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Apar Industries (APR IN) – Q4FY22 Result Update by Mr. Amit Anwani – Research Analyst at Prabhudas Lilladher.
- Price pass through, volume growth, and expansion in the export market resulted in revenue growth of 58.6% in Q4FY22.
- Better product mix across the business segments and focus on high-value products aided margins despite commodity pressure.
Apar Industries (APR) reported a healthy quarterly performance with revenue growth of 58% YoY, mainly driven by price pass through, volume growth across segments, and expansion into newer international markets. Despite higher commodity prices and freight cost, margins expanded by ~30bps YoY to 5.8%, owing to better product mix across business segments and focus on high value products. Volume grew across all the segment in Q4FY22, Conductor- up 9% YoY and Speciality Oil- up 13% YoY. Volumes in domestic conventional conductor is likely to improve in FY23, on account of muted growth for last two years, while oil volume is expected to be impacted due to geopolitical tension and input cost pressure. Given pressure of higher commodity prices management indicated focus will be on profitability over volumes in the near term.
We believe APR’s focus on value-added products would help it de-risk from low-margin conventional business. We revise out EPS estimate upwards by 5%/3% for FY23E and FY24 given 1) focus on value-added products, 2) expanding international footprints and 3) management focus on profitability. The stock is currently trading at 10.2x/9.7x FY23E/24E. We maintain ‘Buy’ rating on stock with TP of Rs855 (Rs830 earlier) valuing it at a PE of 12x FY24E EPS.
Revenue growth across segments: Sales grew 58.6% YoY to Rs30.1bn (PLe ~Rs27.7bn) led by growth across all segments. Conductors/Cables/Transformer & Speciality Oil reported YoY growth of 79.7%/54.2%/29.2%. Conductors volume reported a growth of 9% YoY to 33,849MT and Speciality Oil volume grew 13% YoY to 1,17,021KL in Q4FY22. EBITDA came in at Rs1.7bn (PLe ~Rs1.4bn), with EBITDA margins marginally improving by ~30pbs to 5.8% YoY, aided by lower other expenses despite gross margin declining by 150bps to 22.2%. PAT came in at Rs826mn (vs PLe ~Rs648mn) led by strong operational performance, however interest cost was up 104% YoY at Rs458mn.
Increase in share of Higher value products in order inflow: The conductor segment reported an order inflow of ~Rs11bn (up 328% YoY, on a low base). High-value products such as HEC, OPGW, Copper Conductor, etc accounted for 46% of order inflow in Q4FY22 vs 33% in Q4FY21. Order book stands at Rs3.1bn, of which higher value products account for 53%.