Garware Polyester Limited

Cmp- 238 Rs

Garware Polyester Limited (GPL) is the pioneer and the largest exporters of polyester films in India. Also it is the sole manufacture of Solar Control window films in India and among the only two companies in the world having patented technology for manufacturing the UV stabilized dyed films and perhaps the only company in the world with backward integration for manufacturing of Solar control films.

GPL is the trend-setter in Solar Control Film industry with a history of more than 3 decades of technological development. The Solar Control window films are sold under the well established brands of the company.

The Company also has backward integration through establishment of Batch Process Polyester Chips plant which ensures a steady stream of supply of variety of specially designed chips for the BOPET Film Lines.

Products/Business

The Company produces wide range of products having variety of end applications. GPL manufactures Bi-axially Oriented Polyethylene Terephthalate (BOPET) / Polyester Films, Sun Control Films, Thermal Lamination Films and Specialty Polyester Films. GPL also manufactures premium grade heat rejection films based on the latest IR Rejection Technology developed in its in-house R&D facility center.

The Company has also developed films for better seal and peal strength application for proper lidding of any type of containers (Universal).

The Company has a well-developed marketing network throughout the world and it has developed wide network of dedicated customers across the globe i.e. USA, Europe, Russia Far East, China, Middle East, Africa, South America, Australia, New Zealand etc. In order to expand the business and offer better services to the customers of Consumer products in overseas market, the Company has Subsidiary Companies situated in USA and UK. The quality of GPL products is rated amongst the best in the world 

The Company has maintained its record of being the top exporter of polyester films and continuously bagging the top exporter award from Plexconcil. With introduction of high quality variety of product offerings and its satisfied customer base across the globe, the Company is fully confident of maintaining its strong position in exports

The company has large customer base in overseas premium markets like North America, South America, Russia, Europe, China, Far East, Middle East and Africa. The company has a very well established brand GLOBAL WINDOW FILMS which is registered in the USA and is one the most popular brands there. The Company has been catering to customers across AMERICAS through its Step Down Subsidiary Global Pet Films Inc. (GPF) in USA.

The share in developed market like USA has grown exponentially over these years and the outlook is very positive and encouraging for the business

Thermal Film

With variety and high quality product offerings in thermal lamination films, the Company is growing its share in the export market. GPL has developed Gold & Feather feel films at this division and focusing on increasing exports volume for these specialty products

Currently, the company exports to almost 80 countries worldwide. In the domestic market, it is a market leaders and having a strong brand recall.

Company Performance / Financials

For the Qtr Ending June 2020.

Net Sales at Rs 174.13 crore in June 2020 down 30.75%.

Quarterly Net Profit at Rs. 15.82 crore in June 2020 down 41.6%

EBITDA stands at Rs. 34.23 crore in June 2020 down 33.16%

For the Year Ended 2019.

• On Standalone Basis: 
  • Revenue from operations for the financial year 2018-19 at  922.69 Crores, is higher by 10.91 % over the last year ( 831.90 Crores in 2017-18) due to higher sales volume. 
  • The Earnings before interest, tax, depreciation and amortization (EBITDA) was  142.02 Crores as against EBITDA of  88.69 Crores in 2017-18. 
  • The Profit after tax (PAT) for the year was  74.34 Crores as against the PAT of  33.76 Crores in 2017-18. 
  • The total comprehensive income (net of taxes) for the year was  78.78 Crores as against  40.63 Crores in 2017-18. 

• On Consolidated Basis: 
  • Revenue from operations for the financial year 2018-19 was at  947.89 Crores higher by 12.58 % over the last year at  841.99 Crores in 2017-18 due to higher sales volume. 
  • The Earnings before interest, tax, depreciation and amortization (EBITDA) was at  153.07 Crores as against EBITDA of  88.50 Crores in 2017-18. The Profit after tax (PAT) for the year was  81.65 Crores as against the PAT of  33.12 Crores in 2017-18. 
  • The total comprehensive income (net of taxes) for the year was  86.10 Crores as against  39.99 Crores in 2017-18.

Key Risks

Company has very Low ROCE of about 5-6%.

Earnings are down about 30% due to the covid-19 effect. There exists uncertainty regarding bounce back of the earnings as well as sales cycle for the company.

Future Outlook The Company has modified the manufacturing facilities to suit the requirements of specialty films production and also in the process of upgrading the manufacturing facilities for reliability. The market for the specialty films is growing internationally. The company see good potential for growth in this segment. The new products are introduced which shall be drivers for the growth. The Company has created strong Brand presence for consumer goods marketing in India with dominant market share, in speciality film segment.

Future Outlook

The Global Solar control film market is growing continuously as an effect of increasing awareness of advantages of solar control films, reduction of energy costs & carbon footprint, reduction of ultraviolet (UV) rays and infrared (IR) emissivity. The surge in both, automobile sales and in real estate development globally is also driving growth of solar control films and we see very good growth potential in this segment.

The Company has introduced many Coated Products, Co Extruded Products, PETG Shrink Films for label applications with Low, Medium, and High Shrink Force. A wide range of high heat rejection films are introduced in International Market.The Company has successfully developed and introduced Paint Protection Film (PPF) for automobile application.

The Company has established best manufacturing practices and implemented LEAN methodology, SIX SIGMA and QA initiatives, wherever required, which are showing good results and improvements. The Company is also implementing TPM with the help of CII.

Growing Retail sector, increasing preference towards packaged items, liberalization and rising middle class is expected to increase the consumption of BOPET Films thereby adding to growth of this segment in the domestic market.

Conclusion

• Operations The Profit before tax increased by 116 % on account of higher sales volume and better inventory management, better working capital management, better product mix in expanded market, improved plant efficiency has helped the Company to improve its performance and bottom line profitability.
• Apart from that the book value of the company is about 600Rs while the stock currently trades at just 0.42 times the book value .
• Company holds about 262,543 shares of Garware Technical Fibres valued at 44.63 Cr Rs.
• Company has reserves and surplus of 1380 cr Rs.
• Borrowing have more than halved to 120 cr from more than 300Cr in 2017 showing management is committed towards making company completely debt free.
• Promoter holding is very high (Above 60%) and most importantly has been stable across past few quarters.
• Company has been increasing efficiency which can be seen clearly with increasing Inventory which clearly shows that the practices adopted by the management of implementing six sigma and Lean management techniques are showing results. 
• Overall considering the risk as mentioned above and sharp rise in the price of the share , Garware Polyester Ltd can be explored for long term.

One of the other Group Company Garware Technical Fibres was suggested on 19-May-2019 at the price of 1068 which is currently trading at 1700Rs+ thereby giving more 60% returns in almost 1 year even after significant fall in the markets due to Covid-19.

Link to the Garware Technical Fibres Report-: Garware Technical Fibres.

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