Technical Textile, Trending in the Economy

Garware Technical Fibres: Stock to see in Technical Textiles

Flagship company of the Garware Group.

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(A) About

Garware Technical Fibres Ltd is one of India’s leading players in the technical textiles sector established in Year 1976.

It's a multi-divisional, multi-geographical technical textiles company that provides solutions in high performance aquaculture, cage nets, fishing nets, sports nets and many more.

To read about the history of the company as well as the founders' family detail: Click Here

(B) Shareholding Pattern

Garware Technical Fibres Ltd - Shareholding Pattern
Garware Technical Fibres Ltd - Shareholding Pattern (Promoters)
Garware Technical Fibres Ltd - Shareholding Pattern Public

(C) Executive management

(i) Mr V. R. Garware - Chairman & Managing Director

Mr Vayu Ramesh Garware held the position of MD & Chairman of the company from 1 December 2016 to 1 December 2021.

Since joining the company, he served in various positions in the company. His Age is 9 Years old.

Moreover, He is a Graduate Cum Laude in B Sc Economics (Specialization in Finance) from the Wharton Business School of the University of Pennsylvania, U.S.A.

(D) Business Portfolio

The company is into the business of manufacturing and selling different types of Ropes, Twins, Fishing Nets, webbings, agricultural netting, geosynthetics and many more.

Morever, Garware is the No.1 supplier of cage for Salmon farming globally.

Additionally, Company caters its products to multiple business segments including fisheries, aquaculture, shipping as well as industrial sectors.

(E) Products

The Garware company offers its products to various sectors like :

  1. Fisheries
  2. Aquaculture
  3. Shipping and Industrial
  4. Yarn and Threads
  5. Sports
  6. Coated Fabrics
  7. Agriculture
  8. Geosynthetics

Moreover, The Product categorization is divided in mainly two segments called (i) Synthetic Cordages and (ii) Fibre & Industrial products and projects.

(i) Synthetic Cordages

The segment comprises Ropes, Twines, and nettings made of Twine.

Its cage nets are extremely resilient to the currents, and predators and also ensure no fish escape

Garware Technical Fibres Ltd - Products

(ii) Fibre and Industrial Products & Projects

This segment comprises fiber, Synthetic fabric, Yarn, Woven and Non-woven textiles, Secugrids, and Coated steel gabions.

Garware Technical Fibres Ltd - Products

To Read in Detail about the Products : Click Here

(F) Revenue Detail of Garware Technical Fibres Ltd

(i) Segment wise Revenue Breakup

Garware Technical Fibres Ltd - Segment  wise Revenue

During Mar-21, The Synthetic cordage segment contributed 83.46% of overall revenue, whereas 16.5% of revenue contribution reported from the Fibre and Industrial Products segment.

(ii) Geographical Revenue Segmentation

Garware Technical Fibres Ltd - Geographical wise Revenue

Company's outside revenue grew by ~5% from the previous year. However, revenue from Indian geography dropped by 5%.

(G) Cost Structure of The company

(i) As % of Net Sales

Garware Technical Fibres Ltd - Cost Structure

In March 21, Company incurred 27.50% of expense on Raw material. Meanwhile on other manufacturing expenses company has spent 22.35% as % of Net Sales.

(ii) Raw Material consumed Trend

Garware Technical Fibres Ltd - Raw Material consumed Trend

(iii) Freight and Forwarding Expense Trend

Garware Technical Fibres Ltd- Freight and Forwarding Expense Trend

Freight and forwarding expense has been constant for few past years, but due to Covid out-break and Supply shortages affected freight cost. which resulted increase of 1.31% in FY21 from FY20.

Although, Due to lack of containers, supply did not happened which caused increase in port charges.

(H) Manufacturing Facilities and Capabilities

(i) Manufacturing Plants

Garware Technical Fibres Ltd -  Manufacturing Facilities and Capabilities

The company has 2 Manufacturing Facilities in the state of Maharashtra and both plants are certified from ISO 9000:2015 and ISO 14001:2015 Standards.

(ii) Research and Development

To meet the objective of continuously improving and widening the product range, Company has set up a full-fledged Research and Development Centre which is recognized by the Department of Science & Technology, Government of India.

Additionally, the company filed 27 patents in the last five years

(I) Garware Technical - Geographical Footprint

Geographical Footprint - Garware Technical

Garware has International presence in more than 75 countries through 6 overseas offices
across the Globe.

Whereas, in Indian Geography, Co serves through 7 offices, 18 depots, and over 1600 dealers and sub-dealers.

(J) Financial Parameters

Garware Technical Fibres Ltd -  Financial Parameters

Company recorded 9% growth in Net sales during FY21, and CAGR of 7% in past 10 Years.

Over the years, PAT is also growing and stable as well. further, Cash flow is also showing strong stability in the company.

Apart from that, The ROA, ROE and ROCE also grew well.

(i) Results FY22 - Garware Technical Fibres Ltd

Garware Technical Fibres Ltd - QoQ Performance

Net sales increased by 15.64% to ₹356.31 crores in Q4 FY22 as compared to ₹308.13 crores in Q3 FY22.

During Q4 FY22, the operating EBITDA margin at 21.53% has improved by ~3% compared to Dec-21 Qtr despite very high inflationary headwinds.

(i) Results - Year on Year

Garware Technical Fibre - YoY Performance

(K) Management Discussion Points

In Q4FY22, The synthetic cordage segment, accounting for almost 90% of the mix, grew by 16.1% to Rs. 277.22 cr YoY, whereas, the Fibre and industrial products & projects segment witnessed a de-growth of 12.6% to Rs. 37.78 Cr.

Moreover, the international business is performing well despite the issues of global supply chain disruption - container availability and high ocean freight cost.

During Q2 and Q3 of FY22, the Cash Conversion cycle took a bit longer period due to global supply chain disruption which improved a little in the later part of the fourth quarter.

Industry outlook

The global Textile Industry Valued at $210 Bn in Year 2021, which is expected to Reach at $370 Bn by year 2032.

Moreover, During FY6 to FY20 the Indian Textile Industry grew at CAGR of 10% because high demands from the Infrastructure.

Infact, in FY21, India exports stood at $2.70Bn, which is growing at a CAGR of 9% since FY16.

Fish consumption per capita will rise from 20.5 Kg in 2016 to 21.3 Kg by 2027.

In farmed salmon aquaculture, each cage holds 800-1000 MT of salmon valued at USD 4-5 million, Apart from that, Garware is the the No.1 supplier of cage for Salmon farming globally.

(L) Strengths

(i) Strong market position in domestic sector and diversified revenue streams

Company has over four decades of experience in the cordage industry and commands a dominant share in the organized 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 sectors.

(ii) Widening portfolio of premium products driven by increased focus on value added products

The share of GTFL’s premium product portfolio has been increasing during the last few years, driven by increased focus on innovation and a customer-centric approach. The share of value-added products went up to 70-75% from around 50% during the last three to four years. The same ensures better pricing flexibility, amid volatile input prices, especially for commodities linked with global crude prices.

(iii) Geographically diversified revenue mix

Exports constituted 62% of GTFL’s revenue in FY2021. The company is present in more than 75 countries with healthy positioning in developed markets such as North America and Europe, which contribute to the bulk of export revenues.

Access to overseas markets insulates GTFL’s revenue profile from fluctuations in the domestic market and provides higher growth opportunities. The company is gradually making inroads into new geographies, while expanding its premium product offering for the export market.

(iv) Limited organized competition in domestic market in major product segments

The company 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. Coupled with its established brand name and quality products because of better understanding of fibre technology and polymer processing, this enables GTFL to command adequate pricing power.

(M) Weaknesses

(i) Price-sensitive domestic market can lead to volatility in operating margins

The company operates in a price-sensitive and fragmented domestic market, which is characterised by unorganized players. Furthermore, the upward price movement in end-products (fishnets, twines, ropes) could lead to demand pressure from the retail segment.

However, supported by an increasing share of value-added content, a premium product portfolio and pricing flexibility, GTFL has been able to improve its operating margins over the last few years.

(ii) Sluggish domestic demand in key product segments restricting revenue growth prospects

The domestic demand in the company’s key product segments has been stagnant over the last few years due to GST implementation, demonetisation and cyclones in various parts, which has restricted revenue growth from the Indian market.

GTFL is focusing on value-added products as well as exports to offset the muted demand in the domestic market. Export sales provide a substantial growth opportunity to the company because of a larger market size and its competitive cost advantage over other players in the developed economies.

Also, the firm continuously explores opportunities to enhance its customer offering to drive the top line.

(iii) Profitability exposed to global economic activities as export revenues contribute to over 50% of total revenues

GTFL derives more than 50% of its revenue share from the export market and as a result, it remains exposed to global economic activities and foreign currency volatility. To mitigate the demand risk from a specific overseas market, the company has been geographically diversifying its revenue base.

It adopts a conservative hedging policy, which along with natural hedge from imports (constituting less than 20% of raw material requirement), mitigates the foreign currency volatility to an extent. GTFL’s profitability remains partially exposed to the volatility in crude oil prices as the prices of its key raw materials are linked to crude oil price movements.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry’s Publications.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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