CMP-888
Voith Paper Fabrics India (VPFI) is an almost 150 Years old 100% debt free subsidiary of VP Auslandsbeteiligungen GmbH a Heidenheim, Germany Based Company. The company is engaged in supplying the paper industry with technologically sophisticated products called paper machine clothing.
VPFI was incorporated in India in the year 1968 by Porritts & Spencer UK. In 1999, the Voith Group acquired major stake in the Company. The company changed its name from Porritts & Spencer (Asia) Limited to Voith Paper Fabrics India Limited in the year 2007.
The company initially commenced its business with manufacture of woolen and cotton dryers for pulp, paper and board industry with the technical support of Scapa and now carries its operations with the support of Voith Group.
Paper machine clothing is used to produce all grades of paper from light weight tissue to heavy weight container board. These tailor made engineered fabrics are made up of synthetic. With the entry into forming fabric business, currently VPFV is the only Indian manufacturer in a position to supply the entire range of machine clothing to paper manufacturers.
VPFV has extended the range of clothing for use on paper machines as the main business. Today the focus is on paper machine clothing (PMC), fibre-cement sheet making felts and hi-tech textile processing felts.
Product range of the company includes:
- Forming Fabric
- Press Fabric
- Dryer Fabric
- Fiber Cement
PARENT HISTORY:
VP Auslandsbeteiligungen GmbH, Part of Voith Group of Companies, Germany. Voith Group was founded in 1867 and is almost 150 Years old .The Group has presence in more than 60 countries around the world and operates through its Divisions – viz., Voith Hydro, Voith Paper, Voith Turbo and a new Division, that is, Voith Digital Solutions, whose set-up began on January 1, 2016. It currently employs about 19,100 employees worldwide, generating sales revenue of € 4.3 billion for the year 2015/16 (October to September) and is a major family owned industrial conglomerates in Europe.
GLOBAL OUTPUT-:
This market has an annual volume of 37 million tons and is growing yearly by 3.5 percent. In the last 10 years, the domestic demand for paper has almost doubled from around 9 million tonne in FY 2007-08 to over 17 million tonne in 2017-18. At the same time, with a CAGR of 6-7%, India counts on touching about 20 million tonne by FY 2019-20. However, in the last seven years, import of paper and paperboard have risen at a CAGR of 16.11% in value terms and 18.15% in volume terms. Imports are growing at a very high rate as compared to the increase in domestic production rate.
FINANCIAL PERFORMANCE-:
Company has achieved total revenue of INR 1,120.29 million, whereas ‘profit before tax’ for the current year was INR 324.76 million, marking an increase of 16.15% and 17.51% respectively, over previous year.
SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS AND CHANGE IN RETURN ON NET WORTH -: As compared to previous year (5.36), the change in ‘Debtors Turnover Ratio’ in the current year (7.01) amounts to 30.78%. This is primarily due to improved collection during the year under review. In other specified key financial ratios, the change over previous year is less than 25%. As compared to previous year (9.33%), the change in ‘Return on Net Worth’ in the current year (10.87%) amounts to 16.51%. This is primarily due to enhanced profits for the year under review.
CAPACITY ENHANCEMENT-: VPFI is in the process of its capacity enhancement by around 30% over next 2 years. In the first phase, construction of building is almost complete and installation of the machinery is presently underway. The Production is likely to commence in the current financial year. This will help us to improve quality, productivity and customer satisfaction in coming years.
GLOBAL OUTPUT-:
This market has an annual volume of 37 million tons and is growing yearly by 3.5 percent.
In the last 10 years, the domestic demand for paper has almost doubled from around 9 million tonne in FY 2007-08 to over 17 million tonne in 2017-18. At the same time, with a CAGR of 6-7%, India counts on touching about 20 million tonne by FY 2019-20. However, in the last seven years, import of paper and paperboard have risen at a CAGR of 16.11% in value terms and 18.15% in volume terms. Imports are growing at a very high rate as compared to the increase in domestic production rate.
OTHER KEY ASPECTS-:
- VPFI has Cash Equivalents of 125Cr as of March 2019.
- VPFI has Operating Profit margins of above 25% since past 5 Years.
- Compounded Sales Growth for 3 and 5 year stands at 14% (approx.)
- Compounded Profit Growth for 3 and 5 year also stands at 14% (approx.)
- VPFI has reserves of Rs 208 cr .
- VPFI is 100% debt free company.
COMMENTS-: VPFI has a very small equity base with just 43,93,559 fully paid up shares of which 74% shares are held by the promoters (VP Auslandsbeteiligungen GmbH) thereby leaving very less free float .
In case if the company wishes to buyback all the remaining shares with the cash available , based on the total cash and Equivalents it can pay at least 1000 Rs per share against current market price of 888 Rs. (Please note that this is a hypothetical estimation based on our view which may not be the actual case in reality.)
VPFI was previously suggested in Jan 2019 at the price of 800 Rs. Since than the stock has gained 19% in total making high if 950 Rs.
