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In a 1x1 we met executive promoters of Apar Industries Ltd (APR IN). Apar is the
world's 4th largest producer of transformer oil (domestic leader with 50% market
share) and India's second largest aluminium conductor manufacturer with 22%
share, as per company. Over FY05-11 the company's topline (Rs30.3bn in FY11)
and PAT (Rs953mn) have grown at 23.2% and 20.2% CAGR respectively. Key
customers include PGCIL, transformer suppliers, EPC developers, and ~25% of
revenues come from exports. ~80% of FY11 revenues were from customers
associated with Apar for over 3years, as per company.
Growth pegged to T&D spend. According to mgmt size of domestic market
for conductors ~Rs60-65bn. Company expects single digit conductor volume
growth in FY12 and recovery to ~15% in FY13. It derives ~60% of its order
backlog of conductors (~Rs16bn currently) from PGCIL. Based on their
experience, Apar believes that PGCIL’s pace of execution and contract awards
will pick up under it’s new CMD Mr. RN Nayak. In case of transformer oil,
Apar has a dominant position in HV/EHV segment, followed by Savita Oil
Tech (STEC IN) with 30% share, as per mgmt. Promoters expect the
transformer and specialty oil business to grow at 15% CAGR.
Margin outlook. As per mgmt, conductor segment margins are expected to
recover from lows of 3.9% in FY11 to ~6% levels by FY13. Oil margins are
expected to remain stable as per company.
Capex outlook and balance sheet quality.Apar had net-cash of Rs2.8bn as of
FY11, negative net working capital (ex-cash) and has reported 30% RoE over
last two years. Management plan is to incur ~Rs850mn capex over FY10-13.
Apar has marginally outperformed Sensex over last 12months; overall T&D
equipment suppliers have underperformed by 16%.
How do valuations stack up? Apar is trading at ~5.9x FY11A EPS based on
Bloomberg consensus. Sterlite Technologies is trading at 7x FY13E P/E and
STEC is trading at 7.75x FY11A reported EPS (as per Bloomberg).
NOTE: THIS DOCUMENT IS INTENDED AS INFORMATION ONLY AND NOT AS A
RECOMMENDATION FOR ANY STOCK. IT CONTAINS FACTUAL INFORMATION,
OBTAINED BY THE ANALYST DURING MEETINGS WITH MANAGEMENT. J.P. MORGAN
DOES NOT COVER THIS COMPANY AND HAS NO RATING ON THE STOCK.
Key takeaways from the meeting
In a 1x1 we met executive promoters, Mr. Kushal N. Desai (Managing Director)
and Mr. C.N. Desai (Jt. Managing Director) of Apar Industries Ltd. Promoters
hold 65.2% in Apar (Mcap: US$129mn). The objective of the meeting was to discuss
management view on industry dynamics, competitive positioning, growth prospects
and pricing trends in relation to Apar's product portfolio.
As per management, Apar is the world's 4th largest producer of transformer oil
(50% market domestic share) and India's second largest Aluminium conductor
manufacturer with 22% market share (after Sterlite Technologies which has 26%
domestic market share).
Apar's clientele includes-
leading power generation and transmission utilities in India spanning centre
(PGCIL, NTPC), state (SEBs) & private sector (Adani, Lanco, Jaypee,
Reliance Infrastructure etc.), and a few Asian and African utilities too.
They are suppliers to EPC contractors on the substation side (ABB, Areva,
BHEL, Bharat Bijlee, Crompton Greaves, Siemens, Emco etc.) and to tower
EPC players (Jyoti Structures, KEC International, Kalpataru Power, L&T
etc.).
The company is headquartered in Mumbai and has production facilities at Rabale
(Maharashtra), Silvassa (in Union Territory of Dadar & Nagar Haveli), Nalagarh (in
Himachal Pradesh) and Unbergaon (Gujarat). Over FY05-11 the company's
consolidated topline (Rs30.3bn in FY11) and PAT (Rs953mn in FY11) have
grown at 23.2% and 20.2% CAGR respectively.
Parentage
Apar commenced business through the conductor division in 1958 and diversified
into speciality oil manufacture in 1969. Gujarat Apar Polymers Ltd. was incorporated
in 1989 and renamed as Apar Industries in April 1997, consequent to transfer of
industrial businesses of erstwhile Apar Ltd. The company entered automotive
lubricant manufacture under a license agreement with ENI, Italy, in 2008 to produce
and market high-end automotive and industrial lubricants under the Agip brand in
India (their only B2C product, rest are all B2B). The company acquired a majority
stake in Uniflex Cables Ltd in 2008 to enter cable manufacturing.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In a 1x1 we met executive promoters of Apar Industries Ltd (APR IN). Apar is the
world's 4th largest producer of transformer oil (domestic leader with 50% market
share) and India's second largest aluminium conductor manufacturer with 22%
share, as per company. Over FY05-11 the company's topline (Rs30.3bn in FY11)
and PAT (Rs953mn) have grown at 23.2% and 20.2% CAGR respectively. Key
customers include PGCIL, transformer suppliers, EPC developers, and ~25% of
revenues come from exports. ~80% of FY11 revenues were from customers
associated with Apar for over 3years, as per company.
Growth pegged to T&D spend. According to mgmt size of domestic market
for conductors ~Rs60-65bn. Company expects single digit conductor volume
growth in FY12 and recovery to ~15% in FY13. It derives ~60% of its order
backlog of conductors (~Rs16bn currently) from PGCIL. Based on their
experience, Apar believes that PGCIL’s pace of execution and contract awards
will pick up under it’s new CMD Mr. RN Nayak. In case of transformer oil,
Apar has a dominant position in HV/EHV segment, followed by Savita Oil
Tech (STEC IN) with 30% share, as per mgmt. Promoters expect the
transformer and specialty oil business to grow at 15% CAGR.
Margin outlook. As per mgmt, conductor segment margins are expected to
recover from lows of 3.9% in FY11 to ~6% levels by FY13. Oil margins are
expected to remain stable as per company.
Capex outlook and balance sheet quality.Apar had net-cash of Rs2.8bn as of
FY11, negative net working capital (ex-cash) and has reported 30% RoE over
last two years. Management plan is to incur ~Rs850mn capex over FY10-13.
Apar has marginally outperformed Sensex over last 12months; overall T&D
equipment suppliers have underperformed by 16%.
How do valuations stack up? Apar is trading at ~5.9x FY11A EPS based on
Bloomberg consensus. Sterlite Technologies is trading at 7x FY13E P/E and
STEC is trading at 7.75x FY11A reported EPS (as per Bloomberg).
NOTE: THIS DOCUMENT IS INTENDED AS INFORMATION ONLY AND NOT AS A
RECOMMENDATION FOR ANY STOCK. IT CONTAINS FACTUAL INFORMATION,
OBTAINED BY THE ANALYST DURING MEETINGS WITH MANAGEMENT. J.P. MORGAN
DOES NOT COVER THIS COMPANY AND HAS NO RATING ON THE STOCK.
Key takeaways from the meeting
In a 1x1 we met executive promoters, Mr. Kushal N. Desai (Managing Director)
and Mr. C.N. Desai (Jt. Managing Director) of Apar Industries Ltd. Promoters
hold 65.2% in Apar (Mcap: US$129mn). The objective of the meeting was to discuss
management view on industry dynamics, competitive positioning, growth prospects
and pricing trends in relation to Apar's product portfolio.
As per management, Apar is the world's 4th largest producer of transformer oil
(50% market domestic share) and India's second largest Aluminium conductor
manufacturer with 22% market share (after Sterlite Technologies which has 26%
domestic market share).
Apar's clientele includes-
leading power generation and transmission utilities in India spanning centre
(PGCIL, NTPC), state (SEBs) & private sector (Adani, Lanco, Jaypee,
Reliance Infrastructure etc.), and a few Asian and African utilities too.
They are suppliers to EPC contractors on the substation side (ABB, Areva,
BHEL, Bharat Bijlee, Crompton Greaves, Siemens, Emco etc.) and to tower
EPC players (Jyoti Structures, KEC International, Kalpataru Power, L&T
etc.).
The company is headquartered in Mumbai and has production facilities at Rabale
(Maharashtra), Silvassa (in Union Territory of Dadar & Nagar Haveli), Nalagarh (in
Himachal Pradesh) and Unbergaon (Gujarat). Over FY05-11 the company's
consolidated topline (Rs30.3bn in FY11) and PAT (Rs953mn in FY11) have
grown at 23.2% and 20.2% CAGR respectively.
Parentage
Apar commenced business through the conductor division in 1958 and diversified
into speciality oil manufacture in 1969. Gujarat Apar Polymers Ltd. was incorporated
in 1989 and renamed as Apar Industries in April 1997, consequent to transfer of
industrial businesses of erstwhile Apar Ltd. The company entered automotive
lubricant manufacture under a license agreement with ENI, Italy, in 2008 to produce
and market high-end automotive and industrial lubricants under the Agip brand in
India (their only B2C product, rest are all B2B). The company acquired a majority
stake in Uniflex Cables Ltd in 2008 to enter cable manufacturing.
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