Apar Industries To Post Double-Digit Earnings Growth On Government Initiatives: Edelweiss
Edelweiss sees a strong structural outlook on Apar Industries in between FY17 and FY 19
Apar Industries Ltd. is expected to post double-digit compound annual growth rates in revenue and net profit for three years ending 2018-19, led by demand for conductors, transformer oils and cables and savings induced by the Goods and Services Tax, Edelweiss Securities said in a report.
The government’s focus on power transmission and distribution will further push up margins for Apar. It is also likely to gain from increase in demand for elastomeric cables from the railways and defence, the report said.
The company is likely to clock between 12-20 percent compound annual growth rates in revenue, earnings before interest, tax, depreciation and amortisation, and net profit in the next three-year period.
Disruptions in business due to destocking ahead of GST rollout is temporary phenomenon and the company will benefit from the new indirect tax system in the coming years, said the report.
In the pre-GST period, Apar had to pay varied taxes and cess due to its diverse operations as compared to its competitors. GST implementation will help the company clock savings up to Rs 30 crore in the long term, according to Edelweiss estimates.
The brokerage has maintained ‘Buy’ rating on the stock with a target price of Rs 990.
Edelweiss Estimates
- Revenue to expand at compound annual growth rate of 12 percent
- Earnings before interest, tax, depreciation and amortisation to expand 15 percent CAGR
- Net profit to clock 20 percent CAGR