Saturday, January 11, 2014
Companies showing resilience during tough business environment always deserving attention.Last few years were very bad for many industries mainly due to global recession and policy paralysis here. This week let us look into a company which not only shows good resilience during this tough period but shows decent growth .Apar Industries is the company and it is one of my old recommendation too. Now I feel ,with improvement in the economies of overseas countries and the formation of new government in the months to come in India ,this is the perfect time to look into it again.
Apar is a diversified company ,mainly operating in four segments – Automotive and industrial Lubricants,Specialty Oils,Aluminium Conductors and Cables. Aluminium alloy rod and conductors were developed first in India by this 58 year old company through its own R&D initiatives and now Apar is one of the largest and low cost producer of Aluminium Conductors in the world .Apar having strong technical collaboration with Alcan (Canada) and Properzi (Italy) .Company selling its products under’POWERLINE’ brand in India and exporting the same to more than 80 countries including US, EU, Africa, CIS Countries etc.. . Company also producing different new variants of alloy conductors like High Conductivity Alloy Conductors, High Temperature Thermal Resistant Alloy conductors , High Temperature Low Sag conductors ..etc as per the requirements of customers.
In the specialty oil segment ,company producing Transformer oil,Rubber Process oil..etc.Apar’s POWEROIL brand commanding leadership position in Transformer oil segment. Company is the largest manufacturer in India and fourth largest in the word .Its strong presence in overseas market helping the company to report better performance amid tight business conditions in India.
In the automotive lubricant segment ,AGIP brand is manufactured by the subsidiary of Apar named APAR CHEMATEK LUBRICANTS LTD .It is a joint venture between ENI of Italy and Apar .Recently company increased its stake in this subsidiary from 50% to 97.5%.
In cable segment ,company producing Electrical & Telecommunication cables and supplying products to industries like Power Utilities, Petrochemicals, Steel, Cement, Nuclear Power, Defence, Telecommunication, Metros, and Shipbuilding etc.This division added to the company by the take over of Uniflex cables in 2008 . After five years under Apar Management its turnover improved from a mere Rs.31 Cr to Rs.408 Cr.
Why this stock is interesting :
· Apar is leader in many segments in which it is operating in India and one among the five in the world.
· Well diversified Geographical presence – exporting products to more than 80 countries which is minimising risk of concentration in any region and thus the possibility of recession. Apar reported sharp spurt in export ,which increased more than 45 % in last year.
· Showing strong growth even tough times.Company’s total turnover increased from Rs.3453 Cr to Rs.4532 Cr (31%) in last FY . ( Transformer and Specialty oil segment 6% growth,Conductor Segment 63% ,Cable segment 18 % ,Auto Lubricant 30% growth)
· Stock is available at cheap valuation .Company reported a net profit of Rs.110 Cr and an EPS of Rs.28.50 in last year on a consolidated basis .At CMP of Rs.145 ,stock is available at a P/E of just 5 and also below its book value of Rs.163
· Company following a liberal dividend policy ,which paid 52 % dividend in last FY
· Promoters very aggressively purchasing shares from open market which indicating their confidence . ( Check the details HERE) . Now their stake reached close to 60 % and not a single share is pledged .Also ,Templeton Asset management company hiked their stake by subscribing shares on a preferential basis at a price of Rs.220 per share.
As I mentioned above ,revival in foreign countries and the emergence of a new government in India few months down the line are expected to result in a positive demand scenario in the industries in which company is operating . Raw material prices of company is also showing a steady trend .Company already proved their competency and efficiency in tough times .Stock is a value buy @ CMP Rs.145 for long term investors .Listed in NSE and BSE
Link to Company Website HERE