APARINDS - Apar Industries Ltd Share Price

The management of APAR Industries Limited provided an optimistic outlook during the Q2 FY'26 earnings call. They highlighted that the consolidated revenue for Q2 FY'26 reached Rs.5,715 crores, marking a 23.1% year-on-year growth. The company reported a significant rise in exports, with a 43% increase contributing to 34.7% of the consolidated revenue in this quarter. The EBITDA subsequently grew by 24% year-on-year to Rs.499 crores, with an EBITDA margin of 8.7%. Profit after tax was Rs.252 crores, reflecting a 30% increase compared to the previous year.

Looking ahead, the management emphasized some key points:

• Q3 Expectations: Acknowledging short-term challenges, the company expects pressure on topline and profitability for Q3 due to delays in order inflows from the U.S. market driven primarily by the Section 232 tariff situation and rising metal prices. This caused a wait-and-see approach among customers.
• Short-term headwinds: There are concerns surrounding increased prices for aluminum and copper which have led to reduced ordering activities in recent months.
• Order Inflow Recovery: A resurgence in order inflow, particularly in the U.S. market, is anticipated due to incentives for renewable energy projects, with execution expected to take place in late Q3 and Q4.
• Domestic Market Outlook: The management remains positive about domestic demand, especially in the renewable energy sector, stating strong fundamentals and a growing order book driven by electricity transmission and distribution projects.
• Future Capacity Expansion: The company has ongoing capacity expansions, with completion forecasted by March 2026 aimed at supporting future growth, positioning it to capitalize on increased demand.

Overall, management conveyed confidence in recovery and growth prospects, supported by fundamental drivers in renewable energy, despite facing near-term challenges.

Major Questions and Answers from the Earnings Call Transcript

1. Umesh Raut: What are the guidance updates for EBITDA per ton in the conductor segment considering recent performance?

Ramesh Iyer: We will maintain our guidance at Rs. 30,000 per metric ton despite our recent performance, which has shown figures closer to Rs. 35,000 to Rs. 40,000 per ton. This is due to the product mix and execution fluctuations, thus we retain our guidance for stability.

2. Umesh Raut: How do you see demand shaping up in the second half of FY'26 for the domestic market?

Chaitanya Desai: The second half traditionally improves due to fewer weather-related setbacks, and we expect to catch up on previously delayed projects. Demand may be affected by aluminum price volatility, leading some customers to delay orders.

3. Amit Anwani: What impact have rising metal prices had on orders, and is there an effect on gross margins?

Kushal Desai: Orders are on hold due to rising metal prices as customers await potential price corrections. However, we operate a fully hedged book, so there shouldn't be an impact on gross margins.

4. Amit Anwani: Can you provide clarity on the expected revenue impact from tariffs in the U.S. market?

Kushal Desai: The order inflow was severely impacted during August-September due to tariffs; however, we've started seeing a return of demand in Q3, though revenues will only realize later due to timelines for project completions.

5. Nitin Arora: Do you foresee challenges in domestic growth given the current state of project executions and backlog?

Kushal Desai: We don't anticipate significant challenges. Right-of-way issues have slowed progress, but with the upcoming construction season and backlog, we expect demand to pick up significantly.

6. Achal Lohade: Regarding reconductoring opportunities, how significant do you see this segment's growth?

Kushal Desai: Reconductoring is a cost-effective and quicker solution compared to new lines, with increasing demand expected due to resource constraints in India. The government is currently developing a national reconductoring plan, indicating strong growth potential.

7. Amitoj: What has been the Capex incurred so far and expected revenue increases from cable division investment?

Ramesh Iyer: We've incurred about Rs. 400 crores in Capex thus far. The Rs. 800 crores in cable division Capex is projected to enhance our revenue capacity to approximately Rs. 10,000 crores.

These summarized Q&A interactions encapsulate the major concerns expressed by analysts during APAR Industries' Q2 FY'26 earnings call, emphasizing guidance updates, demand outlook, and financial health amidst market fluctuations.