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Garware-Wall Ropes Ltd Research Report - 11th Aug 2016

Miscellaneous | Published on Aug 11th 2016

IT

Garware Wall Ropes (GWRL)’ 1QFY2017 results outperformed our estimates on the bottom-line front while the top-line disappointed as it de-grew by ~6% yoy. On the operating front, the company reported margin improvement, primarily on account of lower raw material costs. Further, on the bottom-line front, the company reported strong growth on account of a favorable operating performance. Volumes grew but price cut dragged the overall top-line: The company’s top-line de-grew by ~6% yoy to Rs225cr (below our estimate of Rs256cr).The revenue underperformance was mainly due to de-growth of 8% yoy in the Synthetic cordage segment to Rs185cr and flat growth of ~1% yoy in the Fibre & Industrial products segment to Rs49cr. Strong operating performance boosts profitability: On the operating front, the company reported margin improvement (up by 288bp yoy to 13.7%), primarily on account of decline in raw material costs as a percentage of sales by 875bp yoy as prices of its key raw materials i.e. high density polyethylene, polyethylene etc declined during the quarter. The reported net profit grew by ~35% yoy to Rs20cr (outperforming our estimate of Rs15cr) on account of the strong operating performance. Outlook and valuation: Going ahead, we expect GWRL to report a healthy topline in anticipation of strong domestic as well as export sales. On the domestic front, we expect demand to pick up with an expected growth in the agriculture and fisheries segments in the country. Further, we expect the company to continue reporting strong numbers on back of higher demand for aquaculture and sports products globally and also with the company tapping new geographies. Hence, we recommend a Buy rating on the stock with a target price of Rs524.

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CMP 468
Target Price 524
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)1,377.91
MCAP NSE (Rs in Cr)1,375.94
P/E (x)17.74
EPS (Rs.)35.49
BV (Rs.)188.15
Div Yield (%)0.52
FV (Rs.)10.00
P/BV (x)3.35
EV/Sales (x)1.62
EV/EBITDA (x)12.07

Shareholding Pattern (%)

Promoter51.0
Public & Others33.0
Foreign8.0
Corporate6.0
Institution2.0
Grand Total100.0

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