3QFY2017 Result Update | Textile
February 16, 2017
Garware Wall Ropes
BUY
CMP
`614
Performance Highlights
Target Price
`710
Quarterly Data
Investment Period
12 months
(`cr)
3QFY17
3QFY16
% yoy
2QFY17
% qoq
Revenue
195
186
4.9
232
(16.2)
Stock Info
EBITDA
30
25
20.2
40
(26.1)
Sector
Textiles
Margin (%)
15.2
13.2
193bp
17.2
(202bp)
Market Cap (`
cr)
1,432
Adj. PAT
18
15
22.4
26
(31.3)
Net Debt (` cr)
-62
Source: Company, Angel Research
Beta
1.0
For 3QFY2017 Garware Wall Ropes (GWRL) posted results which outperformed
52 Week High / Low
650/270
our estimates on the bottom-line front, while the top-line was in-line with our
Avg. Daily Volume
3,310
estimates. On the operating front, the company reported margin improvement,
Face Value (`)
10
primarily on account of lower other expenditures. Further, on the bottom-line front,
the company reported strong growth on account of a favorable operating
BSE Sensex
28,156
performance.
Nifty
8,725
Reuters Code
GRWL.BO
Top-line grew by ~5%: The company’s top-line grew by ~5% yoy to `195cr
mainly due to growth of 6% yoy in the Synthetic cordage segment to `165cr.
Bloomberg Code
[email protected]
However, Fibre & Industrial products segment reported de-growth of ~4% yoy to
`33cr. Further, the company has seen strong growth in fisheries and aquaculture
Shareholding Pattern (%)
business during the quarter.
Promoters
50.6
Profitability boosted by strong operating performance: On the operating front, the
MF / Banks / Indian Fls
6.1
company reported margin improvement (up 193bp yoy to 15.2%), primarily on
FII / NRIs / OCBs
4.1
account of decline in other expenditures during the quarter. The reported net profit
Indian Public / Others
39.2
grew by ~22% yoy to `18cr on account of the strong operating performance.
Outlook and valuation: Going ahead, we expect GWRL to report a healthy
Abs. (%)
3m 1yr
3yr
top-line 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
Sensex
7.0
19.5
37.6
agriculture and fisheries segments in the country. Further, we expect the company
GWRL
9.8
89.9
998.5
to continue reporting strong numbers on the back of higher demand for
aquaculture and sports products globally coupled with with the company tapping
3-year price chart
new geographies. Hence, we recommend a Buy rating on the stock with a target
700
price of `710.
600
Key financials (Consolidated)
500
Y/E March (` cr)
FY2015
FY2016
FY2017E
FY2018E
400
Net sales
784
828
863
928
300
% chg
14.0
5.5
4.3
7.6
200
100
Net profit
43
62
80
86
0
% chg
61.5
43.7
28.7
8.4
EBITDA margin (%)
10.4
12.7
15.1
15.2
EPS (`)
19.7
28.3
36.4
39.4
P/E (x)
31.2
21.7
16.9
15.6
Source: Company, Angel Research
P/BV (x)
4.3
3.6
3.0
2.6
RoE (%)
13.8
16.8
18.0
16.5
RoCE (%)
19.3
23.2
24.9
23.3
Amarjeet S Maurya
EV/Sales (x)
1.7
1.5
1.4
1.3
022-39357800 Ext: 6831
EV/EBITDA (x)
16.8
12.2
9.5
8.6
[email protected]
Source: Company, Angel Research, Note: CMP as of February 15, 2017
Please refer to important disclosures at the end of this report
1
Garware Wall Ropes | 3QFY2017 Result Update
Exhibit 1: Quarterly performance
Y/E March (` cr)
3QFY17
3QFY16
% yoy
2QFY17
% qoq
9MFY17
9MFY16
% chg
Net Sales
195
186
4.9
232
(16.2)
652
639
2.0
Consumption of RM
77
71
8.3
86
(10.3)
250
268
(6.6)
(% of Sales)
39.4
38.2
36.8
38.3
41.9
Staff Costs
26
23
11.6
26
(1.9)
78
68
15.1
(% of Sales)
13.2
12.4
11.3
12.0
10.6
Operating Expense
63
67
(6.6)
81
(22.3)
224
227
(1.2)
(% of Sales)
32.2
36.2
34.7
34.3
35.4
Total Expenditure
165
161
2.6
193
(14.2)
552
562
(1.8)
Operating Profit
30
25
20.2
40
(26.1)
100
77
30.4
OPM (%)
15.2
13.2
17.2
15.4
12.0
Interest
1
3
(48.6)
2
(11.7)
5
7
(32.8)
Depreciation
4
3
8.9
4
0.9
11
10
9.0
Other Income
1.4
1.2
18.3
3.3
(57.5)
7
2
219.9
PBT
26
20
31.8
38
(31.9)
93
63
47.3
(% of Sales)
13.3
10.6
16.4
14.2
9.8
Provision for Taxation
8
5
58.6
12
(33.3)
29
18
58.6
(% of PBT)
31.2
25.9
31.8
31.2
29.0
Minority Interest
Reported PAT
18
15
22.4
26
(31.3)
64
45
42.7
PATM (%)
9.2
7.9
11.2
9.8
7.0
Source: Company, Angel Research
February 16, 2017
2
Garware Wall Ropes | 3QFY2017 Result Update
Top-line grew by ~5%
The company’s top-line grew by ~5% yoy to `195cr mainly due to growth of 6%
yoy in the Synthetic cordage segment to `165cr. However, Fibre & Industrial
products segment reported de-growth of ~4% yoy to `33cr. Further, the company
has seen strong growth in fisheries and aquaculture business during the quarter.
Exhibit 2: Top-line growth trend
300
25
20
250
15
200
10
5
150
-
100
(5)
(10)
50
(15)
0
(20)
Net sales
QoQ growth (%)
Source: Company, Angel Research
Lower other expenditure drives operating margin expansion
On the operating front, the company reported margin improvement (up 193bp yoy
to 15.2%), primarily on account of decline in other expenditures, during the quarter.
Exhibit 3: Operating profit and margin trend
45
20
40
18
35
16
14
30
12
25
10
20
8
15
6
10
4
5
2
0
0
Operating Profit
Margin (%)
Source: Company, Angel Research
February 16, 2017
3
Garware Wall Ropes | 3QFY2017 Result Update
PAT grew by ~22% yoy
The reported net profit grew by ~22% yoy to `18cr on account of the strong
operating performance.
Exhibit 4: Net Profit and growth trend
35
30
30
25
25
20
20
15
15
10
10
5
-
5
(5)
0
(10)
Net Profit
QoQ growth (%)
Source: Company, Angel Research
February 16, 2017
4
Garware Wall Ropes | 3QFY2017 Result Update
Investment rationale
Higher exports to accelerate top-line growth
We expect GWRL to report a healthy top-line CAGR of ~6% over FY2016-18E on
back of higher growth in exports. Over the last seven years, the company has
reported a CAGR of ~16% in export sales to `412cr (for FY2016). The percentage
of exports to total sales has increased from 32.5% to 50% over the same period.
Exports predominately comprise of fishing and aquaculture offerings and of sports
goods. Going forward, we expect the company to continue to report strong
numbers on the export front on the back of higher demand for aquaculture and
sports products globally. The company has export presence in 72 countries, mainly
in the US, Canada and across Europe. It is now planning to strengthen its presence
in Africa through agricultural offerings. Thus, we expect the company to post
export sales CAGR of ~6% over FY2016-18E. The Management is targeting to
increase contribution of export business to about 65% of turnover in the next
couple of years.
Lower raw material prices and higher export contribution to
enhance margins
In the last six years, despite the volatility in raw material prices, the company has
maintained its operating margin in the range of 10-11%. In FY2016, the company
witnessed an improvement in its operating margin by 235bp. Going forward, we
believe that the company would be able to increase its margins owing to - (a)
easing raw material prices including that of high density polyethylene, nylon, etc.,
which are crude based raw materials, and (b) higher contribution from exports,
which is a high margin business.
Continuous debt repayment and improving return ratios
The company is continuously generating higher cash flows, which has resulted in
debt reduction and improvement in its ROE. The company has been consistently
repaying debt over the past five years, resulting in debt having come down from
~`140cr in FY2012 to `30cr in FY2016. Going forward, we believe the company
will continue repaying debt with strong cash flows, which in turn will lead to
reduction in interest cost (interest cost has reduced from ~`17cr in FY2012 to
~`9cr in FY2016). A lower interest expense in turn will lead to higher profitability
for the company. Further, the company’s ROE has improved from 9.6% in FY2012
to 16.8% in FY2016.
February 16, 2017
5
Garware Wall Ropes | 3QFY2017 Result Update
Outlook and valuation
Going ahead, we expect GWRL to report a healthy top-line 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
the back of higher demand for aquaculture and sports products globally coupled
with the company tapping new geographies. Hence, we recommend a Buy rating
on the stock with a target price of `710.
Exhibit 5: One-year forward P/E band
6.0 X
8.0 X
10.0 X
12.0 X
14.0 X
700
600
500
400
300
200
100
0
Source: Company, Angel Research
Company Background
Garware Wall Ropes Ltd (GWRL) is an ISO 9001:2008 certified company.
Established in 1976, the company is a leading player in technical textiles,
specializing in providing customized solutions to the cordage and infrastructure
industry worldwide. The company is a global player and known for its innovation
in the field of fisheries, aquaculture, shipping, sports, agriculture, coated fabrics
and geosynthetics. GWRL’s products are manufactured in its state-of-art facilities at
Wai and Pune (both in Maharashtra, India) and are marketed in more than
75 countries worldwide.
February 16, 2017
6
Garware Wall Ropes | 3QFY2017 Result Update
Profit & Loss Statement
Y/E March (` cr)
FY13
FY14
FY15
FY16
FY17E
FY18E
Total operating income
604
688
784
828
863
928
% chg
4.0
13.9
14.0
5.5
4.3
7.6
Total Expenditure
541
622
703
722
733
787
Cost of Materials
263
316
363
343
336
367
Personnel Expenses
81
64
84
93
104
114
Others Expenses
197
242
255
286
293
306
EBITDA
63
65
81
105
130
141
% chg
(1.1)
3.9
24.6
29.6
23.6
8.3
(% of Net Sales)
10.4
9.5
10.4
12.7
15.1
15.2
Depreciation& Amortisation
16
14
12
13
15
16
EBIT
47
51
69
92
115
125
% chg
(2.2)
9.4
35.5
33.9
24.6
8.7
(% of Net Sales)
7.7
7.4
8.8
11.2
13.3
13.5
Interest & other Charges
14
13
10
9
6
4
Other Income
1
1
2
3
8
6
(% of PBT)
4.1
2.6
3.0
4.0
6.8
4.7
Share in profit of Associates
-
-
-
-
-
-
Recurring PBT
33
39
61
87
117
127
% chg
4.2
17.0
54.9
43.9
34.5
8.4
Prior Period & Extraord. Exps./(Inc.)
-
-
-
-
-
-
PBT (reported)
33
39
61
87
117
127
Tax
9
12
17
25
37
41
(% of PBT)
26.1
31.8
28.9
28.9
32.0
32.0
PAT (reported)
25
27
43
62
80
86
Add: Share of earnings of asso.
-
-
-
-
-
-
Less: Minority interest (MI)
-
-
-
-
-
-
PAT after MI (reported)
25
27
43
62
80
86
ADJ. PAT
25
27
43
62
80
86
% chg
2.7
8.1
61.5
43.7
28.7
8.4
(% of Net Sales)
4.1
3.9
5.5
7.5
9.2
9.3
Basic EPS (`)
11.3
12.2
19.7
28.3
36.4
39.4
Fully Diluted EPS (`)
11.3
12.2
19.7
28.3
36.4
39.4
% chg
2.7
8.1
61.5
43.7
28.7
8.4
February 16, 2017
7
Garware Wall Ropes | 3QFY2017 Result Update
Balance Sheet
Y/E March (` cr)
FY13
FY14
FY15
FY16
FY17E FY18E
SOURCES OF FUNDS
Equity Share Capital
24
22
22
22
22
22
Reserves& Surplus
243
254
291
347
421
501
Shareholders Funds
267
276
313
369
443
523
Minority Interest
-
-
-
-
-
-
Total Loans
110
71
45
30
20
15
Deferred Tax Liability
19
21
21
21
21
21
Total Liabilities
397
368
379
420
484
559
APPLICATION OF FUNDS
Gross Block
339
351
371
391
411
431
Less: Acc. Depreciation
185
198
211
224
239
255
Net Block
154
153
160
167
172
176
Capital Work-in-Progress
0
7
7
7
7
7
Investments
9
9
9
9
9
9
Current Assets
399
430
519
615
694
773
Inventories
122
127
137
127
137
148
Sundry Debtors
140
143
182
199
213
229
Cash
20
9
11
83
113
132
Loans & Advances
104
138
175
191
205
232
Other Assets
13
13
13
15
26
32
Current liabilities
167
232
318
380
399
407
Net Current Assets
232
198
201
235
294
366
Deferred Tax Asset
1
1
1
1
1
1
Total Assets
397
368
379
420
484
559
February 16, 2017
8
Garware Wall Ropes | 3QFY2017 Result Update
Cashflow Statement
Y/E March (` cr)
FY13
FY14
FY15
FY16
FY17E
FY18E
Profit before tax
33
39
61
87
117
127
Depreciation
16
14
12
13
15
16
Change in Working Capital
(21)
19
(1)
38
(29)
(53)
Interest / Dividend (Net)
13
15
10
9
6
4
Direct taxes paid
(8)
(5)
(17)
(25)
(37)
(41)
Others
(0)
-
-
-
-
-
Cash Flow from Operations
34
82
64
121
72
54
(Inc.)/ Dec. in Fixed Assets
1
(20)
(20)
(20)
(20)
(20)
(Inc.)/ Dec. in Investments
(0)
(0)
0
-
-
-
Cash Flow from Investing
2
(20)
(20)
(20)
(20)
(20)
Issue of Equity
-
-
-
-
-
-
Inc./(Dec.) in loans
(17)
(51)
(27)
(15)
(10)
(5)
Dividend Paid (Incl. Tax)
(7)
(7)
(6)
(6)
(6)
(6)
Interest / Dividend (Net)
(15)
(16)
(10)
(9)
(6)
(4)
Cash Flow from Financing
(39)
(74)
(43)
(29)
(22)
(15)
Inc./(Dec.) in Cash
(3)
(11)
2
72
30
18
Opening Cash balances
24
20
9
11
83
113
Closing Cash balances
20
9
11
83
113
132
February 16, 2017
9
Garware Wall Ropes | 3QFY2017 Result Update
Key Ratios
Y/E March
FY12
FY13
FY14
FY15
FY16E FY17E
Valuation Ratio (x)
P/E (on FDEPS)
56.0
54.5
50.4
31.2
21.7
16.9
P/CEPS
33.6
32.8
32.7
24.2
17.9
14.2
P/BV
5.4
5.0
4.9
4.3
3.6
3.0
Dividend yield (%)
0.4
0.4
0.4
0.4
0.4
0.4
EV/Sales
2.5
2.4
2.0
1.7
1.5
1.4
EV/EBITDA
22.8
22.7
21.4
16.8
12.2
9.5
EV / Total Assets
2.5
2.5
2.3
2.0
1.6
1.4
Per Share Data (`)
EPS (Basic & fully diluted)
11.0
11.3
12.2
19.7
28.3
36.4
EPS (Adjusted)
11.0
11.3
12.2
19.7
28.3
36.4
Cash EPS
18.3
18.7
18.8
25.3
34.3
43.4
DPS
2.7
2.7
2.7
2.7
2.7
2.7
Book Value
114.5
122.1
126.1
143.0
168.6
202.3
Returns (%)
ROCE
12.2
12.3
14.7
19.3
23.2
24.9
Angel ROIC (Pre-tax)
13.3
13.4
15.5
20.4
30.1
33.8
ROE
9.6
9.2
9.7
13.8
16.8
18.0
Turnover ratios (x)
Asset Turnover (Gross Block)
1.7
1.8
2.0
2.1
2.1
2.1
Inventory / Sales (days)
78
74
67
64
56
58
Receivables (days)
94
85
76
85
88
90
Payables (days)
34
35
34
36
37
35
WC cycle (ex-cash) (days)
138
124
109
113
107
113
February 16, 2017
10
Garware Wall Ropes | 3QFY2017 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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offering of securities of the company covered by Analyst during the past twelve months.
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Disclosure of Interest Statement
Garware Wall Ropes
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
February 16, 2017
11