45% of overall OB) due to right of way issues in India such as delays in land acquisition, environmental clearance, densely populated urban centres, etc which make it unviable to erect a new set of poles and towers required to expand transmission capacity. Therefore, premium conductors with a higher load carrying capacity are installed to meet the growing power demand in India

? In the period prior to PGCIL making AL59 grade conductors mandatory, the company faced high competitive intensity with ~33 players in the fray. However, with the new standards, only 4-5 players are eligible

? Of the ~Rs4bn capex outlay for FY24, the company has earmarked 1/3rd for the conductors segment for both greenfield and brownfield expansion. The new capacity is expected to come on-line by the end of FY24 and will largely cater to the growing demand for AL59 conductors in India

Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaime