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Garware-Wall Ropes Ltd Research Report - 12th Feb 2016

Miscellaneous | Published on Feb 12th 2016

IT

Garware Wall Ropes (GWRL)’ 3QFY2016 results outperformed our estimates on the bottom-line front. The company’s top-line for the quarter grew by a subdued 0.2% 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. Subdued top-line growth: The company’s top-line grew by ~0.2% yoy to ~`186cr (which is below our estimates of ~`197cr), mainly due to de-growth in the Synthetic Cordage segment (by ~2% yoy to `155cr). The Fibre & Industrial Products segment reported a growth of ~6% yoy to `35cr. Strong operating performance boosts profitability: On the operating front, the company reported margin improvement (up by 346bp yoy to 13.2%), primarily on account of lower raw material costs (key raw material for GWRL are high density polyethylene, polyethylene etc) and other expenses. Raw material costs as a percentage of sales declined by 719bp yoy, during the quarter. The reported net profit grew by ~43% yoy to `14.6cr (our estimate was of `11.2cr) on account of the strong operating performance. Outlook and valuation: Going ahead, we expect GWRL to report a top-line CAGR of ~9% over FY2015-17E to ~`936cr owing to strong domestic as well as export sales. On the bottom-line front, we expect the company to report ~22% CAGR over FY2015-17E on account of expansion in operating margin (due to lower material prices and higher exports, which is a high margin business). Further, the company has reduced its debt significantly which will lead to cost savings. Hence, we recommend a Buy rating on the stock with a target price of `467.

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CMP 291
Target Price 467
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)1,373.32
MCAP NSE (Rs in Cr)1,378.13
P/E (x)17.68
EPS (Rs.)35.49
BV (Rs.)188.15
Div Yield (%)0.53
FV (Rs.)10.00
P/BV (x)3.34
EV/Sales (x)1.62
EV/EBITDA (x)12.09

Shareholding Pattern (%)

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

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