Garware Wall-Ropes - Buy at Rs43 with a target of Rs60 - LKP BYTES

The story so far ...

The Pune based Garware Wall-Ropes ( GWR) is a Rs6bn company belonging to the RBG Group of companies and is a leading producer of technical textiles which is primarily used in a variety of industries like Infrastructure, Transportation, Fishing, Agriculture, Sports, Defence and Industrial applications. GWR has formidable brand equity for its products with well known brands like Garfil, Garmet, Sapphire, Olivene, Maxiflex, Maxigold, Sportiva and Plateena among others. GWR has 3 manufacturing facilities in the state of Maharashtra.

Synthetic Cordage is a $700mn industry worldwide and GWR is the world leader with an 8% market share. The synthetic cordage segment forms more than 75% of its revenues and Industrial Products accounts for the balance 25%. Exports form close to 45% of its revenues and Europe is a key market for GWR. The company has historically enjoyed poor discounting on the bourses as it is not into a high margin business.

The story ahead ...

GWR is an innovative company and through its new product offerings across diverse sectors has successfully managed to move up the value chain from being a company which essentially used to service the fishing sector over the past few years. Today its products in the geo-synthetic space is being well received as the market is growing and this provides immense opportunities to GWR going forward as the company has several products here which can provide a host of civil engineering solutions.

With an un-interrupted dividend track record over a number of years, GWR has a 6% dividend yield and with a comfortable debt equity of 0.5x the Rs6bn entity is available at a market capitalization of just Rs1bn. We recommend a BUY on GWR trading at 4xFY'13E and 3xFY'14E earnings with a one-year price target of Rs60.

Source : Equity Bulls

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