Apar Industries Q1 Results Review - Exports To Drive Both Growth, Margins In Near Term: Nirmal Bang

Nirmal Bang Report

Apar Industries Ltd.'s Ebitda margin was above our estimate by 71 basis points on account of better-than expected Ebitda growth in transformer and specialty oils business.

The slowdown in the U.S. and Europe led to a drop in exports in the conductors and cables segments. But, this was offset by strong domestic demand for both. Apar has intensified its focus on new capacity addition to the grid, spurred by the Solar Power segment.

Overall, domestic revenues (63% revenue contribution in Q1 FY25 versus 46.7% YoY) grew by 43.4% YoY, while exports (37% revenue contribution in Q1 FY25 versus 53.3% YoY) de-grew by 25.9% YoY. The management expects recovery in exports in H2 FY25.

While we remain structurally positive about Apar’s long term business prospects, the stock has run up ~55% YTDCY24.

We maintain Accumulate with a revised target price of Rs 8,700. This implies a PE of 29 times on June-26E EPS and it is at ~20% premium to the two-year historical average PE multiple on one-year forward basis. We believe that the multiple is fair and adequately captures:

1. ~19% EPS CAGR over FY24-FY26E, and

2. post-tax RoCE of ~32% in FY26E.

We believe it is a long-term compounder and should be accumulated at every dip.

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