Akashdeep Portfolio : Learning along the way

Apar Industries Business Update Summary:

• Apar’s consolidated revenue for Q4 FY ’23 was INR4,089 crores, a 36% YoY increase. Export of conductors and cables contributed significantly to this growth, with exports growing by 85% YoY.
• The power generation sector in India experienced the fastest growth in three decades, driven by intense summer heat, colder winter, and economic recovery. Coal and solar plants saw increased output, but India still faced a power deficit of 6.69 billion units.
• India’s solar capacity additions grew by 20% in FY ’23, contributing to 22% of total power generation and reducing CO2 emissions.
• Apar’s conductor business saw revenues of INR2,121 crores in Q4 FY ’23, a 41% YoY increase. The division experienced high profitability due to a higher share of premium products and increased exports.
• The oil division’s Q4 FY ’23 revenues reached INR1,179 crores, up 28% YoY. Transformer oil showed faster growth, and margin pressures eased towards the end of the year.
• Apar’s cable business revenues grew by 38% in Q4 FY ’23, reaching INR943 crores, driven by elastomeric cables and exports.
• FY ’23 was a record-breaking year for Apar, with strong growth in all divisions and historic high top-line and bottom-line performance.
• The company is optimistic about future growth prospects due to a favorable macro environment, focus on infrastructure and renewables, but acknowledges that post-COVID demand and certain tailwinds may taper in FY ’24.

Highlights – Future Tailwinds:

1. Favorable macro environment: Apar expects continued growth opportunities due to the positive domestic and global macro environment.
2. Thrust on infrastructure and renewables: The company anticipates sustained growth in these sectors, driving demand for its products.
3. Renewable energy sector: Apar foresees robust business opportunities in the renewable energy space, especially from solar installations.
4. Transformer oil demand: With infrastructure developments underway, steady demand for transformer oil is expected domestically and internationally.

Highlights – Future Headwinds:

1. Tapering post-COVID demand: Apar acknowledges that the demand and premium on quick and reliable delivery may taper to some extent in FY ’24.
2. Competitive dynamics in Conductors Business: Intensified competition, including from Chinese suppliers, who are pricing sharply and seeking ways around higher tax regimes, poses challenges for Apar’s conductor business.
3. Inventory adjustments: Customers reducing higher levels of inventories built up to mitigate supply chain bottlenecks may result in a lower level of short-term orders.