Prabhudas Lilladher has upgraded Apar Industries to 'Accumulate', citing strong earnings and a growing share of high-value products. The company’s focus on international data center cable markets and robust specialty oil margins drove the revised outlook. Investors are now tracking order execution and potential capacity utilization as key factors for future performance.
Detailed Coverage
Brokerage firm Prabhudas Lilladher has upgraded its rating for Apar Industries to 'Accumulate', citing improved financial expectations. The firm increased its earnings per share estimates for the company for fiscal years 2027 and 2028, pointing to better-than-expected earnings and a successful shift toward higher-value products in its portfolio. The company recently reported a 29.1% year-on-year revenue growth, with operating profit margins widening to 11.5%.
Segment Performance and Product Mix
Apar Industries has seen a shift in its business composition, particularly within its Conductors segment. While volumes for standard domestic orders dipped, partly due to challenges related to rising aluminum prices and clearance delays, the company has successfully increased the share of premium products to 50.3% of segment revenue. This focus helped the company achieve an operating profit per tonne of roughly Rs 53,418. The company currently maintains an order book valued at approximately Rs 101.9 billion, which includes significant multi-year utility contracts from markets in the United States and Europe.
Growth Drivers in Cables and Specialty Oil
The company’s Cables division is benefiting from consistent domestic demand and new approvals from major global technology firms, including Meta, Microsoft, and Google. These approvals are expected to support the company’s expansion into the U.S. data center cable market. Simultaneously, the Specialty Oil business performed well despite some operational hurdles at its UAE facility. Profitability in this segment was aided by the use of inventory bought at lower costs before market prices for crude and gas oil increased due to regional geopolitical tensions.
Risks and Future Monitoring
While the company has a positive outlook regarding its medium-term growth and global expansion, several factors remain important for investors to track. The company’s profitability in the Specialty Oil business can be sensitive to raw material price fluctuations, as seen with recent oil price movements. Additionally, the execution of the large international order book remains a core focus, as global demand and logistics could impact delivery timelines. Investors may also want to monitor the company’s capital spending plans as it seeks to scale its capacity to meet the demands of international tech clients. The stock is currently trading at estimated price-to-earnings multiples of 38.5x and 34.4x for FY27E and FY28E, respectively, reflecting the market's assessment of its growth trajectory.