Sample  Research Report  
 Garware Wall Ropes   
Vol. No. : 21    Issue No. : 13                             Friday, February 06, 2015

Growth climbing up well

With not much capex and reducing debt, focus on higher margin and faster growing new businesses augur well for the company’s growth

Related Tables
4Garware Wall Ropes: Financials
4Garware Wall Ropes : Result

Buy Garware Wall Ropes
BSE Code 509557
NSE Code GARWALLROP
Bloomberg GWWR@IN
Reuters GRWL.BO
52-week High/Low Rs 238 / Rs 53
Current Price Rs 197 (as on 6th February 2015)

Established in 1976, Garware-Wall Ropes (GWRL) is India's leading player in technical textiles, providing specialized solutions in the cordage and infrastructure industry. The company was formed by Mr Garware in collaboration with M/s Wall Industries Inc. It manufactures synthetic yarns, twines, ropes, webbings, nets, net related products, coated fabrics and geosynthetic products and provides innovative and application focused solutions to diversified industries that includes fishing, aquaculture, agriculture, sports, geosynthetic, coated fabrics, yarn and thread.

The company has state-of-art manufacturing facilities in Wai and Pune and has international presence in more than 75 countries through 5 overseas offices each in USA, UK, Russia, Canada and Australia.

Exports are rising

About 50% of total turnover for the first 9 months ended Dec’14 came from exports. Exports stood around 48% in FY’14 and 42% for FY’13 total sales. The growth business verticals except for Agriculture segment are predominately exported and thus going forward, export contribution as a % of total sales will keep on increasing. Management expects to increase the export contribution as a % to total sales to around 65% in next couple of years driven by more number of customers and vast applications within the aquaculture and sports segment.

The new businesses are high growth and high margin

Aquaculture, Agriculture and Sports are some of the business verticals, which will be the future growth drivers for the company.

In Aquaculture, the company provides variety of advanced solutions and products for aquaculture cages, predator systems etc with a dominant market share and presence in developed markets of Canada, USA, Scandinavia, UK etc.

Agriculture includes providing solutions such as anti bird net, insect net, shade net, crop support net, sericulture net, anti hail net, floriculture net and grape net etc.

Sports is another segment which has significant potential for the company. Garware Wall Ropes already have significant market share in many countries for Sport nets, be in the field of tennis, cricket, golf, soccer, hockey, basket ball, volleyball, badminton, ski and beach volleyball. Company has about 25% market share in the US sports net market. Over the years, GRW has become no 1 sports net manufacturer in India and the top exporter to USA.

All these segments, unlike the traditional businesses are poised to grow at more than 15-20% rate going forward.

Share of new businesses is rising

In FY’11-13 period, fishing, ropes and Geosynthetic business dominated the sales with about 65% of total sales. For 9 months ended FY’15, fishing is about 20% of total turnover, Aquaculture constitute about 15-20%, Agriculture about 15-20%, Ropes about 13%, Sports about 10%, Geosynthetics about 7% and rest would be from various other segments like coated fabrics, jute bags, woven sack, reinforcements etc.

Going forward the share of the new businesses will increase further, as the management’s focus is to leverage its international presence by providing high end solutions. Also the endeavor of the company is to increase the number of clients and customers, thus grabbing the volume and value growth both in the new businesses.

Once India’s Infra growth story picks up Geosynthetic business should do well

Geosyntheis segment caters to the requirements in hilly, mountains, rocky and damped regions that are considered hurdles during large infrastructure projects. The company provides assistance and solutions with reinforced soil structures, landfills, rock protection, gabion gravity retaining walls, geosynthetic lining, coastal and river protection and erosion control and embankment protection solutions.

Geosynthetic material is used in those engineering applications that come in contact with soil/rock and /any other geotechnical material. GRWL’s geosyntheic products used in the roads segment are for reinforced soil walls, asphalt reinforcement, sub-reinforcement, and heavy duty pavements, slopes and embankment foundations.

The company’s geosyntheic products in the railway segment are laid under the layers of track bed to keep the strength of the track intact. The major advantage is that it improves bearing capacity of the tracks, reduces maintenance of ballast and the trains can operate without speed restrictions. One of the geosynthetic products — rock fall boulder nets — is laid over the rocks on the roads to prevent rock fall. These nets improve safety and eliminate traffic interruption. The company also provides various coastal protection systems to eliminate soil erosion problem, improve coastal safety and reduce property losses.

Once infrastructure development picks up in India, this product line has excellent growth potential.

Not much capex or money required for future growth

The company’s plants are more than 25 year old and are fully depreciated. For future growth, it just needs to add additional lines within the same plant. Thus there are hardly any capex required for future growth of the company.

Fall in crude oil will be positive

PP and HDPE are major raw materials for the company. Since these are derivatives of crude oil, fall in crude oil prices will lower its raw material cost and will be positive for the company.

After three sluggish years, FY15 is a turning point

From FY’11 till FY’13, the company grew its net sales at CAGR of about 10% with PAT was almost flat for 3 consecutive years.

However, for nine months ended Dec’14, net sales grew by 18% to Rs 587.33 crore, there was a 14% increase in OP to Rs 58.72 crore. Other income was up by 55% to Rs 1.29 crore. Interest was down by 50% and depreciation was down by 14% to Rs 6.99 crore and Rs 9.41 crore respectively. Thus PBT stood at Rs 43.61 crore, up by 59%. After providing total tax of Rs 12.81 crore, up by 58% YoY, PAT for 9 months ended Dec’14, grew by 60% to Rs 30.80 crore.

For the quarter ended Dec’14, net sales grew by 9% to Rs 185.17 crore. OPM was up by 70 bps to 9.8% leading to a 17% rise in OP to Rs 18.10 crore. Other income stood at Rs 0.12 crore. Interest and depreciation was down by 52% and 5% respectively to Rs 1.76 crore and Rs 3.10 crore. Thus PBT was up by 53% to Rs 13.36 crore. After providing total tax of Rs 3.18 crore, PAT for Dec’14 quarter stood at Rs 10.18 crore, up by 45% YoY.

Valuation

For FY’15, we expect the company to report net sales and PAT of Rs 800.81 crore and Rs 41.39 crore. For FY’16, we expect the company to register net sales and PAT of Rs 920.94 crore and Rs 49.89 crore respectively. This gives an EPS of Rs 18.9 for FY’15 and Rs 22.8 for FY’16. Current market price of Rs 197 discounts FY’16 projected earning by 8.6 times.

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Garware Wall Ropes: Financials
 
  1003(12) 1103 (12) 1203(12) 1303(12) 1403(12) 1503(12P) 1603(12P)
Net Sales 453.68 500.74 580.49 603.73 687.65 800.81 920.94
OPM % 10.8% 11.0% 11.0% 10.4% 10.0% 9.9% 10.2%
OP 48.94 54.94 63.57 62.84 68.71 79.64 93.94
Other income 0.77 0.00 1.12 1.36 0.88 1.39 1.74
PBIDT 49.71 54.94 64.69 64.20 69.59 81.03 95.67
Interest 10.75 8.92 16.61 14.48 16.12 8.08 7.27
PBDT 38.96 46.02 48.08 49.72 53.47 72.96 88.41
Depreciation 12.92 14.84 16.02 16.32 14.39 12.67 13.94
PBT 26.04 31.18 32.06 33.40 39.08 60.29 74.47
Total Tax 6.66 6.75 8.05 8.73 12.41 18.90 24.58
PAT 19.38 24.43 24.01 24.67 26.67 41.39 49.89
EPS* 8.9 11.2 11.0 11.3 12.2 18.9 22.8
*Annualised on diluted equity post buy back of Rs 21.88 crore of face value of Rs 10 each
(P) Projection
Figures in crore,
Source: Capitaline Databases

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Garware Wall Ropes : Result
 
  1412(03) 1312(03) Var. (%) 1412(09) 1312(09) Var. (%) 1403(12) 1303(12) Var. (%)
Sales 185.17 170.59 9% 587.33 497.04 18% 687.65 603.73 14%
OPM (%) 9.8% 9.1%   10.0% 10.4%   10.0% 10.4%  
OP 18.10 15.46 17% 58.72 51.46 14% 68.71 62.84 9%
Other inc. 0.12 0.23 -48% 1.29 0.83 55% 0.88 1.36 -35%
PBIDT 18.22 15.69 16% 60.01 52.29 15% 69.59 64.20 8%
Interest 1.76 3.70 -52% 6.99 13.95 -50% 16.12 14.48 11%
PBDT 16.46 11.99 37% 53.02 38.34 38% 53.47 49.72 8%
Dep. 3.10 3.28 -5% 9.41 10.96 -14% 14.39 16.32 -12%
PBT 13.36 8.71 53% 43.61 27.38 59% 39.08 33.40 17%
Total Tax 3.18 1.68 89% 12.81 8.12 58% 12.41 8.73 42%
PAT 10.18 7.03 45% 30.80 19.26 60% 26.67 24.67 8%
EPS (Rs) * # #   # #   12.2 11.3  
*Annualised on diluted equity post buy back of Rs 21.88 crore of face value of Rs 10 each
Figures in crore,
Source: Capitaline Databases

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