Garware Wall Ropes - 2QFY2016 Result Update - Angel Broking

Garware Wall Ropes (GWRL)'s 2QFY2016 results outperformed our estimates on the bottom-line front. The company's top-line for the quarter grew by a subdued 6% yoy. On the operating front, the company reported margin improvement, primarily on account of lower raw material costs. Further, on the bottom-line front, the company reported strong growth on account of a favorable operating performance and lower interest costs.

Subdued top-line growth: The company's top-line grew by ~6% yoy to ~Rs. 214cr (which is below our estimates of ~ Rs. 232cr), mainly due to lower growth in the Synthetic Cordage segment (of ~3% to Rs. 180cr). The Fibre & Industrial Products segment reported a strong growth of ~14% to Rs. 39cr.

PAT grew ~42% yoy: The reported net profit grew by ~42% yoy to ~Rs. 15.4cr (our estimate was of ~Rs. 12.7cr) on account of falling material prices and lower interest costs with the company having repaid a significant amount of its debt in FY2015.

Outlook and valuation: Going ahead, we expect GWRL to report a top-line CAGR of ~11% over FY2015-17E to ~Rs. 967cr owing to strong domestic as well as export sales. On the bottom-line front, we expect the company to report ~20% CAGR over FY2015-17E on account of expansion in operating margin (due to lower material prices and higher exports, which is a high margin business). Further, the company has reduced its debt significantly which will lead to cost savings. Hence, we recommend a Buy rating on the stock with a target price of Rs. 423.

Shares of GARWARE-WALL ROPES LTD. was last trading in BSE at Rs.344.9 as compared to the previous close of Rs. 370.4. The total number of shares traded during the day was 70522 in over 3044 trades.

The stock hit an intraday high of Rs. 386.9 and intraday low of 333.4. The net turnover during the day was Rs. 25680963.

Source : Equity Bulls

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