Apar Industries Limited Q4 FY24 Earnings Conference Call Insights

Key highlights from Apar Industries Limited (APARINDS) Q4 FY24 Earnings Concall

• Financial Performance
  • Q4 FY24 consolidated revenue grew 9% YoY to INR 4,455 crores.
  • EBITDA increased 3% YoY to INR 457 crores with 10.3% margin.
  • PAT declined 3% YoY to INR 236 crores.
  • FY24 consolidated revenue at all-time high of INR 16,153 crores, up 13% YoY.
  • FY24 EBITDA grew 24% YoY to INR 1,632 crores with 10.1% margin.
  • FY24 PAT increased 29% YoY to INR 825 crores with 5.1% margin.
• Industry Updates
  • 14,203 circuit km of transmission lines added in FY24, short of 16,602 km target.
  • Planned addition of 17,500 circuit km per year for next 3 years.
  • 70,728 MVA substation capacity added in FY24, with private sector contributing 15,000 MVA.
  • Renewable energy capacity addition of 18.48 GW in FY24, highest ever.
  • Total installed renewable capacity at 143.6 GW, solar at 81.81 GW.
• Business Segments
  • Conductors Q4 revenue up 10% YoY, EBITDA/ton at INR 48,453.
  • Oils Q4 revenue up 3% YoY, EBITDA/KL up 15% YoY.
  • Cables Q4 revenue up 15% YoY, EBITDA margin at 11.4%.
  • Oils FY24 revenue up 4% YoY, EBITDA/KL at INR 5,746.
  • Cables FY24 revenue up 18% YoY, EBITDA margin at 11.4%.
• Challenges and Outlook
  • Increased competition from Chinese exporters, routing products illegally.
  • Short-term slowdown in demand due to ongoing elections.
  • Optimistic about long-term growth drivers in domestic and global markets.
• Capacity Expansion
  • Ongoing capacity expansion as per plan of INR 350-400 crore capex annually.
  • Expansions across rod making, alloying, stranding, CTC, busbars for conductors.
  • Capacity additions happening continuously to maintain ~90% utilization.
  • Current conductor capacity around 2.1-2.15 million tons, increasing by 10-15% annually.
• Working Capital
  • Interest-bearing working capital down to ~INR 3,200 crore post QIP funds deployment.
  • Working capital levels to fluctuate based on business volumes and inventory cycles.
  • Quarterly interest cost expectation of ~INR 112 crore at current volumes.
  • Interest to sales ratio expected to be around 2-2.5% as a benchmark.
• Demand Outlook
  • Short-term US market demand expected to remain soft in current year.
  • Long-term growth drivers intact, some project delays due to interest rate expectations.
  • Healthy domestic demand driven by renewables, transmission lines, infrastructure.
• Conductor Growth Outlook
  • Expect 15% volume CAGR over medium to long-term.
  • Growth driven by new transmission lines and reconductoring projects.
  • Reconductoring demand to increase due to rising power consumption.
  • Export mix declined due to softness in US market last year.
  • Expect export mix to improve once US demand revives.
• Conductor Profitability
  • Guiding for INR 28,500/ton EBITDA over long-term.
  • FY24 achieved INR 42,000/ton aided by project execution and provision writebacks.
  • Margins can vary quarterly based on project mix and competitive dynamics.
• Supply-Demand Dynamics
  • No acute supply chain issues currently for APAR’s products.
  • Industry has increased capacity to meet growing demand.
  • Short-term issues earlier during transition to AL-59 conductors now resolved.
• Cable Business Growth
  • Domestic cable business grew ~80% in last two quarters.
  • Driven by supplies to Indian Railways, solar, wind projects.
  • LDC (B2C wires) business also grew from INR 170 cr to INR 260 cr.
  • Expect 25% YoY growth in FY25 as US exports revive.
• US Market Impact
  • US business ~12-13% of revenue in FY24, down from peak of 26%.
  • Expects US market to remain slow in the coming year.
  • Strong domestic demand offsetting US slowdown so far.
• Competition
  • Facing Chinese competition in both conductors and cables business.
  • Chinese more active in building wires segment (40% of US market).
  • Also entering solar cables segment where company has good product acceptance.
  • Some raids on distributors selling low-priced Chinese cables in US.
• Capacity Utilization
  • Around 90% capacity utilization for conductor and cable divisions.
  • Planning 10-15% increase in conductor capacity.
  • Targeting 25% year-on-year growth in cable capacity.
• Growth Outlook
  • Remains optimistic about growth drivers over next 3-5 years.
  • Expects energy transition to provide opportunities domestically and globally.
  • Overall positive outlook driven by renewable energy growth prospects.