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Apar Industries – Riding Capital Goods Boom

March 5, 2010

Apar Industries is one among the best-established companies in India operating in the diverse fields of electrical, metallurgical and chemical engineering.

Consolidation of conductor manufacturing plants – The company will continue to invest and maintain its leadership position asĀ  a direct beneficiary of the robust growth emerging in India’s power sector.

Increased focus on the export of specialty oils – Its specialty oils business strengthened itself through approvals of new generation transformer oils from global OEMs like Areva, Siemens and ABB.

Widening product basket in the specialty oils business – It has entered into a license agreement with ENI of Italy to market high-end
automotive and specialty industrial lubricants in India from August 2007 onwards.

Strategic shift of the polymer plant from Mumbai to Valia – It has shifted its HSR plant from Mumbai to Valia in view of the declining demand or that product and a growing NBR demand.

Apar Industries has two business divisions, each of which has significant market share positions in its segment. The company is deriving over 75 percent of its revenue from power sector based on the end customer use.

Financials – The company is expected to report an EPS of Rs 15.15 and Rs 20.15 for FY 10 and FY 11 respectively.

Recommendation – SBI Research valued the stock by applying, P/ex & Ev/ebitdax. The stock via these valuation models generates a one-year target price of Rs. ~ 202 and hence the BUY recommendation.

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