Garware Technical Fibres Limited (“Garware Technical” or the “Company”) is one of India’s leading players in the technical textiles sector. The Company provides innovative solutions in high-performance aquaculture cage nets, fishing nets, sports nets, safety nets, agricultural nets, coated fabrics, polymer ropes, and geosynthetics.
The Company enjoys the advantage as its products for fisheries, aquaculture and agriculture together account for the major part of its business.
Garware Technical is the largest manufacturer and supplier of Salmon aquaculture cage nets in the world, with a large share in major markets like Scotland, Canada, Norway, and Chile.
The Company is also a major player in the domestic fisheries sector, with a dominant position in the supply of nets for trawl fishing. The Company’s products are manufactured in state-of-art facilities at Wai and Pune (both in Maharashtra, India) and are marketed in more than 75 countries worldwide.
Financial Performance
| Particulars | FY16 | FY17 | FY18 | FY19 | FY20 |
| Revenue (In Rs. Cr.) | 824.82 | 845.87 | 884.61 | 1,017.82 | 953.09 |
| Growth | – | 2.55% | 4.58% | 15.06% | -6.36% |
| EBITDA (In Rs. Cr.) | 102.64 | 135.43 | 160.49 | 191.97 | 177.51 |
| EBITDA Margin | 12.44% | 16.01% | 18.14% | 18.86% | 18.62% |
| EBIT (In Rs. Cr.) | 89.53 | 121.27 | 145.14 | 174.73 | 158.25 |
| EBIT Margin | 10.85% | 14.34% | 16.41% | 17.17% | 16.60% |
| PBT (In Rs. Cr.) | 87.14 | 123.24 | 153.09 | 182.09 | 178.86 |
| PAT (In Rs. Cr.) | 61.90 | 84.36 | 105.17 | 125.68 | 140.53 |
| PAT Margin | 7.50% | 9.97% | 11.89% | 12.35% | 14.74% |
| EPS (In Rs.) | 28.29 | 38.55 | 48.06 | 57.44 | 64.22 |
| EPS Growth Rate | – | 36.28% | 24.67% | 19.50% | 11.82% |
| Historic P/E (Closing Price of 31st March) | 11.97 | 18.41 | 19.16 | 19.41 | 16.73 |
| CURRENT P/E | 29.90 | ||||
| EV/EBITDA | 9.95 | 13.73 | 17.79 | 12.08 | 24.23 |
| D/E | 0.08 | 0.19 | 0.26 | 0.17 | 0.18 |
| Interest Coverage | 11.76 | 20.71 | 16.08 | 13.99 | 15.34 |
| ROCE | 25.97% | 25.44% | 23.77% | 25.31% | 20.36% |
| ROE | 16.94% | 18.90% | 19.59% | 19.32% | 19.01% |
WHAT’S DRIVING THE STOCK?
Strong Financial Position
The Company’s profitability remains strong with ROCE of 20.36% and ROE of 19% in FY2020 on account of healthy operating performance and improved product mix. During FY 2020, the Company achieved satisfactory financial results in the face of the outbreak of COVID-19. Around 60% of the Company’s business caters to end-users in food-related industries, which are expected to enjoy high demand. Leveraging this positioning, GTFL is continuously enhancing its operational performance.
Strong Market Position
The Company has over four decades of experience in the cordage industry and commands a dominant share of 60-65% in the organised domestic market. Over a period, the company has established a healthy brand for its fishnets, ropes and twines among others, catering to multiple business segments including fisheries, aquaculture, shipping and industrial. With its strong focus on innovation, Garware Technical filed eight patents during the year and received four patents.
Geographically Diversified Revenue Mix
Exports constituted 58% of the Company’s revenue in FY2020. The Company has presence in more than 75 countries with healthy market positioning in the developed markets such as North America and Europe, which contribute to the bulk of export revenues. The Company is gradually making inroads in new geographies while expanding its premium product offering for the export market.
In the international markets, the Company continued to record strong growth in the aquaculture and sports segments and improved its market share. Towards the end of the financial year, the Company had a robust order book. However, deliveries could not be made due to the complete lockdown imposed in the country following the spread of COVID-19.
Limited Organised Competition in Domestic Market
Garware Technical competes with various organised as well as unorganised players in the domestic market. However, focus on premium products and investment in R&D helped in sustaining its market position. This coupled with an established brand name and quality products because of a better understanding of fibre technology and polymer processing enables Garware Tech to command adequate pricing power.
WHAT’S DRAGGING THE STOCK?
COVID-19 Pandemic Impact
The anticipated continuity of the COVID-19 pandemic is expected to reduce the ability of the Company’s customers to invest in fresh capex and may therefore impact the demand for your Company’s products. Lockdowns and migration of labour is placing pressure on the Company’s factories as well as on those of its suppliers.
Increased competition from the unorganized players.
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