Form is temporary, class is permanent
A trifecta of growth drivers – electricity demand, transmission and renewables – is driving demand for conductors, cables and transformer oil. Apar Industries (Apar) is on the cusp of benefitting from these secular trends, enabled by its leadership in these segments. It services the most profitable segments and markets within conductors and cables. It is leader in the most profitable segments of conductors in domestic market and the export market. It has shifted its focus on the premium segment of domestic conductor market compared to highly competitive conventional conductor segment. It has applied a similar template to ascend to the top in the cables business in wind and solar markets. Apar’s dominance in transformer oil brings in steady cashflow. Its earnings have grown 6x in last four years. While its exports, especially to US, haves seen some weakness in recent times, the US tariff headwinds are behind us. We believe, Apar is well set to capitalise and see a 21% CAGR over FY25–28E. The stock trades at 29x FY28E EPS. We initiate coverage on Apar with BUY.
The perfect conductor
Apar enjoys a dominant share – pegged at 30% – in India’s conductor market. It has steered towards serving the less-competitive and highly profitable segments of the market – premium conductors and export markets. We expect demand for premium conductors to remain strong on account of: 1) surge in demand for reconductoring; 2) conductors for high-voltage transformers; and 3) shift in demand to high-efficiency conductors for transmission. The share of premium products in its conductor revenue grew from 20% in FY18 to 41% in FY25. As a result, its EBITDA/ tonne grew 5x over the last five years.
Wired to succeed
Apar has repurposed its cables portfolio to dominate niche segments and export markets. It leads the renewables generation segment – 70%/25% share in wind/ solar cables – and has the largest share in the export markets for cables at ~11% in FY25. Apar continues to augment its retail portfolio and other emerging segments. The company continually invests in its distribution channels to grow the retail segment. It is also investing significantly in cable capacity expansion.
Well-oiled machine
Apar’s transformer oil has been approved for all kinds of transformers in India, and globally. It is the largest manufacturer in India and third largest in the world. Rising transformer capacity should spur growth in the segment (inter-state transformer capacity likely to double).
Initiate coverage with BUY and TP of INR 12,750
Initiate coverage with BUY and TP of INR 12,750, valuing Apar at 35x FY28E EPS.
