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Strong Q1, Premium mix powers margin outperformance

We revised our EPS estimates by +18.7%/+8.5% for FY27E/FY28E and upgrade our rating from ‘Hold’ to ‘Accumulate’ factoring in stronger-than-expected earnings, an improving premium product mix, robust order inflows and improving growth prospects. APAR Industries (APAR) reported robust revenue growth of ~29.1% YoY, while EBITDA margin expanded by 263bps YoY to ~11.5%, aided by higher sales realizations and strong profitability across all three business segments, led by the Specialty Oil business. In the Conductors segment, volumes declined due to delays in manufacturing clearances for conventional domestic orders following a sharp rise in aluminum prices. However, premium products contributed ~50.3% of revenues (vs. ~43.7% YoY), driving record EBITDA/t of ~Rs53,418, while the order book remained robust at ~Rs101.9bn, supported by ~Rs28bn of multi-year utility orders from the US and Europe. The Cables business reported healthy growth, supported by robust domestic demand, while recent approvals from Meta, Microsoft and Google are expected to strengthen APAR's presence in the US data centre cable market. Meanwhile, the Specialty Oil business delivered an exceptional quarter despite temporary disruptions at its UAE facility, with margin expansion driven by inventory procured at lower historical costs being realized at elevated market prices following the sharp rise in crude and gas oil prices during the Middle East conflict. With an improving premium product mix, healthy export order inflows, expanding global customer approvals and ongoing capacity expansion, management remains confident of sustaining healthy growth over the medium term. The stock is currently trading at a PE of 38.5x/34.4x on the earning of FY27/28E. We upgrade our rating from ‘Hold’ to ‘Accumulate while valuing the Conductors/Cables/Specialty Oils segment at a PE of 40x/40x/16x Mar’28E (40x/40x/16x Mar’28E) arriving at a revised SoTP-derived TP of Rs14,720 (Rs13,309 earlier).

Long term view:

While supply chain disruptions arising from Middle East conflict and persistent Chinese competition in non-US markets remain key monitorables in the near term, however company’s outlook in long term remain intact driven by

1) robust T&D capex and renewable evacuation opportunities

2) increasing mix of premium conductors such as AL-59 and HTLS in the domestic market

3) healthy traction in elastomeric and specialty cables across renewables, railways, defence and data centers

4) leadership position in the transformer oils business supported by strong power infrastructure investments globally.

Strong growth in Conductors EBITDA/MT:

Conductors revenue grew 19.9% YoY to Rs33.4bn likely driven product mix and higher realisations while US revenue was down by ~34% YoY. Conductors EBITDA/MT came in at Rs53,279 (PLe: Rs43,500), while EBITDA margin stood at 8.5% (vs 9% in Q1FY26) likely aided by Premium product mix which stood at 50.3% (vs 43.7% in Q1FY26). Specialty Oils revenue was up 34.8% YoY to Rs17bn, with volumes remain degrew by 13.7% YoY due to war. Specialty Oils EBITDA/KL came in at Rs25,482 (PLe: Rs5,917) and EBITDA margin expanded to 19.3% (vs 8.3% in Q1FY26). Company reported provision of Rs930mn on account of sharp volatility in oil prices. Cables revenue increased by 29.5% YoY to Rs18.4bn primarily driven by domestic (+59.9% YoY ) while exports (-13.7% YoY) and US sales up by (+2.5% YoY). Cables EBITDA margin expanded by 60 bps YoY to10.6%.

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