Apar Industries Q3FY18 Concall Summary

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Financial Highlights

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  • The consolidated revenue it came in at about Rs 1,500 crores for the quarter which is up 31% from Q3 FY17. 
  • The YTD 9 month’s picture revenue is up 15% at around Rs 4,054 crores. The EBITDA was down 13% at Rs. 285 crores and the EBITDA margin has come in at about 7%.
  • In the auto lube segment , the 9 months period revenue grew 24% to reach Rs 1,572 crores. Global shipments for auto lube segment for the 9 month period is 14% higher coming at about 298,000 KL. 
  • The EBITDA for the quarter actually declined from Rs 107 crores to Rs 99 crores resulting in an EBITDA margin of about 6.6%.
  • Profitability in both the oil business and the cable business has been better and the performance has also improved compared to Q2 FY18 as some of the effects of the GST has started stabilizing. 
  • Profit after tax for the quarter came in at Rs 40 crores versus Rs 43 crores. 
  • Profit after tax margin actually came in at about 2.6%. Depreciation for the quarter is up 23% at about Rs 14 crores. 
  • Profit after tax for this 9 months period came in at Rs 105 crores which is about 23% lower than the same period previous year. 
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Business Updates

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  • Speciality oil business is expected to have at least a 7% to 8% growth over and above the 14% which is seen this year and on the cable business it is expected about a 20% growth. 
  • This year the conductor has not that done well and the speciality oil as a segment has done well while the cable continues to doing well. 
  • The oil business has actually performed much better in the third quarter compared to the second quarter and something similar is expected in the fourth quarter also. 

Conductors Business

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  • The conductor revenue was up 25% at Rs 638 crores compared to Rs 510 crores in Q3 FY17. 
  • Export contribution of the conductor business came in at 47% of the revenues. Conductor business order book today stands at Rs 1,531 crores which is higher than Rs 1,406 crore at the end of September. So, orders came into the extent of about Rs 125 crores more. Export orders contributed about 50% of the pending orders.
  • High efficiency conductor contribution to the total conductor revenue stands at around 13% for the quarter.
  • The conductor business 9-month FY18 revenue came in stable at about Rs 1,674 crores with exports contributing to about 48%. The high efficiency conductor revenue for the 9-month period came in at 15%.
  • EBITDA for conductor business per metric tonnes post Forex adjustment came in at about Rs. 8,900 per metric tonnes. 
  • EBITDA post Forex per metric tonnes decline to about Rs 7,000 from Rs 13,900 in Q3 FY17.
  • EBITDA for conductor segment per MT had is at Rs. 8,900 that is the actual performance versus the Rs 10,000 per MT guided for the year.
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Specialty Oil Business

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  • The revenue for the transformer and specialty oil business for the quarter grew strongly by about 34% to reach Rs 567 crores compared to Rs 423 crores a year ago.
  • EBITDA transformer and specialty oil business per KL after Forex adjustment for the quarter that increased by 17% to Rs 4,522 per KL. 
  • The EBITDA of auto lube segment per KL after Forex came in at Rs 4,130. 
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Cable Business

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  • In the cable business, it delivered a good revenue growth of about 36% and revenue for the quarter came in at about Rs 285 crores compared to Rs 211 crores from a year ago.
  • The 9 months period for the cable division revenue is up 34% to reach Rs 780 crores and it will lead to hit sales number of approximately Rs 1,100 crores for the year. 
  • The sales revenue of the optical fibre were increased about Rs 120 crores to Rs 1,100 crores for this division. 
  • Overall cable segment revenue for this year is expected to be around Rs 1,000 crores.
  • The EBITDA of the cable business post Forex adjustments increased to 10.8% from 9.7% in the period a year ago.
  • EBITDA for the optical fibre post Forex adjustment has come in at about 9.2%. 
  • On the Cable side, the EBITDA’s have gone up from 8.3% which there has been guidance for the year to over 9% for the 9 months period. 
  • On the cable side it is expected that the EBITDA percentages will remain, 9.2% for the 9 months period.
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Orders Update

  • Key players participating in T&D infrastructure both domestically in India and Indian players have received orders of almost Rs 12,773 crores compared to about Rs 4,500 crores in the previous quarter. A large portion of this actually has come in from business that has been won from overseas.
  • There has been substantial orders in the domestic distribution segment in the last few months about Rs 109 crores which is expected to increase capacity utilization primarily of our Jharsuguda plant. 
  • Within the elastomeric segment, there have been seen a substantial increase in ordering from the Indian railways as well as on the defence side compared to a few years ago. So, even though the elastomeric volume has fallen the profitability has increased within that segment. 
  • The conductor order book in terms of volume is 97,000 metric tonne and the export contribution is Rs. 1500 crore and the break up is around 50% export and 50% domestic. 
  • HEC is around 14% of the total order book.
  • Global shipments transformer and specialty oil business for the quarter, it increased by 16% in volume terms to reach almost a 106,000 KL compared to about 91,000 KL a year ago. 

Volumes:

  • The Hamriyah plant delivered volume of about 43,000 KL in the 9 months period. 
  • The Conductors volume number for FY18 is expected to come in between 150,000 tonnes and 155,000 tonnes. 
  • In the last quarter the automotive lubricants grew in volume terms by 52% and is expected to still grow by 20%.
  • In the conductor segment, the volume has caught up well because till last quarter there was guidance of a 12% de-growth but company is already at (-5%) growth. Volumes are picking up in a very good way.
  • In auto lubes segment, there was the highest historical volumes delivered which amounted to about 8,716 KL , 52% higher than the same period previous year. This was largely led by growth in the OEM segment and also a 10% increase in the retail sales.

Development 

  • The Saubhagya scheme which was announced in Q2 FY18, has been launched in Assam, Madhya Pradesh, Jharkhand and Mizoram. Also, as far as UDAY is concerned states like Nagaland, Andaman & Nicobar, Dadra & Nagar Haveli, Daman and Diu have also signed the MOU with the government. So, today there are 27 states and 4 union territories which are part of UDAY. 
  • There has been progress in terms of the effectiveness of UDAY as the losses for DISCOMs participating in the UDAY scheme have come down from Rs 51,590 crores to about Rs 36,905 crores. 
  • The new manufacturing assets that company have put in place have been commissioned in Jharsuguda and Lapanga in Orissa. The power cable plant in Umbergaon is also now producing at close to full capacity and the new plant in Hamriyah also had its highest production in the last quarter. 
  • New aluminium rod making and melting facility in Lapanga has commenced production based on ingots. Company has signed a binding MOU with Hindalco for delivery of molten metal.
  • There is a tie up with EPC contractors for new lines and joint bidding is being done on the line so that when the business comes to that particular EPC contractor the automatic conductor comes to the company. Similar arrangements have also been done in Nepal.

CAPEX

  • In the cable business, the CAPEX is expected to be between Rs 20 crores-Rs 25 crores in FY19.
  • The CAPEX was largely involved in terms of putting up new land building and electrical connections, etc. and the cost of shifting of capacity from Silvassa to Orrisa has been written off.

    Capacity

    • The capacity in the Orissa belt at Jharsuguda stands at about 80,000 metric tonnes, 50,000 tonnes higher than what was originally planned. This movement has been done primarily keeping in mind all the benefits accruing from GST with the locational advantage coming out of the Orissa location.  
    • Power cable business actually is up but the company is basically limited by capacity at the moment.
    • Conductor guidance given at the beginning of the year was close to Rs 10,500 per metric ton. In the 9 months company have come in Rs 8,900 and the expectation for the fourth quarter is to do something in that same range. 
    • In the oil segment, the guidance for this year is of about a 375,000 KL. 297,000 KL is done so far and for the cable business it is expected to close at about Rs 1,100 crores. 
    • Out of the 180,000 tonnes, the original plan was 150,000 in the Silvassa area and 30,000 in Jharsuguda but it ended up with 80,000 in Jharsuguda and 100,000 in Silvassa. So, there is a big change and all that is happened during this year. 

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