Apar Industries (APR IN)

Rating: ACCUMULATE | CMP: Rs5,165 | TP: Rs5,630

October 26, 2023 Premiumization and exports drives performance

Q2FY24 Result Update Quick Pointers:

☑ Change in Estimates | ☑ Target |  Reco  Strong exports growth (up ~26% YoY), product premiumization and volume
growth across segment drives revenue growth of ~21% YoY.
Change in Estimates

FY24E
Current
FY25E
Previous
FY24E FY25E
 Conductors EBITDA/ton continues to remain strong at Rs39,007/ton, driven by
Rating ACCUMULATE ACCUMULATE product mix and higher exports contribution.
Target Price 5,630 5,499
Sales (Rs.m) 1,57,550 1,83,228 1,64,972 1,90,403
We revise our FY24/25/26E by 15.8%/2.7%/1.7%, factoring in strong H1FY24
% Chng. (4.5) (3.8)
EBITDA (Rs.m) 13,413 14,554 11,966 14,172 performance and strong cables & conductor’s outlook in domestic & exports
% Chng. 12.1 2.7
EPS (Rs.) 177.5 195.6 153.3 190.5
market. Apar Industries (APR) reported strong quarterly performance with
% Chng. 15.8 2.7 revenue growth of ~21% YoY and EBITDA margin expansion of 193bps YoY.
Demand for premium conductors continues to remain strong in domestic
Key Financials - Consolidated market from TBCB and re-conducting space. During Q2FY24, improved re-
Y/e Mar FY23 FY24E FY25E FY26E conducting execution capabilities resulted in higher productivity. Export of
Sales (Rs. m) 1,43,522 1,57,550 1,83,228 2,12,156
cables to US and European markets may witness volume sluggishness in near
EBITDA (Rs. m) 12,270 13,413 14,554 17,277
Margin (%) 8.5 8.5 7.9 8.1 term owing inventory de-stocking of excess inventories by distributors amid
PAT (Rs. m) 6,377 6,793 7,486 9,132 normalizing supply chain, however medium to long term outlook continues to
EPS (Rs.) 166.6 177.5 195.6 238.6
Gr. (%) 148.5 6.5 10.2 22.0 remain strong for overall exports. Cables business likely to continue with its
DPS (Rs.) 40.0 53.3 58.7 71.6 growth momentum, driven by strong growth in elastomeric cables (for
Yield (%) 0.8 1.0 1.1 1.4
renewables, defence etc.) which is up ~40%+ in H1FY24 and focus is on
RoE (%) 32.3 27.5 25.2 25.7
RoCE (%) 49.4 43.6 39.4 39.8 expanding B2C segment by enhancing distribution and geographical reach.
EV/Sales (x) 1.4 1.2 1.1 0.9
EV/EBITDA (x) 15.9 14.5 13.3 11.1 We believe APR’s focus towards value added products and strong traction in
PE (x) 31.0 29.1 26.4 21.6
P/BV (x) 8.8 7.3 6.1 5.1
exports business will continue to drive strong topline & profitability in the long
run. The stock is currently trading at PE of 29.1x/26.4x/21.6x FY24/25/26E. We
maintain ‘Accumulate’ rating with revised TP of Rs5,630 (Rs5,499 earlier)
Key Data APAR.BO | APR IN
valuing Conductors/Cables/Speciality Oil segment at 25x/32x/12x Sep25E.
52-W High / Low Rs.6,020 / Rs.1,352
Sensex / Nifty 63,148 / 18,857
Market Cap Rs.198bn/ $ 2,375m
Shares Outstanding 38m Strong volume and exports growth drives performance: Consolidated sales
3M Avg. Daily Value Rs.963.27m grew 21.4% YoY to Rs39.3bn (PLe ~Rs38.3bn) comprising of Conductors/
Speciality Oil/ Cables ~49%/~31%/~22% of total sales. EBITDA grew 54.8% YoY to
Shareholding Pattern (%) Rs3.5bn (PLe Rs3.6bn) with EBITDA margins expanding by 193bps YoY to 8.9%
Promoter’s 60.64 (PLe ~9.3%), owing to lower other expenses as % of sales (13.4% vs 15.7% in
Foreign 7.47
Domestic Institution 17.97 Q2FY23). PAT grew ~69% YoY to ~Rs1.7bn (PLe ~Rs1.9bn), led by strong
Public & Others 13.92
operational performance and higher other income (up 53.5% YoY to Rs188mn)
Promoter Pledge (Rs bn) -
despite higher interest expenses (up 44.9% to Rs1bn).

Stock Performance (%)

1M 6M 12M
Healthy growth witnessed in Conductors and Cables: Conductors segment
Absolute (11.0) 89.6 236.0 reported a growth of 35.1% YoY to Rs19.4bn driven by strong volume growth (up
Relative (7.1) 81.1 216.8
79% YoY) and exports growth (up 1.6x YoY). Cables reported a 15.8% YoY growth
to Rs8.8bn driven by 18% YoY growth in exports. Specialty oil segment revenue
Amit Anwani
grew 1.9% YoY to ~Rs12bn with volume growth of 16% YoY.
amitanwani@plindia.com | 91-22-66322250
Nilesh Soni
nileshsoni@plindia.com | 91-22-66322214

October 26, 2023 1

 Apar Industries

Strong operating performance drives profitability

YoY gr. QoQ gr. YoY gr.
Y/E March Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24 H1FY24 H1FY23
(%) (%) (%)
Revenue 32,349 39,389 40,886 37,730 39,260 21.4 4.1 76,990 63,281 21.7
Total Revenues 32,349 39,389 40,886 37,730 39,260 21.4 4.1 76,990 63,281 21.7
Expenditure 30,090 35,957 36,647 34,269 35,762 18.9 4.4 70,031 58,648 19.4
as % of sales 93.0 91.3 89.6 90.8 91.1 91.0 92.7
Consumption of RM 24,517 29,377 29,820 28,475 29,793 21.5 4.6 58,268 47,891 21.7
as % of sales 75.8 74.6 72.9 75.5 75.9 75.7 75.7
Employee Cost 507 515 700 657 724 42.6 10.2 1,380 990 39.4
as % of sales 1.6 1.3 1.7 1.7 1.8 1.8 1.6
Other expenditure 5,066 6,065 6,127 5,137 5,246 3.5 2.1 10,383 9,768 6.3
as % of sales 15.7 15.4 15.0 13.6 13.4 13.5 15.4
EBITDA 2,259 3,432 4,239 3,462 3,498 54.8 1.0 6,959 4,633 50.2
Depreciation 261 261 273 272 282 8.1 3.5 554 510 8.7
EBIT 1,998 3,171 3,966 3,189 3,216 60.9 0.8 6,405 4,123 55.4
Other Income 122 66 107 139 188 53.5 35.4 326 167 95.3
Interest 711 940 791 696 1,031 44.9 48.1 1,727 1,325 30.4
Extra ordinary items - - - - - - -
PBT 1,409 2,298 3,282 2,632 2,373 68.4 (9.8) 5,005 2,966 68.8
Total Tax 383 599 855 657 629 64.3 (4.3) 1,286 715 80.0
PAT 1,026 1,699 2,428 1,975 1,744 69.9 (11.7) 3,719 2,251 65.2
(Profit)/loss from JV's/Ass/MI - - (0.2) (0.4) (5.0) (5) - -
PAT after JV 1,026 1,699 2,427 1,974 1,739 69.4 (11.9) 3,713 2,251 65.0
Adjusted PAT 1,026 1,699 2,427 1,974 1,739 69.4 (11.9) 3,713 2,251 65.0
Adjusted EPS 26.8 44.4 63.4 51.6 45.4 69.4 (11.9) 97 58.8 65.0

Margins (%) Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24 bps bps H1FY24 H1FY23 bps
EBIDTA 7.0 8.7 10.4 9.2 8.9 193 (27) 9.0 7.3 172
EBIT 6.2 8.1 9.7 8.5 8.2 201 (26) 8.3 6.5 180
EBT 4.4 5.8 8.0 7.0 6.0 169 (93) 6.5 4.7 181
PAT 3.2 4.3 5.9 5.2 4.4 126 (80) 4.8 3.6 127
Effective Tax rate 27.2 26.1 26.0 25.0 26.5 (66) 154 25.7 24.1 160
Source: Company, PL

Conductors and Cables witnessed healthy revenue growth of 35% and 15.8% YoY respectively
YoY gr. QoQ gr. YoY gr.
Segmental Performance Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24 H1FY24 H1FY23
(%) (%) (%)
Conductor
Volume (MT) 30,227 44,538 49,489 45,565 54,074 27.0 18.7 99,639 66,104 50.7
Revenue 14,390 19,120 21,210 17,742 19,433 35.0 9.5 37,175 29,870 24.5
EBITDA Adj 1,230 2,270 2,820 1,770 2,110 71.5 19.2 3,880 1,970 97.0
EBITDA margin (%) 8.2 11.6 13.5 10.0 10.9 266 88 10.4 6.6 384
EBITDA Adj. (Rs/MT) 39,108 49,942 58,006 38,740 39,007 (0.3) 0.7 38,968 31,380 24.2
Speciality Oil & Lubricant
Volume (KL) 113,360 126,731 131,132 130,654 133,788 18.0 2.4 264,442 228,719 15.6
Revenue 11,760 12,450 11,790 11,980 11,986 1.9 0.0 23,967 22,440 6.8
EBITDA 580 270 460 780 660 13.8 (15.4) 1,440 1,760 (18.2)
EBITDA margin (%) 4.9 2.2 3.9 6.5 5.5 12 (15) 6.0 7.8 (183)
EBITDA Adj. (Rs/KL) 4,550 1,646 3,697 6,035 4,562 0.3 (24.4) 4,909 5,083 (3.4)
Cables
Revenue 7,620 9,210 9,430 9,668 8,823 15.8 (8.7) 18,490 14,000 32.1
EBITDA Adj. 700 1,090 1,170 1,100 980 40.0 (10.9) 2,080 1,190 74.8
EBITDA margin (%) Adj 9.2 11.8 12.4 11.4 11.1 20.9 (2.4) 11.2 8.5 275
Source: Company, PL

October 26, 2023 2

 Apar Industries

Cables account for 63% of SoTP

Segmental Target Targeted
Valuation Value /
PAT multiple Value
basis Share
(Rs mn) (X) (Rs mn)
Conductors Segment 2,425 P/E 25 60,631 1,584
Cables Segment 4,212 P/E 32 134,776 3,522
Speciality Oil Segment 1,672 P/E 12 20,064 524
Total Target (Rs. Mn) 215,471 5,630

Source: Company, PL

Conference Call Highlights

 Revenue growth of ~21% was driven by volume growth across all division and
strong exports growth up ~26.3% YoY. Exports growth was driven by 158.3%
growth in conductor division and 18.4% in cables.

 Enquiry pipeline is strong for conductors as well as cables.

 Capex: Overall capex for FY24 is envisaged at ~Rs3.5bn.

 Exports: US markets accounts for 16% of total APR revenues.

 Conductors revenue growth (up 35% YoY), was driven by strong volume
growth (up 79% YoY), strong exports (up ~1.6x YoY). Order book stands at
Rs59.8bn (51% exports) to be executable over next 6- 7 months. Order inflows
came in at Rs25.1bn in Q2FY24 up 71% YoY. High value products contribution
was at 45.6% in Q2FY24.

 Re-conducting is witnessing a healthy traction with increasing power

demand. APR has improved its productivity and efficiency in re-conducting
EPC space.

 Currently APR is only targeting domestic Re-conducting opportunity.

 Speciality oil revenue reported muted growth of 2% YoY, led by volume-led

growth (up 18% YoY). EBITDA post forex was at Rs4,562/Kl flat YoY.

 Performance for segment was impacted in Q2FY24 as one of the major

Base oil supplier to the company suffered supply chain issues resulting in
lower supplies which was further compounded by poor refinery campaign
affecting profitability in the quarter. Contracted base oil supplies have
improved September onwards.

 Cables (revenue growth 16% YoY): Exports grew 18% YoY. EBITDA, post
forex adjustment continues to maintain double-digit margin at 11.1% in Q2FY24
v/s 9.2% in Q2FY23 due to improved product mix and scale up in economies.

 Witnessing continued slowdown in distribution channel in US and Europe

due to de-stocking of excess inventory resulting in lower growth rate in
Q2FY24 and is expected to continue for next couple of months.

 B2C segment is progressing as per plan and company has increased its
retail touch points by 70% YoY and is now currently active in 18 states.

October 26, 2023 3

 Apar Industries

Financials
Income Statement (Rs m) Balance Sheet Abstract (Rs m)
Y/e Mar FY23 FY24E FY25E FY26E Y/e Mar FY23 FY24E FY25E FY26E

Net Revenues 1,43,522 1,57,550 1,83,228 2,12,156 Non-Current Assets

YoY gr. (%) 54.0 9.8 16.3 15.8
Cost of Goods Sold 1,07,088 1,18,961 1,38,111 1,59,492 Gross Block 14,827 18,327 20,327 22,327
Gross Profit 36,434 38,589 45,117 52,664 Tangibles 14,814 18,314 20,314 22,314
Margin (%) 25.4 24.5 24.6 24.8 Intangibles 14 14 14 14
Employee Cost 2,205 2,710 2,895 3,352
Other Expenses 21,960 22,467 27,667 32,036 Acc: Dep / Amortization 5,320 6,566 8,048 9,706
Tangibles 5,320 6,566 8,048 9,706
EBITDA 12,270 13,413 14,554 17,277 Intangibles - - - -
YoY gr. (%) 124.0 9.3 8.5 18.7
Margin (%) 8.5 8.5 7.9 8.1 Net fixed assets 9,507 11,762 12,279 12,621
Tangibles 9,494 11,748 12,265 12,608
Depreciation and Amortization 1,043 1,245 1,483 1,658 Intangibles 14 14 14 14

EBIT 11,226 12,167 13,071 15,619 Capital Work In Progress 991 1,091 1,091 1,091
Margin (%) 7.8 7.7 7.1 7.4 Goodwill - - - -
Non-Current Investments 67 42 42 42
Net Interest 3,055 3,542 3,577 4,004 Net Deferred tax assets (217) (217) (217) (217)
Other Income 375 457 513 594 Other Non-Current Assets 1,153 1,891 2,382 2,970

Profit Before Tax 8,546 9,082 10,007 12,209 Current Assets

Margin (%) 6.0 5.8 5.5 5.8 Investments 501 501 501 501
Inventories 25,756 28,489 33,132 38,362
Total Tax 2,168 2,289 2,522 3,077 Trade receivables 32,256 35,395 41,164 47,662
Effective tax rate (%) 25.4 25.2 25.2 25.2 Cash & Bank Balance 5,301 5,730 6,621 8,300
Other Current Assets 6,008 6,806 8,428 9,759
Profit after tax 6,377 6,793 7,486 9,132 Total Assets 82,177 92,414 1,06,830 1,22,687
Minority interest - - - -
Share Profit from Associate - - - - Equity
Equity Share Capital 383 383 383 383
Adjusted PAT 6,377 6,793 7,486 9,132 Other Equity 21,981 26,737 31,977 38,369
YoY gr. (%) 148.5 6.5 10.2 22.0 Total Networth 22,364 27,119 32,359 38,752
Margin (%) 4.4 4.3 4.1 4.3
Extra Ord. Income / (Exp) - - - - Non-Current Liabilities
Long Term borrowings 1,514 1,814 2,014 2,214
Reported PAT 6,377 6,793 7,486 9,132 Provisions - - - -
YoY gr. (%) 148.5 6.5 10.2 22.0 Other non current liabilities - - - -
Margin (%) 4.4 4.3 4.1 4.3
Current Liabilities
Other Comprehensive Income - - - - ST Debt / Current of LT Debt 1,528 1,528 1,528 1,528
Total Comprehensive Income 6,377 6,793 7,486 9,132 Trade payables 52,066 56,977 65,761 74,981
Equity Shares O/s (m) 38 38 38 38 Other current liabilities 4,488 4,759 4,951 4,996
EPS (Rs) 166.6 177.5 195.6 238.6 Total Equity & Liabilities 82,177 92,414 1,06,830 1,22,687
Source: Company Data, PL Research Source: Company Data, PL Research

October 26, 2023 4

 Apar Industries

Cash Flow (Rs m) Key Financial Metrics

Y/e Mar FY23 FY24E FY25E FY26E Y/e Mar
Year FY23 FY24E FY25E FY26E

PBT 8,546 9,082 10,007 12,209 Per Share(Rs)

Add. Depreciation 1,043 1,245 1,483 1,658 EPS 166.6 177.5 195.6 238.6
Add. Interest 1,553 3,542 3,577 4,004 CEPS 193.9 210.1 234.3 282.0
Less Financial Other Income 375 457 513 594 BVPS 584.4 708.6 845.6 1,012.6
Add. Other 794 - - - FCF 117.7 149.2 170.2 214.8
Op. profit before WC changes 11,936 13,870 15,067 17,870 DPS 40.0 53.3 58.7 71.6
Net Changes-WC (2,763) (2,272) (4,032) (4,572) Return Ratio(%)
Direct tax 2,190 2,289 2,522 3,077 RoCE 49.4 43.6 39.4 39.8
Net cash from Op. activities 6,983 9,309 8,514 10,222 ROIC 49.5 41.9 37.5 38.4
Capital expenditures (2,467) (3,600) (2,000) (2,000) RoE 32.3 27.5 25.2 25.7
Interest / Dividend Income - - - - Balance Sheet
Others (222) - - - Net Debt : Equity (x) (0.1) (0.1) (0.1) (0.1)
Net Cash from Invt. activities (2,689) (3,600) (2,000) (2,000) Net Working Capital (Days) 15 16 17 19
Issue of share cap. / premium - - - - Valuation(x)
Debt changes (67) 300 200 200 PER 31.0 29.1 26.4 21.6
Dividend paid (574) (2,038) (2,246) (2,740) P/B 8.8 7.3 6.1 5.1
Interest paid (1,200) (3,542) (3,577) (4,004) P/CEPS 26.6 24.6 22.0 18.3
Others - - - - EV/EBITDA 15.9 14.5 13.3 11.1
Net cash from Fin. activities (1,841) (5,280) (5,623) (6,543) EV/Sales 1.4 1.2 1.1 0.9
Net change in cash 2,453 429 891 1,679 Dividend Yield (%) 0.8 1.0 1.1 1.4
Free Cash Flow 4,505 5,709 6,514 8,222 Source: Company Data, PL Research
Source: Company Data, PL Research

Quarterly Financials (Rs m)

Y/e Mar Q3FY23 Q4FY23 Q1FY24 Q2FY24
Net Revenue 39,389 40,886 37,730 39,260
YoY gr. (%) 76.7 35.7 22.0 21.4
Raw Material Expenses 29,377 29,820 28,475 29,793
Gross Profit 10,012 11,066 9,255 9,467
Margin (%) 25.4 27.1 24.5 24.1
EBITDA 3,432 4,239 3,462 3,498
YoY gr. (%) 196.5 144.3 45.8 54.8
Margin (%) 8.7 10.4 9.2 8.9
Depreciation / Depletion 261 273 272 282
EBIT 3,171 3,966 3,189 3,216
Margin (%) 8.1 9.7 8.5 8.2
Net Interest 940 791 696 1,031
Other Income 66 107 139 188
Profit before Tax 2,298 3,282 2,632 2,373
Margin (%) 5.8 8.0 7.0 6.0
Total Tax 599 855 657 629
Effective tax rate (%) 26.1 26.0 25.0 26.5
Profit after Tax 1,699 2,428 1,975 1,744
Minority interest - - - -
Share Profit from Associates - - - -
Adjusted PAT 1,699 2,428 1,975 1,744
YoY gr. (%) 209.1 193.9 61.3 69.9
Margin (%) 4.3 5.9 5.2 4.4
Extra Ord. Income / (Exp) - - - -
Reported PAT 1,699 2,428 1,975 1,744
YoY gr. (%) 209.1 193.9 61.3 69.9
Margin (%) 4.3 5.9 5.2 4.4
Other Comprehensive Income - - - -
Total Comprehensive Income 1,699 2,428 1,975 1,744
Avg. Shares O/s (m) 38 38 38 38
EPS (Rs) 44.4 63.4 51.6 45.6
Source: Company Data, PL Research

October 26, 2023 5

 Apar Industries
Price Chart Recommendation History

(Rs)
No. Date Rating TP (Rs.) Share Price (Rs.)
5825
1 05-Oct-23 Accumulate 5,499 5,393

4440 2 28-Sep-23 Accumulate 5,418 5,486

3 29-Aug-23 Accumulate 5,418 5,047
3055
4 01-Aug-23 Accumulate 4,100 3,782
1670 5 06-Jul-23 BUY 3,725 3,493
6 14-Jun-23 BUY 3,725 2,993
285
Oct - 20

Oct - 21
Apr - 21

Apr - 22

Oct - 22

Apr - 23

Oct - 23
7 09-May-23 BUY 3,832 3,056
8 11-Apr-23 UR - 2,695
9 31-Jan-23 BUY 2,260 1,687
10 04-Jan-23 BUY 1,834 1,789

Analyst Coverage Universe

Sr. No. Company Name Rating TP (Rs) Share Price (Rs)
1 ABB India Accumulate 5,013 4,068
2 Apar Industries Accumulate 5,499 5,393
3 Bharat Electronics Accumulate 140 139
4 BHEL Reduce 67 127
5 Carborundum Universal BUY 1,482 1,192
6 Cummins India Hold 1,788 1,691
7 Engineers India Accumulate 165 143
8 GE T&D India Hold 260 413
9 Grindwell Norton BUY 2,604 2,092
10 Harsha Engineers International Accumulate 474 415
11 Hindustan Aeronautics BUY 2,266 1,889
12 Kalpataru Projects International BUY 732 647
13 KEC International Hold 645 672
14 Larsen & Toubro BUY 3,302 3,096
15 Praj Industries Accumulate 618 571
16 Siemens Accumulate 4,241 3,559
17 Thermax Hold 2,613 3,101
18 Triveni Turbine Accumulate 419 421
19 Voltamp Transformers Hold 4,611 4,413

PL’s Recommendation Nomenclature (Absolute Performance)

Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly

October 26, 2023 6

 Apar Industries

ANALYST CERTIFICATION
(Indian Clients)
We/I, Mr. Amit Anwani- MBA (Finance), Mr. Nilesh Soni- BCom, MBA (Finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views
expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or
indirectly related to the specific recommendation(s) or view(s) in this report.

(US Clients)
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reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is or will be directly related to the specific
recommendation or views expressed in this research report.

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