Apar Industries Q1FY18 Concall Summary

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Industry Highlights

  • Developments in T&D segment in Q1 was a good head start from the policy point of view and industry players in T&D received orders which increased their revenue by 34% from INR 8300 in crores Q1FY16 to INR 11126 crore Q1FY17.
  • PFC will raise INR 70000 crore for expanding in the transmission and renewable energy projects.
  • UDAY initiative by government has brought down state discom losses by 22% saving approximately INR 40295 crore. It has also narrowed gap between avg. cost of power supply and avg. revenue of state power discoms. 23 states  have exhibited improvement in total technical and commercial losses. 
  • Due to GST rollout on the expected timeline, short term demand in June and July has been affected. 

Financial Highlights

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  • Consolidated revenue increased to INR 1306 crore which is an increase of 19% y-o-y basis. Largest contribution is from the cable segment.
  • EBITDA declined by 16% to INR 97 crore in Q1FY17 from INR 115 crore in Q1FY16. EBITDA margin came in at 7.4% for Q1FY17. 
  • PAT declined by 17% to INR 39 crore in Q1FY17 from INR 47 crore in Q1FY16. The decline can be attributed to recent expansion of conductor and oil segments due to which two plants are not operating at their full capacity and aggressive pricing in conductors and specialty oil segment.
  • Depreciation is up by 36% because of new capacities installed.  

Conductor Segment

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  • Conductor segment has posted revenue growth of 9% to INR 542 crore in Q1FY17 from INR 499 crore in Q1FY16 because of increase in volume of exports which contribute to 44% of the segment.
  • EBITDA per MT post Forex adjustment has come down by around INR 1000 per MT to INR 10980 per MT when compared y-o-y basis. 
  • Higher efficiency conductor revenue has increased to 18% of overall conductors’ revenue from 9% a year ago.
  • Segment order book was down to INR 1162 crore in Q1FY17 from INR 1519 crore in Q1FY16 because of closure of large number of orders in the month of July.
  • Export orders have contributed 49% to current order book. 
  • The inflow of orders were affected by competitive pricing, subdued demand from domestic market, Chinese competitors were benefited by lower aluminum prices.

Transformer and Specialty Oil Segment

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  • Revenue grew by 19% to INR 499 crore in Q1FY17 from INR 420 crore due to strong growth in transformer oil, white oil and automotive oil segment.
  • Highest Q1 sales achieved as global shipments increased by 13% to reach 96445 KL.
  • EBITDA per KL post Forex adjustment declined to INR 4072 crores due to aggressive pricing in domestic and export market.
  • Weighted average and Margins were affected because retail automotive sales and industrial oil sales carry significantly higher margins than the average margins and both were affected in the month of June substantially. 

Automotive Lube Segment

  • Sales growth by 8.6% because of client acquisition and new sales in OEM segment. 
  • GST rollout impacted retail sales. 

Cable Segment

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  • Revenue grew by 47% to INR 253 crore. 
  • Power cable and elastometric cable business both grew by 61% and 40% respectively. 
  • Lack of clarification in GST rates lead to delays in shipment and resulted in bad sales in renewable sector. 
  • EBITDA margin post Forex adjustment has increased by 95 basis point and reached to 8.1 %. 
  • Power cable segment witnessed good volume with high competitive intensity and tight margins.
  • Profitability improved because of increase in volume.

Future Prospects

  • The company is expecting an order book in the range of INR 1500 crore in conductor segment.
  • Because of implementation of GST, the company will be much more competitive as many competitors in oil and automotive segment will not be able to avail CST benefit. 
  • The production of power cables will hopefully begin in Q2 as investments to manufacture high voltage cables is going as per plan.
  • T&D investment plan will start to convert orders led by improving growth of discoms and improving scenario for funding from PFCs. and settling down of GST, these all factors will contribute in confident of growth of the company.