Apar Industries stock cracks 30% in Jan, records worst monthly drop in 16 years. Is it a buying opportunity? | Stock Market News

Shares of Apar Industries, which surged relentlessly over the last four calendar years, failed to sustain the same momentum this month. Weak December quarter earnings raised concerns over the stock’s valuation, leading to one of its worst monthly performances in recent history.

Over the last 17 trading sessions, the stock has lost 37% of its value. So far this month, it is down nearly 30%, marking its biggest monthly drop since June 2008, when it tumbled 34%. 

Although the company reported healthy revenue growth in Q3FY25, with a strong performance in the cable and conductor segments, a decline in margins weighed on its bottom-line performance. As a result, its consolidated net profit dropped to ₹175 crore, marking a 20% decline compared to ₹218 crore in Q3FY24. It also fell by 10% on a QoQ basis.

Pressure on conductor margins impacted 3Q performance

Despite higher volumes in the conductor segment (+19% YoY) and strong sales growth in the cable segment (+37% YoY), the company’s Q3 FY25 EBITDA declined 12% YoY, coming below the analysts’ estimates.

This was due to a 16% YoY contraction in EBITDA per metric ton (MT) in the conductor segment, impacted by pricing pressures from Chinese competitors, an export slowdown, and a lower premium product mix. Additionally, weaker growth in the transformer oil segment has also impacted the performance, as per analysts.

The revenue from the Conductor segment rose by 23% YoY in Q3 FY25 and 17% YoY in 9MFY25, driven by strong domestic demand (+55% YoY in Q3 and +75% YoY in 9MFY25). However, export revenues declined 42% YoY in 9MFY25 and 23% YoY in Q3 FY25.

On a sequential basis, exports improved in Q3 FY25 (+42.7% QoQ). The company’s order book in the segment stood at ₹7,600 crore (+25% YoY), while new order inflows were ₹3,100 crore (+62% YoY), indicating a potential gradual recovery. EBITDA per MT declined 16% YoY to ₹29,593 per MT due to pricing pressure and an unfavorable product mix, said Japanese brokerage firm Nomura.

The cable segment continued its strong growth, with revenues rising 37% YoY in Q3 FY25 and 28% YoY in 9MFY25. Domestic business performed well, growing 30% YoY in Q3 and 52% YoY in 9MFY25, supported by increased capital expenditure in power transmission & distribution (T&D), infrastructure, railways, and renewables.

Nomura noted that FY25 has been a year of consolidation for the conductor business due to the normalization of realizations and margins, along with demand headwinds in export markets. “While the domestic conductor volume growth trajectory will remain unwavering, in our view, led by continued infrastructure capex spend, FY26 should see an export demand revival driven by rising competitiveness and a pickup in premiumization for conductors in the global market,” said the brokerage.

Nomura remains bullish on the stock

Following Apar Industries’ Q3 performance, Nomura has cut its EBITDA estimates by 8% to factor in a delayed recovery in exports and normalized EBITDA per MT for the conductor segment.

However, it maintained a ‘Buy’ rating on the stock, citing reasonable valuations, but lowered its target price to ₹10,300 from ₹11,700. Despite this revision, the new target still implies a 43% upside from the stock’s latest closing price. It expects a 25% EPS CAGR over FY25-FY27, primarily driven by strong momentum in the cable segment.

Although the stock has corrected sharply it remains up by 1,100% over the past two years. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.