Apar Industries - Poised for growth

Apar Industries is involved mainly in the power ancillary business - Conductors, Specialty Oils (mainly transformer oils) and Cables.

Conductor Segment
• CO generates 45% of revenues from conductors
• Apar has a market share of 23% in the domestic market
• One of the top five manufacturers of conductors in the world. Largest exporter of conductors from India.
• Estimated conductor market size in India is 7500 cr growing at 13%
• First turnkey project for High Temperature Low Sag (HTLS) conductors was successfully executed. It is a higher margin product compared to conventional conductors.
• Co is expecting a growth from 2% of revenues to 7.5% of revenues in FY16 in HTLS
• Co is expanding capacity by 30,000MT. Commercial production is to start by September 2016

Specialty Oils
• Domestic market share of 45% in transformer oils
• Fourth largest transformer oil manufacturer in the world and exports to 100 countries
• This segment is dependent on crude prices. Fall in prices depresses topline revenue.
• Shift in demand to 765KV & 1200KV transformers driving demand for higher voltage transformer oils
• Co has 2 manufacturing units - Rabale (222,000 KL) & Silvassa (220,000 KL)
• Co has setup a R&D center in Rabale
• Commissioning a new plant at Sharjah which will start production by Q3 FY17
• Tie-up with ENI of Italy from 2007 to produce auto lubricants

Cables
• Co has 2 manufacturing sites in Umbergaon & Khatalwada - Gujarat
• Domestic market sales is 78% and exports comprises of 22%
• Co moving away consciously from HT LT cables due to low margins and moving into Elastomeric & E-beam cables
• National Optical Fibre Network (NOFN) will create a network connecting all gram panchayats
• 3G & 4G rollout will also add to the requirements

Financials
Market Cap.: 1,767.58 Cr.
Current Price: 459.15
Book Value: 196.60
Stock P/E: 20.52
Dividend Yield: 0.76%
Face Value: 10.00
52 Week High/Low: 541.95 / 321.00
Dividend Payout Ratio: 28.14%
Debt to equity: 0.78
Price to book value: 2.34
Sales growth 5Years: 20.19%
Profit growth 5Years: -7.16%
OPM: 6.19%
NPM last year: 0.96%
Return on assets: 7.97%
Return on equity: 7.66%
Return on capital employed: 18.72%

Risks

• A delay in power distribution sector turnaround may impact the profitability of the company.
• Exports may get impacted due to volatility in currencies
• Speciality Oils are derivatives of crude hence any sharp price movement in crude can impact the company

Opportunity
With a turnaround in the power distribution business and possible benefits from the UDAY scheme, all the segments are likely to benefit. Apar has a good potential to benefit from this trend.

Company website for Annual reports and Concall transcripts - www.apar.com/financials.php
Screener Financials - https://www.screener.in/company/APARINDS/


Disclosure:- I am not a SEBI registered research analyst. This is a chronicle of my personal investment thoughts and NOT a buy/sell recommendation. Please do you own due diligence before investing.