Apar Industries’ stock dropped nearly 30% in January, its worst monthly performance in 16 years. Despite revenue growth, weak margins led to a 20% decline in net profit, raising concerns. Nomura maintains a ‘Buy’ rating with a target price of ₹10,300.
Apar Industries, a leading Indian manufacturer of electrical conductors and cables, saw its stock price tumble by nearly 30% in January, marking its worst monthly drop in 16 years. The company, known for its contributions to the power transmission and distribution, infrastructure, railways, and renewable sectors, has faced significant market challenges following its weak December quarter earnings.
As of January 30, Apar Industries’ shares have fallen by 37% over the last 17 trading sessions, highlighting concerns over its valuation. Despite reporting strong revenue growth in Q3FY25, weak margins have led to a 20% year-on-year decline in net profit. The company’s consolidated net profit dropped to ₹175 crore from ₹218 crore in Q3FY24. This decline was compounded by a 10% drop in profits on a sequential basis.
The conductor segment, which showed a 19% year-on-year growth in volumes, experienced pricing pressures due to competition from Chinese manufacturers, an export slowdown, and a less favorable product mix. As a result, EBITDA for the segment contracted by 16% on a per-metric ton basis. While the cable segment continued to grow, with a 37% year-on-year increase in revenue, the overall performance still reflected the pressures on margins.
Nomura, a Japanese brokerage firm, noted that despite the challenges, the company’s order book in the conductor segment stood at ₹7,600 crore, a 25% year-on-year increase, and new order inflows rose by 62%. These factors point to a potential gradual recovery in the coming quarters, particularly in the domestic market, driven by continued capital expenditure in infrastructure.
Nomura has revised its EBITDA estimates for Apar Industries downward by 8%, citing a delayed recovery in exports and normalized margins in the conductor segment. Despite these adjustments, Nomura maintains a ‘Buy’ rating on the stock, with a lowered target price of ₹10,300, down from ₹11,700. This new target price still implies a 43% upside potential from its latest closing price, driven by strong growth in the cable segment.
Though the stock has faced a sharp correction, it remains up by 1,100% over the past two years, indicating strong long-term potential. Investors may wonder if this sharp pullback presents a buying opportunity, as the company continues to benefit from strong demand in its domestic markets and long-term infrastructure spending in India.
The stock’s recent performance raises questions about its valuation, but with Nomura’s bullish outlook and strong growth prospects in the cable segment, it could still offer a solid investment opportunity.
