Best 10 Mid-Cap Stocks To Buy For 2018 | Karvy Research Report

Short Term Disruptions to Fade Away – Bright Future

Govt focus on T&D: India’s power sector is all set to take-off with government’s strong focus on 24×7 power to all, revival of Discoms through UDAY scheme. Govt launches Rs. 160000mn Saubhagya scheme for supplying free power connections to towns which have no power access. The scheme is set to improve energy demand and benefit capital goods industry, especially the distribution segment. Power grid set to invest heavily in local power transmission infrastructure of states. The 24×7 power for all scheme alone envisages an investment of Rs. 12 lakh crore. With the government thrust, Apar (with 70% of revenues from the power sector and leading presence in T&D segment) could witness significant traction in order booking. The company has built a strong product basket focusing on high efficiency in T&D segment.

Onetime hiccups: The company has suffered a onetime disruption in the business due to de-stocking ahead of GST rollout. Impact of GST roll out was on order book and sales which were lull in H1FY18. However, management, is confident of recovery in order booking post GST.

Focus on premium products to propel growth: The company is majorly focusing on premium products like High Efficiency Conductors (HEC) in conductors segment, auto lubes in specialty oil segment and elastomeric cables in cables segment. All these products are premium products and high margin earning products. Apar has suffered a dip in conductor segment margin due to aggressive pricing in domestic and international market and absorption of excess overhead cost due to capacities lying idle at newly added Jharsaguda plant. The capacity utilisation at Jharsaguda plant was at 60-65% level and by FY18 it is expected to reach 70-75% level. Conductor segment order book was also high due to aggressive bidding in domestic tenders. The cables segment has shown a robust growth of 27.2% in H1FY18 on the back of growth in power cables (52.0%) and Optical Fire cables (36.0%) on YoY basis.