Add Apar Industries Ltd For Target Rs. 6,000 By Yes Securities
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Our view
Apar Industries Ltd (APR) reported a strong Q2FY24 print beating our expectations on both revenue and PAT front. This was driven by better than expected export revenue growth driving a surprise on margin. The company performance continues to be driven by volume led growth across its domestic and export businesses. Despite the de-stocking trend in large distributors, the company has levers to report a robust export growth by expanding further into newer geographies and exploring newer channels through direct EPC or utility business. Strong structural drivers remain intact and will play out over the medium to long term driven by target to increase renewable energy contribution across major geographies. In India, there is a continued strong traction in power transmission capex, railway infra spending and private capex recovery that will sustain demand for both conductors and cables.
We like the company given its global leadership position, robust prospects of valueadded products, strong positioning across product categories and consistent dividend pay-out. At CMP, the stock is trading at a P/E of 25.6x/17.2x and EV/EBITDA of 12.8x/9.6x for FY24E/25E. We upgrade our FY25 earnings estimates factoring in a) higher share of exports and b) rising premiumization within domestic market. We upgrade the stock to ADD with a revised TP of Rs6,000 based on 20x FY25E earnings.
Result Highlights
* Revenue growth of 21% YoY in Q2FY24 moderates from last year (54% revenue growth in FY23). Conductor (+35% YoY) and cables segment (+16% YoY) stole the show while Transformer & Speciality oil (TSO) segment saw muted revenue growth of ~2% YoY.
* Gross margin remained broadly stable both sequentially and on YoY basis at 24.1%. EBITDA grew by 55% YoY at Rs3.5bn (YSLe Rs2.8bn). EBITDA margin expanded 190bps YoY to 8.9% driven by operating leverage.
* PBT grew by 68% YoY to Rs2.4bn helped by operating performance, leverage on depreciation while interest costs saw notable increase of 45% YoY to Rs1.03bn.
* PAT came in at Rs1.74bn (vs YSLe of Rs1.45bn) recording growth of 69% YoY.
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