Shares of Apar Industries Ltd, a leading global manufacturer of aluminium and alloy conductors, are facing significant pressure. The stock has declined by 19% over the past year, reflecting growing investor concerns over a slowdown in growth momentum. This slump is primarily attributed to trade protectionism measures leading to tariffs and a consequent delay in finalizing export orders.
Soft Quarter Ahead Amid Export Headwinds
In a recent discussion with PL Capital, the company's management indicated expectations for a soft December quarter (Q3FY26). While existing orders have not been cancelled, the finalization of new contracts—especially in crucial export markets—has been pushed back. This delay is directly impacting the near-term visibility of project execution and revenue recognition.
The conductors segment, which contributes to over half of Apar's total revenue, is at the heart of the challenge. Approximately 45% of this segment's sales come from exports, including key markets like the United States. Uncertainty surrounding tariffs and elevated prices of raw materials like aluminium and copper have extended the contracting cycles with international clients.
On the domestic front, demand remains robust, supported by ongoing investments in power transmission and distribution, renewable energy projects, and railway infrastructure. The company's contracts typically include cost pass-through clauses, which protect its profit margins. However, these clauses do not safeguard the timing of projects, meaning profitability is preserved but revenues can be deferred to later periods.
Segment-Wise Challenges and Capex Plans
For the full fiscal year FY26, the management has guided for a volume growth of around 10% in the conductors business. They also view ₹30,000 per tonne as a sustainable minimum EBITDA level over a business cycle. It is noteworthy that in the first half of FY26 (H1FY26), Apar achieved a much higher EBITDA per tonne of ₹41,421, benefiting from a favourable product mix, but the management has cautioned against extrapolating this peak performance.
Analysts from Antique Stock Broking Ltd estimate that as realizations improve and execution normalizes, Apar could achieve an EBITDA per tonne in the range of ₹40,435 to ₹44,000 over FY26 to FY28.
The cables business, contributing about 25% of revenues, was intended to diversify reliance on conductors but is facing its own near-term pressures. Exports make up 38% of cable revenues, with a higher dependence on the US market, making it more sensitive to tariff changes. Furthermore, this segment is experiencing margin pressure as it absorbs higher fixed costs during a significant investment phase.
Apar is currently executing a substantial ₹800 crore capital expenditure plan for its cable division. The new facilities are expected to be commissioned by FY27, with utilization ramping up through FY28 to support a revenue capacity of ₹10,000 crore.
The speciality oils segment, accounting for roughly a quarter of revenues, continues to provide stability to the overall business. However, its growth trajectory is steady but limited, and it is not seen as a major catalyst for a stock re-rating at this juncture.
Valuation Discount Versus Earnings Visibility
From a valuation perspective, Apar Industries is currently trading at a discount compared to its frontline peers. The stock trades at approximately 30 times its estimated FY27 earnings, which is lower than Polycab India (37x) and KEI Industries (40x), as per Bloomberg data.
The medium-term outlook for Apar's key businesses remains positive, underpinned by sustained global investment in power infrastructure for data centers, renewables, and electric mobility. However, the weakened near-term earnings growth visibility is testing investor patience. For now, the comfort offered by a relatively lower valuation may not be sufficient to improve market sentiment until there is greater clarity on order finalizations and export market dynamics.
