APARINDS - Apar Industries Ltd Share Price

Management's outlook for FY '26 indicates a positive trajectory across all three business segments. They anticipate a volume growth of 6% to 8% for the oil division, with EBITDA margins expected to range from Rs. 5,000 to Rs. 6,000 per KL. The cable division is projected to achieve a 25% value growth, with EBITDA margins between 10% and 12%. Meanwhile, the conductor division expects a volume growth of about 10%, with anticipated EBITDA per metric ton of over Rs. 30,000.

Key forward-looking points shared by the management include:

1. CAPEX Plans: A significant capital expenditure plan of Rs. 1,300 crores is set for FY '26, with Rs. 800 crores allocated to the cable division, Rs. 300 crores to the conductor division, and Rs. 200 crores to the oil division. The expectation is that this investment will enhance capacity and operational efficiency over the next 12 to 18 months.

2. Market Dynamics: The demand landscape is driven by India's increasing electricity needs, projected to require a generation capacity of 997 gigawatts by 2031-32. This necessitates expanding the transmission network significantly, with a forecasted CAPEX of Rs. 4.3 lakh crores for the Central Transmission Utility of India.

3. US Market Strategy: The upcoming Free Trade Agreement (FTA) with the US is hoped to boost competitiveness in that market, amidst concerns about tariff situations. Management emphasized that over 40% of wires and cables are imported into the US, which presents a significant market opportunity.

4. Product Premiumization: The focus on premium products, especially in the conductor segment, aims to enhance margins and lessen reliance on conventional conductors, which could lead to improved profitability.

Overall, management reflects optimism about sustaining growth, backed by strategic capital investments and market dynamics favoring the energy sector.

Here are the major questions from the Q&A section of the earnings transcript along with summarized responses:

1. Question: From the looks of it, it looks like you are selling a lot of non-premium conductors in the domestic market. Still, you have been able to maintain the EBITDA per ton. What explains the strong profit despite your exports? Is it AL-59?

   Answer: The strong profit is driven by high premium product contributions of 45% in Q4, along with rebounds from the US business, which has improved margins. Additionally, our copper business is scaling up, enhancing overall conductor division margins.

2. Question: Is the US impacting our sales in Q1? Is it a fair assumption that Q1 will be weak and the US will pick once we have the FTA in place?

   Answer: We expect Q1 to sustain strong revenues due to ongoing contracts and clearances already in place. Tariff changes will have some impact, but the demand for our products remains solid. Customers are prepared to handle any shifts in tariffs.

3. Question: Can you talk about markets outside the US, as there seems to be a moderation in growth there?

   Answer: The outside US markets remain weak mainly due to aggressive Chinese competition. While the US market shows promise, our domestic market is performing well. We are enhancing our presence and approvals in the US to counteract international competition.

4. Question: You mentioned that you will be investing significantly in CAPEX. How are you planning to fund this?

   Answer: We will fund the Rs. 1,300 crore CAPEX with a 50/50 equity and long-term debt approach. This strategic investment aims to bolster our capacity across all business segments.

5. Question: Can you provide guidance for EBITDA per ton growth for the next fiscal year?

   Answer: For FY '26, we're looking at a conductor volume growth of 10% with EBITDA per ton around Rs. 30,000. For the cable business, we anticipate a value growth of 25% with an EBITDA margin of 10%-12%; and for the oil division, a growth of 6%-8% with EBITDA per KL of Rs. 5,000 to Rs. 6,000.

6. Question: How will the upcoming capacities affect conductor margins due to competition from EPC players?

   Answer: While new capacities from others may focus on conventional conductors, we hold an advantage with our premium and specialized products. Our investments in R&D allow us to maintain a competitive edge, diversifying and improving profitability despite new entrants.

Each answer encapsulates the core information shared during the earnings call while maintaining the essence of the original questions.