Shares of a multibagger stock in the power sector rallied 10 percent on Monday’s early trades to touch a fresh record high of ₹ 5349.95 apiece on the National Stock Exchange (NSE), amid a healthy business outlook. At 11:40 AM, its shares were trading at ₹ 5230.15 apiece.
Apar Industries manufactures and supplies conductors, a variety of cables, specialty oils, polymers and lubricants. Its key segments include conductor, transformer & specialities oils and power/telecom cables. The company provides diverse fields of electrical and metallurgical engineering, offering value-added products and services in power transmission conductors, petroleum speciality oils, and power & telecom cables.
The company posted a 61 percent year-on-year (YoY) increase in its profit after tax (PAT) at ₹ 197 crores. Meanwhile, its revenue grew 22 percent YoY and came in at ₹ 3,773 crores with volume-led growth across all divisions. The company’s EBITDA margin improved 172 bps to 9.54 percent from 7.82 percent in Q1FY23.
The Indian power industry’s future appears to be bright, according to experts. Sustained economic growth continues to drive the demand for electricity in India. Moreover, the government’s ‘power for all’ has accelerated capacity addition in India. The Union budget for FY 24 involves a ₹ 35,000 crore outlay for energy security, energy transition and net zero objectives. In addition, ₹ 20,700 crore of outlay was provided for renewable energy grid integration and evacuation from Ladakh.
Apar Industries’ order book stood at ₹ 5,356 crores as of June 30, 2023. The Ministry of New and Renewable Energy targets awarding 50 gigawatts per annum of renewable energy capacity, including 10 gigawatts per annum from wind energy between 2024 and 2028. The company believes that even if a portion of these aggressive plans get executed, the demand for conductors, cables and transformer oil will all remain strong.
The management is eyeing a gradual shift worldwide to an increased usage of specialised/ACCC-type conductors as customers are building more robust and higher capacity transmission systems to evacuate power, especially from renewable power sources.
The company’s share price increased from ₹ 1,210.60 to ₹ 5,349.95 apiece in a span of one year to deliver multibagger returns of 342 percent. Therefore, if an investor would have invested ₹ 1 lakh in the company’s shares a year ago, the value of their holdings would have been ₹ 4.42 lakhs today!
With a market capitalization of ₹ 18,609 crores, Apar Industries is a mid-cap stock. It has a high return on equity of 32.28 percent and an ideal debt-to-equity ratio of 0.17. Its shares were trading at a price-to-earnings ratio (P/E) of 26.11, which is higher than the industry P/E of 14.90, indicating that the stock might be overvalued as compared to its peers.
The company’s promoters hold a 60.64 percent stake in it, followed by mutual funds with 17.41 percent, retail investors with 14.47 percent, foreign institutions with 7.47 percent and other domestic institutions with 0.01 percent.
Written by Simran Bafna
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