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Strong Q2, Margin resilience amid volume volatility

APAR Industries (APAR) reported strong revenue growth of ~21.3% YoY with EBITDA margin expanded by 164bps YoY to ~9.8% (adj for net of US tariff returns of INR427.5mn), aided by higher sales realizations and profitability across segments. In Conductors, premiumization and execution of higher-margin orders lifted EBITDA/MT to INR48,241 (vs INR39,363 in Q2FY26) despite a 9.2% decline in volumes, while delayed customer clearances impacted offtake; management expects volumes to recover in H2FY27. The record conductor order book of INR120.3bn, including ~INR30bn of international utility orders, provides strong revenue visibility, with premium HTLS and OPGW products and accelerating reconductoring requirements offering structural growth opportunities. The Oil division delivered robust profitability, with EBITDA/KL rising to INR23,262 (vs INR6,517 in Q2FY26), reflecting improved realizations and a strategic shift towards higher-margin customers amid input-cost volatility; however, management indicated that current elevated margins should not be considered a normalised run rate. The Cables business maintained healthy momentum, with 22.1% YoY revenue growth and margins of 11%; its INR30bn order book is supported by ~INR10bn of data-centre-related orders from Google and Amazon, alongside opportunities in renewables and railways. Capacity expansion and commissioning of new equipment are expected to support larger, higher-specification orders and enhance participation in premium cable applications. The proposed investment of up to US$100mn in wholly owned Singapore subsidiary Petroleum Specialities Pte ltd (PSPL) could support overseas expansion. The stock is currently trading at a PE of 41.1x/35.6x on the earning of FY28/29E. We roll forward to Sep’28E and maintain our ‘Accumulate’ rating while valuing the Conductors/Cables/Specialty Oils segment at a PE of 43x/43x/18x Sep’28E (40x/40x/16x Mar’28E) given ongoing capacity expansion plan, improving product mix and better medium-term growth visibility. This results in a revised SoTP-derived TP of INR16,674 (INR14,720 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 and rise in reconductoring opportunities

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.

Better gross margin and operating leverage aided profitability:

Consolidated revenue rose 21.3% YoY to INR69.3bn (PLe: INR70.8bn). Revenue mix stood at Conductors ~50%/ Speciality Oil ~24%/ Cables ~25%. Domestic/export mix stood at 72.4%/27.6% (vs 65.3/34.7% in Q2FY26). Reported EBITDA stood at INR7.2bn (PLe: INR5.9bn) a 55% YoY increase with EBITDA margin expanded by 226bps YoY to 10.4% (Ple: 8.3%) aided by better gross margin and operating leverage. After adjusting for net of US tariff refunds of INR427.5mn from other expenses Adj.EBITDA increased by 45.8% YoY to INR6.8bn. Adj. EBITDA margin expanded by 164bps YoY to 9.8%. Adj.PBT increased by 62.7% YoY to INR5.5bn (Ple: INR4.3bn) aided by higher other income (+163.7% YoY to Rs613mn). Adj. PAT grew by 65.3% YoY to Rs4.2bn (PLe: INR3.2bn) aided by lower effective tax rate (-103bps YoY to 25.1%).

Strong growth in Conductors EBITDA/MT:

Conductors EBITDA/MT came in at INR48,241 (PLe: INR46,500), while EBITDA margin stood at 7.4% (vs 8% in Q2FY26). Premium product mix stood at 39.4% (vs 45.4% in Q2FY26). Conductors order book stood at INR120.3bn with order inflow stood at ~INR47.8bn of which exports contributed ~51%. Specialty Oils revenue was up 35.3% YoY to Rs18.2bn, with volumes degrew by ~20% YoY likely due to war. Domestic/export mix stood at 63/37% (vs 57/43% in Q2FY26). Specialty Oils EBITDA/KL came in at INR23,262 (PLe: INR8,500) and EBITDA margin expanded to 16.5% (vs 7.0% in Q2FY26). Cables revenue increased by 22.1% YoY to INR18.7bn primarily driven by domestic (+71.4% YoY ) while exports (-45.1% YoY) and US sales was down by (-53.8% YoY). Cables EBITDA margin expanded by 81 bps YoY to11%.

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