Faze three

Current Market price on the date of publishing this report-: 366 Rs

Note

🚨🔔 We have been tracking this company for quite a while now, but the increase in promoter holding by 4.62% in the last quarter has put the company on the radar. Despite intriguing financials and the confidence supported by increasing promoter holdings, we suggest users to not over invest in any particular company. 💰 Invest in such a way that even if the company closes, it should not make a huge dent in the portfolio. Stay cautious and always keep an eye on the market trends. 🧐📈📉

This is a 38 years old company engaged in manufacturing and exports of end home textile products items like bathmats, rugs, blankets, throws, cushions, etc. The company has diversified its product mix and is also a direct exporter to top retail store chains in USA, UK and Europe.

Introduction

Incorporated in 1985, Faze three was promoted by Ajay Anand who is the chairman and the Managing director of the company. At the factory in Haryana, the company produces and exports cotton handlooms, upholstery fabric, and made-ups. Among its offerings are dhurries, pillows, furniture, rugs, etc. FTEL sells goods to the US, Germany, Japan, Taiwan, and Hong Kong as well as many other countries. Additionally, FTEL was awarded gold medals for its export performance in 1991–1992 and 1992–1993.

Faze Three has been awarded the Dun & Bradstreet Business Enterprises of Tomorrow 2022 recognition for 2022 and 2021. The Company has received Best Innovation Award from Sainsbury’s UK and also an Outstanding Partnership Award from Williams-Sonoma Inc.

Besides that company has following accretions

Also, as a policy we try and ensure that single customer exposure is below 15% of Total Revenue and on the raw material side our dependence on imports is almost zero

Manufacturing companies’ competitive advantages include end-to-end integration from yarns to finished items. a Green Channel Supplier for the majority of global retailers.The company is also India’s largest maker of automotive seat fabric.

Three of the company’s seven home textile production facilities are in Silvassa, one is in Vapi, and three are in Panipat. Additionally, it has an integrated polyester yarn production unit and two on-site textile processing facilities that meet international standards.

Due to its brilliant design teams working together across three continents, the company is at the forefront of establishing design trends for the industry. Design studios for the company are located in America, England, Mumbai, Panipat, and Silvassa.

The internal capabilities of Faze Three cover the complete value chain, from design to delivery, including yarn and finished goods. The company adopts a customer-centric strategy, actively collaborating with customers before order confirmation on issues including design, development, and more. The company focuses on order-backed manufacturing, allowing it to guarantee prompt product delivery with shorter order turnaround times of 75–120 days. It offers versatility in terms of items and colours and has a reasonable minimum order quantity. Over 90% of its raw materials come from domestic sources, and 95% of its products have been sold directly to customers on a FOB basis.

Over the past 20 years, the company has established enduring relationships with its top 15 clients, which has led to consistent business across all product lines. No one customer contributes more than 15% of the overall revenue; instead, the top 15 clients account for almost 80% of the business’s income.

Brand

Company has its own brand called as AA Living which was founded nearly 21 years ago in 1998. AA Living’s flagship interior and lifestyle store is located at Nepean Sea Road, Mumbai.

Company’s brand was listed as part of “Top 10 stores in Asia” by WGSN in 2009, and won the “Best Linen” award at the GoodHomes 2014 awards. We also won the popular choice “Best kids décor store” award by Kidsstoppress.com in 2015 and 2016 for company’s brand Bizzy.

Company’s export clientele include celebrated international brands Vera Wang, DKNY, Restoration Hardware, Country Home, Coyuchi, Spirella, Aqua Nova, Front Gate, Pottery Barn, West Elm, Macy’s, Laura Ashley, Debenhams, Marks & Spencer, JC Penny, Elizabeth Arden, Lands’ End, William Sonoma, Zara and Dillards. In the children’s sector we export to leading brands such as Cocalo, Somersault and Pottery Barn Kids to name a few.

Company’s clientele includes notable celebrities and industrialists such as

as well as companies such as

Besides the brand has also been featured on the following

Business Products

Company mainly caters to following divisions

Retailer Solutions/ Textile Solutions

The company provides a full range of home textile products and services to all significant retailers across the world. It has a significant position in the home textile market because to its large-scale production facilities in India for bath mats, rugs, bedding items, pillows, and outdoor performance products. Additionally, the business offers its retail partners the advantages of its knowledge and durable infrastructure for marketing, logistics, and inventory management.

In order to create the most marketable product variety, Faze Three’s strong sales and merchandising teams, who are situated in India, the USA, the UK, and Switzerland, collaborate closely with retailers.

Hospitality Solutions

Faze Three provides bed and bath solutions to major hospitality chains and distributors globally. Company’s primary market is USA, Europe and expanding into Asia. The product range for Hospitality solutions include

Divergent Textiles Products such as

RePOLY Products

Germieshield

Microcapsules

This category includes businesses that produce cosmetotextiles. A textile item with specific cosmetic features is called a cosmetotextile. It contains a material that is released over time on skin.

Protector Yarn – It is the first yarn ever created that incorporates permethrin into the fibre for insect protection against mosquitoes, ticks, bed bugs, dust mites, and many other insects. Furthermore, it is completely safe and has no impact on people.

BOOST YARN – This implies a continuous skin care by large-scale transfer of vitamin E acetate (α-tocopheryl acetate) on human skin.

Automotive Seat Covers – Faze Three’s Autofab division develops and produces Automotive fabric & seat covers in India.

More details about this are covered in the company’s seperately listed company report which can be found from the link in the description below.

Other than that company caters to Hotel chains, Spas and Resorts as well as Cruise and liners.

Capex

• From 2019 to December 2022, the company invested more than INR 120 crores from internal accruals across all of its units in expansion, new equipment, new technologies, and de-bottlenecking.
• Expansion at Silvassa, which was completed in April 2021 and will have a 3x capacity above its previous (brown field) capacity, is in the flooring and rugs sector.
• With a total investment of INR 35 Cr, an expansion under the Top of Bed & Blankets sector is planned for the period of November 2021 to November 2022, with the goal of tripling current capacity on brownfield property.
• The Cotton Home Textiles division at Panipat is now expanding and will have a 3x capacity by October 2023. Total investment: INR 25 Cr. 35 Cr (estimated) INR was invested overall.
• With a potential income of at least USD 10 Mln in phase 1 within 3–4 years, the company has invested INR 12 Crs in subsidiary Mats and More Pvt Limited (Aurangabad) to develop a new category of outdoor patio mats for current clients. All future expansions, including this one, will be paid for with internal cash accruals. The business is also looking at manufacturing prospects in brownfields.
• The capex plan for the company would be finished in FY 24. As a result, between 40 and 45 percent of CFO generated would be accessible for alternate uses starting in H2FY 24.

Financials

For the year ended March 23

• The company reported consolidated revenue from operations of INR 504.46 billion, up from INR 324.59 crore the year before.
• In comparison to QE March 2021, the total Standalone Income for the quarter ending in March 2022 was INR 157.06 Crores.
• The Company’s results for the quarter ended March 2022 showed its best quarterly total income and net profit totals ever since its founding.
• Company’s Standalone Net Profit after Tax (NPAT) for the year ended March 31, 2022, was INR 51.07 crores as compared to INR 25.01 crores, representing a rise of 104% year over year.
• Consolidated NPAT was 51.08 crores for the fiscal year that ended on March 31, 2022, compared to NPAT of 24.93 crores for the fiscal year that ended on March 31, 2021.
• Company forecasts favourable movement in the aforementioned metrics based on the present visibility and pipeline of clients.
• Total Income & NPAT for the Year Ended 31st March, 2022 are the highest yearly values recorded by the Company.

For Q3 FY 23

• Net Sales stood at Rs 132.14 crore in December 2022 down 0.01% from Rs. 132.15 crore in December 2021.
• Quarterly Net Profit stood at Rs. 14.51 crore in December 2022 up 14.7% from Rs. 12.65 crore in December 2021.
• EBITDA stood at Rs. 24.90 crore in December 2022 up 6.27% from Rs. 23.43 crore in December 2021.

Management’s comments

Over the past five years, approximately 30% of operating profit has gone back into working capital and approximately 45% has gone back into expansion for future growth.

Sectorial Outlook

One of the largest and oldest industries in India is the textile sector. The textile industry is quite diverse, including hand-woven, hand-spun, and numerous mills. Since it is one of the largest sectors, the industry employs about 4.5 crore people nationwide, including 35.22 lakh people who work in handlooms. India is the second-largest exporter of garments and textiles after China.

India’s domestic clothing and textile sector makes for 12% of the nation’s export revenue, 7% of the industry’s value-added production, and 5% of the GDP of the nation. India is the sixth-largest exporter of clothing and textiles worldwide. India’s textile and apparel (T&A) exports, which include handicrafts, reached a record high of US$ 44.4 billion in FY 2021–22, a significant rise of 41% and 26% over the equivalent amounts in FY 2020–21 and FY 2019–20, respectively.

After garments and technical textiles, home textiles are the third-largest sector of the Indian textile industry. The two most popular selling items, bed linen and bath linen, make up two thirds of the market for home textiles. The other important goods in the industry are kitchen linens, curtains, upholstery, and rugs and carpets.

Going forward

Large retail chains from the US, UK, and Europe make up the top 15 clients of the business. Given their global sourcing, which includes India, these customers have a desire for at least 10x across all product lines. After the company’s decision to move away from China, there has been a noticeable shift towards sourcing goods from India. Within the company’s current customer base and product mix, there is a significant unmet demand as per the management.

Because it offers handloom, technical, and rubber-backed floor coverings under one roof, the company occupies a unique position in the market. In contrast to its competitors, who often only provide one of these items, the company is extremely strategically and operationally well-positioned.

Bathmats’ primary competition is a highly fragmented market that is controlled by privately held businesses outside of India. With annual sales between $150 million and $250 million, China is the home of the majority of the suppliers in this category.

Conclusion

Faze Three with a diversified product basket which includes cotton and rubber backed bathmats, blankets, durries, throws, hand tufted carpets and rugs made of cotton and wool, cushion covers, curtains as well as poly cotton and cotton mask, table covers, amongst many others under the technical textiles’ ambit is a company that has successfully positioned itself in the home textiles industry by providing a diverse product selection that appeals to a variety of consumers and market categories. Because of its emphasis on quality and capacity growth, ability to interact with consumers, and ability to provide quicker turnaround times, the firm is well-positioned for long-term sustainable growth. The company’s investment in Mats and More Pvt Limited’s subsidiary and exploration of brownfield prospects show how committed it is to consistently growing its product line and entering new markets.

In addition, Faze Three is a prospective long-term opportunity due to India’s expanding family income and population, as well as the expansion of end-use industries including housing, hotel, and healthcare. Faze Three is a company worth looking into for individuals wishing to invest in a business with significant development potential in the home textiles sector due to its solid partnerships with top clients, steady commerce across product lines, and distinctive positioning in the market.