Fiberweb India Ltd - Set to grow at a rapid pace; initiate with BUY - BOB Capital Markets Ltd

We initiate coverage on Fiberweb India Ltd. (FIL) with a BUY rating and a price target of Rs.158 implying 55% upside. We believe, being a focused player of non-woven products, FIL could be a key beneficiary in the Technical Textile space led by 1) improving global demand for Technical Textile (TT) products 2) robust order book 3) proposed expansion plan 4) increasing per capita income and changing perception of consumers towards disposal products. We believe, FIL to achieve its revenue growth at a CAGR of ~36% over FY16p-19e.

Superior quality, product development and global presence is a key to grow: FIL has state of art facility with unique double beam technology which has diverse applications supplied by the renowned manufacturer, REIFENHAUSER Gmbh of Troisdorf, Germany. Hence the products of the company are of best quality and have been accepted by giant companies as end-users in many advanced countries. It has certificates like ISO 9001-2008, 14001-2004, OHSAS 18001:2007 Certified by quality Registrar Intertek and UKAS. Apart from the above, the Company also holds authorization/accreditation conforming to Oeko-Tex standards from Hohenstein Textile Institute, Germany. The company's ability to produce superior quality product and continuous Research & Development would help the company to sustain its revenue growth from export markets.

Proposed capacity expansion to boost the topline: Due to increasing demand across the markets (domestic & international) the company is planning expansion in FY17-18. The company has plans to buy two more machines which would add the capacity (~10000 MT / ~2000 MT respectively) to fulfill the current market demand. Also it has plans to improve manufacturing efficiency by incorporating various balancing equipment's. We expect post expansion capacity of ~17000 MT (current 5000 MT + additional 12000 MT) would upsurge the company's revenues at a CGAR of ~36% over FY16-19e.

Robust order book gives revenue visibility: FIL has strong order book of Rs.789 mn including export order worth of Rs. 489 mn and domestic worth of Rs. 300mn executable over FY17-18. In agriculture, Hygiene and laminated segment Company's products command premium in USA, UK, Europe and Middle East. Its order book has grown at a CAGR of 72% / 62%, domestic / international respectively over FY12-FY17. Recently the company has done a pilot marketing of the products and experienced a good response from developed countries like USA, UK and Europe. We expect this will help to grow order book going forward.

Valuation: We believe, going forward the non-woven Technical Textile sector would grow globally as well as in India led by 1) changing perception of consumers towards disposable products 2) increasing per capita income 3) increasing awareness of hygiene. We like the stock as it is uniquely placed in the organized sector with low cost of production, strong order book and robust expansion plan by FY18 due to growing demand in TT products. The stock is currently trades at 24.1x/ 16.7x / 14.2x / 11.6x of FY16/17/18/19e. We initiate a coverage on FIL with BUY rating and a price target of Rs. 158 with a potential upside of 55% (18x PE multiple to FY19e EPS;10 year average PE).

Shares of FIBERWEB (INDIA) LTD. was last trading in BSE at Rs.95.5 as compared to the previous close of Rs. 96.05. The total number of shares traded during the day was 12999 in over 125 trades.

The stock hit an intraday high of Rs. 98 and intraday low of 92.05. The net turnover during the day was Rs. 1229570.

Source : Equity Bulls

Keywords