Background: A Technical textile is a textile product manufactured for non-aesthetic purposes, where function is the primary criterion. It is a large and growing sector and supports a vast array of other industries. Unfortunately, technical textiles is clubbed with pure textiles and that’s why sometimes these wonderful gems go undiscovered and unappreciated.
The Company: Garware Wall Ropes, is a Leading Indian player in Technical Textiles. GWRL with its tremendous expertise in Polymer Engineering, provides solutions for various verticals like Deep-sea fishing, Acquaculture, Shipping, Agriculture, Sports, Infrastructure, Defense and Transportation. GWRL is the largest domestic manufacturer of High-density polyethylene (HDPE) and polypropylene (PP) twines, ropes and nets, which find application in fishing, shipping, industrial and transportation sector. Additionally, the company also manufactures polypropylene monofilament (PPMF) yarn, a niche segment. Besides manufacture of some of the geo-synthetic products, the company also trades in geo-synthetic products that it imports from leading geo synthetic players in UK, Germany, and USA. GWRL produces various industry leading solutions from its massive integrated manufacturing facilities in Pune, Wai and Silvassa.
The company holds a dominant share of the domestic market with its fishnet brands Garfil and Sapphire, mainly on the strength of its brand image, product quality, and wide dealer network. This has enabled GWRL command price premium over competing products. The fishing, Aquaculture and allied verticals have been the major revenue contributor till recent past. In recent times, GWRL has expanded into different verticals and its sales growth has come from this expansion into new product lines such as geo-synthetics, growing sales of its polypropylene mono filament (PPMF) yarn, and an increasing share of high value-add premium products (like Sports Nets) in its overall product mix. Further, the company entered into segments like coated fabrics and agri-tech last year and the same has started to support the revenue growth from this year onwards. Most importantly, the company eyes a big defense Pie. The company has created numerous out-of-the-box solutions for the defense sector in partnership with DRDO and expects to get strong topline and bottoline growth from this vertical moving forward. Over the years, GWRL has been able to improve realization across all product segments, leading to higher sales and profitability. The company has a well-diversified customer base across countries. GWRL’s success in the export markets has come mainly on the strength of its product quality, range and cost competitiveness, which have enabled strong growth in gross sales in the past.
Lets, look at the verticals and its solutions and products in detail:
- Fisheries – One of the most important vertical for GWRL this vertical provides Fish Nets, Twines and Ropes. The company has several industry defining products like OPENER, for mouth portion of net, ROCKY for safe fishing on rocky grounds, STAR for better speed and water outflow in the belly portion of the net and KNOTLESS CODEND, which ensures no damage to the catch.
2. Defense – This is one of the latest addition to the verticals of GWRL and is probably the most promising. What is remarkable is the amount of research and solutions being already developed for the defense sector. The company is a trend setter in this sector. Defense textiles business has become a highly technology intensive segment in modern times. GWRL has developed a strong association as an Industry partner with Aerial Delivery Research & Development Establishment (ADRDE) an associate office of DRDO.
a) Flexible Helimat – patent pending. Specialised application for Indian defence sector. During landing & take-off of helicopter the rotor downwash results in ‘browning effect’ throwing up sand and dust in the air putting the helicopter and pilot at risk. GWRL has developed the innovative ‘Flexible helimat’ (patent pending) made out of multilayered HDPE warp knitted fabrics to protect the helicopter and the pilot from brown-outs. It is much superior compared to other products of its class in terms of light weight, ease of transportation, assembling and deployment on the field. Helimat is available in camouflaging designs & colors to match terrain such as suit desert, semi desert as well as jungle areas.
b) Inflated structure for Radars- This is first time such a structure is being indigenously built in India under partnership between Garware Wall-Ropes Ltd and Aerial Delivery Research & Development Establishment (DRDO).This inflatable structure is a weather proof enclosure to protect the electronic equipments from damage due to high winds, flying debris, temperature extremes, icing and sandstorms.
c) Aerostat balloon – Indigenization for Indian Defence sector and value addition for the coated fabric division. The Tethered Aerostat Radar System, or TARS, is a stationary airborne platform system intended primarily for military surveillance programs as it is capable of detecting low altitude aircrafts.
d) High performance cordage made out of Nylon, Polyester, Aramid & Dyneema ranging from few mm to few inches are being developed and supplied to all the Army, Navy, Air force & other defense departments for applications in parachutes, transport, aerostat balloons etc.
3. Aquaculture – This is one of the most important and growing vertical for Aquaculture and provides Cages, Predator nets, Bird Protection nets, knotless Netting and Mooring.GWRL in recent years came out with altogether a new material for net-pen that inherently resists fouling and does not require copper treatment. This product has literally revolutionized aquaculture.
4. Agriculture – This vertical is used for value-added applications such as shade nets,crop covers, mulch nets, anti-hail nets, bird-protection nets and green house covers. Last year it expanded its product range to include insect-protection nets that prevents infestation and crop damage. Company is expected to launch products for other areas like sericulture and floriculture.
5. Coated Fabrics – The company recently introduced this vertical by introducing a multi-benefit product for users of tents and pandals. The product provides protection against fire, UV rays, dust, wind and water. While the conventional textile used to erect tents or pandals are made from highly ignitable materials, GWRL product is made from fire-retardant fabrics.
6. Yarn & Threads – This vertical provides yarn and threads for various applications like Woven Sack,Jute Bag stiching, Weaving, Shoe stiching, Bag Closing and even Doll Hair. A lot of its end application is stiching bags used in delivering e-commerce goods.
7. Sport Nets – It provides nets for almost all sports like Tennis, Soccer, Badmition, Hockey, Volley Ball, Swimming Pool nets etc. This is an ever-green vertical for GWRL and it has a strong brand name in this vertical world wide.
8. Geosynthetics – GWRL offers solutions in various applications such as Rockfall Protection, Coastal & River Protection, Erosion Control, Landfill and Lining Systems, Earth Retention Systems and Ground Improvement Techniques.
The company has a very strong R&D culture as evident from various patents and patent pending solutions such as Sapphire Ultracore Predator Protection Nets (Patent pending. A unique mixture of polymer and metal wires with a stiffening resin), Garfil STAR yarn (High strength special polyolefin yarn – patent pending) apart from Flexible Helimat as mentioned above etc.
Valuations: The company has an extremely healthy dividend payout and has a record of un-interrupted dividend payout. The company has been consistently generating very good cash flows and is trading at 0.65 times market cap to FY14 sales (684cr_ and at a forward PE of around 10. GWRL has been reducing debt with the debt reducing from over 42cr in FY12 to around 10cr. The promoter holding has increased from 46% to over 50.25% with additional 6% being held by another garware company and GRWL Trust. For the first half of this FY, the company has delivered a growth of 23.4% on topline and a profit growth of around 68.4%. The H2 of the company is expected to be even better and a futher fillip to this belief comes from last week’s promoter buying just before declaring the trading window.
Technicals:The stock is trading at multi-year high and is currently trading above its support levels of 203-204. It is looking at set to break its multi-year highs of 224 and if it closes above it, this would signal tremendous strength further. Needless to say stock technically is very strong.
GWRL has very good capital structure and debt coverage indicators; healthy cash accruals; a dominant market share in the domestic fishnets, ropes and twines business backed by a strong established presence in the export markets. Exports contribute close to 45% of revenues for the company and therefore, there’s a natural hedge available. Changes in export incentives had affected the profitability of GWRL last year, however, with improved realizations and favorable addition and changes in product portfolio, the company was not only able to protect the operating income as well as net profits but also increase it. The company and business is extremely diverse and this gives it very good diversity in earnings and therefore, stability. Most importantly the company is very innovative and is continuously re-discovering itself. No wonder that even when the world including india was not growing the company kept on re-inventing itself and kept on growing. The company has a very strong product portfolio and does not have a direct competitor. The present government’s thrust on defense opens up a huge additional opportunity for GWRL and the company has already started to innovate and demonstrate multiple unique products for the sector. The company was hoping to do 1000cr turnover in next two FY but with the changing indian scenario and improving its US and Europe markets, the company could easily overshoot this by 10-15%.
Note:The volumes are pretty high for some reason and its quite possible that the stock is by default trying to breakout above 224-225 levels in anticipation of good results. Please research the stock fully and only if convinced take further action. This is one of the most stable small cap stock around.
Disclaimer: No holding in the stock, but it is safe to assume that I may or may not invest in future. Also, the above stock view is my personal view in individual capacity. For rest, please look at the About page.
God Bless !!