Stock of this conductor manufacturer has zoomed 100% in 2.5 months

Apar Industries hit a new high today on the favourable medium-term demand outlook with increased demand from the end-users such as the power, infrastructure, railways, defence and marine sectors.

Shares of Apar Industries (AIL) gained 4 per cent to hit a new high of Rs 2,795 on the BSE in Thursday’s otherwise weak market on the favourable medium-term demand outlook with increased demand from the end-users such as power, infrastructure, railways, defence and marine sectors.

AIL is one of the largest global manufacturers of aluminium and alloy conductors. The company has a manufacturing capacity of 1,80,000 MTPA for conductors and 5,40,000 KL capacity for speciality oils, including lubricants. Its manufacturing facilities are at Rabale (Maharashtra) for oil and lubricants, Silvassa for conductors and oils, Athola and Rakholi (Dadra and Nagar Haveli) for conductors, Umbergaon and Khatalwad (Gujarat) for wires, cables and polymers, Jharsugoda and Lapanga (Orissa) for conductors and Hamriyah (Sharjah) specialty oil.

In the last two and a half months, since March 30, the stock has zoomed nearly 100 per cent from a level of Rs 1,407.90 on the BSE. The robust rally in the stock came on the back of a strong 210 per cent year-on-year (YoY) jump in consolidated profit after tax to Rs 170 crore in the December quarter (Q3FY23), led by strong operational performance.

The company’s consolidated sales grew 76.9 per cent YoY to Rs 3,942 crore in Q3FY23. Earnings before interest, tax, depreciation, and amortisation (Ebitda) grew 199 per cent YoY to Rs 349 crore, with ebitda margins expanding by 360bps YoY to 8.8 per cent, owing to better gross margins.

The management said the company witnessed volume growth across all the three divisions and the net profit tripled on a YoY basis. “We are optimistic about the growth prospects of our company as we believe we are appropriately placed to tap the benefits of infra-led spends, push towards renewable energy as well as China+l,” the management said.

The company’s order book of the conductor segment remained strong at Rs 4,885 crore as on December 31, 2022 with 44 per cent pertaining to premium products. Further, an order inflow guidance supported by favourable growth opportunities provides healthy revenue growth visibility over the near term. The company has reputed clientele comprising large engineering, procurement and construction (EPC) players and major utilities like railways, defence and marine.

ICRA in a recent rationale said AIL’s ratings favourably factor in the improving coverage metrics over the years amid a moderate operating profit margin (OPM) profile. The consolidated OPM remained in the range of 6-7 per cent between FY18 and FY22, improving to 7.9 per cent in 9MFY2023 with the rising share of premium products in conductors segment.

ICRA notes that the company has a hedging policy which limits the moderation in profitability, though with a lag.

The Stable outlook on the long-term rating reflects ICRA’s opinion that AIL’s revenues and accruals will be supported by its comfortable order book benefiting from its strong market position in conductors and specialty oil segment along with expectations of a healthy order inflow with focus on premium products in the near to medium term.

Further, favourable demand prospects for transmission and distribution products in domestic market as well as increased order intake internationally where sizeable capex is in infrastructure and power sector is expected to provide further growth opportunities to the company, ICRA said.