Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Apar Industries Ltd (BOM:532259, Financial) reported a consolidated revenue increase of 18.4% year-on-year for Q2 FY25, driven by strong domestic business growth of 61.1%.
- The company's EBITA rose by 7.8% year-on-year to INR402 crore, with a margin of 8.7%, and profit after tax increased by 11.5% to INR194 crore.
- The domestic market has shown robust performance, with increased order flow across all business segments, compensating for lower export volumes.
- Apar Industries Ltd (BOM:532259) has a healthy pending order book of INR6,615 crore in the conductor business, indicating strong future demand.
- The company is well-positioned to benefit from the global energy transition, particularly in the renewable energy sector, with a diverse product portfolio and strategic focus on high-growth areas like solar and wind energy cables.
Negative Points
- Export revenues have declined, contributing only 29.8% to the overall revenue compared to 48.4% in Q2 FY24, due to lower US market revenues and logistical challenges.
- The US business saw a significant year-on-year decline of 38.9%, although there was a sequential improvement in order intake.
- The global supply chain continues to face challenges, including higher freight rates and container shortages, impacting export operations.
- Increased competition from Chinese companies in international markets, particularly outside the US, has affected export volumes and pricing strategies.
- The company's EBITA margin has been impacted by a higher mix of domestic business, which traditionally yields lower profitability compared to exports.
Q & A Highlights
Q: How challenging is it to manufacture HP DC cables, and is there a plan to produce them in your factories?
A: HP DC cables are not significantly more complex to manufacture compared to regular conductors. We have already supplied conductors in this space. The major transition occurs in transformer oil, where moving from AC to DC requires higher stability and insulation, which is our strength globally. - Kushal Desai, Chairman and Managing Director
Q: Can you maintain the guidance of 8% to 10% growth in the conductor business despite lower volumes?
A: The first half saw lower export volumes and a shift to premium products, affecting growth. We expect volume growth to pick up in the second half, but we might fall short of the 10% guidance for the full year. - Unidentified Company Representative
Q: How do you plan to tackle Chinese competition in international markets?
A: We focus on netback value rather than volume. The domestic market remains strong, and we won't drop prices just to compete with Chinese firms. We are enhancing our presence in the US market and expect domestic and US markets to be our main revenue sources. - Kushal Desai, Chairman and Managing Director
Q: What is the outlook for the domestic market, given the high growth rates?
A: The domestic market will remain strong due to technological advancements and vertical integration strategies. We expect a high polarization of revenue from India and the US, with other markets like Australia and Europe being serviced at lower levels. - Kushal Desai, Chairman and Managing Director
Q: Are there any new products in the pipeline for the Transformer Oil or Oil division?
A: We have developed a synthetic transformer oil with better biodegradability and high performance. It is significantly more expensive but suitable for special applications like renewable energy and Indian Railways. - Kushal Desai, Chairman and Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
