IS GARWARE TECHNICAL FIBRES A COMMODITY PLAY OR A SECULAR GROWTH STORY?

 GARWARE TECHNICAL FIBRES LTD.

Twitter:- @saketreddy

I WILL DIVIDE THE BLOG INTO TWO PARTS :- BUSINESS VERTICALS AND OPERATIONAL PERFORMANCE OF GTFL.

1.Company Description :-

GWRL is a niche player in technical textiles with a strong export franchise (58% of revenue). Expertise in fibre technology and polymer processing holds it in high repute among makers of high wear & tear and high impact products. Diversifying from a twine/rope manufacturer (shipping) in FY1994 to netting (fishing, sports, agri), GWRL is evolving into a leading player in geosynthetic (infra) and coated fabric (Defence). Also providing specialized solutions to the cordage and infrastructure industry worldwide. Established in 1976, the company today is a multi-divisional, multi-geographical technical textile company. The company manufactures and provides world class solutions in high performance polymer ropes, fishing nets, sports nets, safety nets, aquaculture cages, coated fabrics, agricultural netting and geosynthetics.

2. Business Verticals:-

FISHING:-

The company is a leading supplier of nets, ropes and twines for deep-sea fishing and is the No.1 in India with 65% market share and is among the top 5 companies globally. The company's Product range includes Twisted and Braided Nets used in Trawling, Gill Nets, Dole Nets, Purse Seine Nets, Pelagic Nets.The company also offers customized differentiated products to cater to the needs of the fishing industry across India’s vast coastline. Fishing contributes about 25% of revenues to the company and has a presence in Canada, Chile, Norway, Australia, New Zealand and South East Asia. Some of the clients are reputed companies like Indian Navy, ONGC, Coast Guard, IOCL.

Some of the Unique Features of GTFL'S Fishing Nets are  :-

• Garfil Runner : High Speed
• Garfil Nest : Less Fish Damage
• Garfil Opener : Better Mouth Opening
• Garfil Rocky : Cut Resistance
• Garfil Ropes : Strong & Reliable
• Garfil STR : India’s No. 1 Fishing Net.

AQUACULTURE:-

The company is Globally renowned for their aquaculture cages and predator systems.  GTFL's products include a variety of aquaculture cages, predator systems with a strong presence in the developed markets of Canada, USA, Norway, Scotland, Australia, New Zealand, Chile, etc. Aquaculture segments contributes around 25% to the company's overall revenues. The company's product range includes Nylon and Star Cages, Predator nets, Bird protection nets, Sea lice treatment tarpaulins and Knotless nets.

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• Some of the Unique Features of GTFL's AquaCulture Nets are as follows :-

• Sapphire Ultracore: High Cut Resistance Predator NetSapphire SealPro: Light Weight, Hardwearing Cages for dual purpose- Farming & Pred control.
• Sapphire Excel: Specially designed stiff braided net for Norway.
• STAR: Unique for Farming Industry (patent pending).
• Viking Plus: New netting for fish farming cages, durable, long life and excellent to machine washing.
• Maxima & X-2 Mooring Ropes: Light weight, high strength range

YARNS & THREADS AND COATED FABRICS :-

Under the Garlon brand, Garware Technical Fibres offers Yarn and Thread solutions that find multiple applications across industries; from portable bag closing machines and port bagging thread to Shoe stitching and manufacture of Fibrillated Bulk Containers. The company's product range includes Bag Closing, Shoe Stitching, Doll Hair, Woven Sack,Weaving, Reinforcements, Jute bag stitching and FIDC. Ropes find application across various users in the Heavy Engineering, Shipping,

Transmission, Safety and allied industries.Yarn gets used for stitching purposes across various industries, such as Fertilisers, FoodGrains, Foot Wear, Filter Fabrics and other allied industries.

Garware offers a wide range of Coated Fabric solutions for quality conscious customers to enhance value to their businesses. Backed by a strong technical know-how and processes, Garware Coated Fabrics are used in a wide range of demanding applications ranging from Truck Tarpaulins to Aquaculture Solutions.

Depending on the customer needs, the diverse range of Coated Fabrics can be imbued with various features like fire retardant, anti-rodent, anti-mildew and many more. The Garware range of Coated Fabric products are deployed as truck tarpaulins, awnings, tents, hangar covers, inflatable bouncies, bio gas covers, trailer curtains, oil booms and many more. Used for various applications ranging from transportation to sports.Woven Fabric Finds usage in several products, such as mats, table cloth, etc.

SOME UNIQUE CHARACTERISTICS OF GTFL'S YARNS& THREADS & COATED FABRICS BUSINESS :-

• Garlon by Garware Technical Fibres has the highest brand recall and recognition and is the default choice for almost all PPMF yarn and thread requirements in India.
• Better seam strength of bags
• Continuous package resulting in low downtime & minimum wastage
• Guaranteed length
• High breaking strength
• Resistant to chemicals
• Knotless package
• Unique anti slough off Y Cone pack
• Compatible with all kinds of portable sewing machine
• High abrasion resistance
• Easily repairable
• Wide range of colours
• 100% Waterproof
• Highly UV resistant
• Wind stability

SPORTS, GEOSYNTHESIS, AGRICULTURE AND SHIPPING:-

Leading supplier of nets for tennis, football, cricket, golf,basket-ball, beach volley ball and Ski nets for Tournaments globally from India. The company provides tennis nets, volley ball nets, basketball nets, ski nets, cricket nets, badminton nets, soccer nets, handball nets etc. under Sportiva Brand Name. The nets are manufactured as per international standards and are well known for their high shock resistance, UV resistance and better knot stability.

GTFL Sports nets are used by Varroc-Vengsarkar Cricket Academy. They are also

used in several professional tournaments, such as Wimbledon, English Premiere League, American BaseballLeague, Irish Football League and NBA. They are also involved in Fitness Ropes and ropes related to Mountaineering.

Garware Technical Fibres offers solutions of synthetic ropes for various applications from power transmission (tower erection & line stringing) to marine hawsers for shipping, mooring and towing applications.

With decades of experience in developing application focussed solutions, Garware Technical Fibres is the most recognized brand name and the largest domestic player for Industrial ropes and marine hawsers. Leading supplier of mooring ropes (used to keep vessels secured) to shipping companies globally.

Garware Technical Fibres  diversified in the field in geosynthetics in the year 1998. We offer products and services in the field of civil engineering & infrastructure development. 

They have a team of highly qualified and fully competent civil, geotechnical, transportation and environmental engineers to undertake design and detailed engineering for a wide range of applications. They  use internationally accepted software like Geo5, Talren, MSEW, ReSSA, Reslope, GeoCoPS, FoSSA, etc. to design solutions in area like roads, railways, environmental and waste management, coastal and water front structures, etc. The company's  team of qualified experienced project managers, engineers, technicians and supervisors have been successfully implementing turnkey projects involving geosynthetic/geoenvironmental solutions with utmost efficiency and quality. Here, the company's clients include Konkan Railway Corp. (KRCL), Hind. Zinc, Chennai Airport.

THIS BRINGS ME TO AN END IN ANALYSING GTFL's DIVERSIFIED BUSINESS VERTICALS. NOW LET US LOOK AT THEIR OPERATIONAL PERFORMANCE OVER THE YEARS:-

1. GTFL'S FINANCIALS :-

SOURCE: CAPITALMIND

GTFL had a mediocre decade in terms of revenue growth, with revenues growing at low teens, but they had incredibly increased their bottomline performance through innovative cost cutting measures and have more than QUADRUPLED their NPM from 4.9% to 18.84% in a span of 9 years.

This incredible margin expansion had led to higher Profits and Cash flows for the Company. Also, Crude Oil being their largest raw material hasn't made much difference to their EBITDA growth, Raw Material Pricing Volatility has never been a major concern for GTFL.

GTFL has also been increasing ROCE's consistently over many years indicating that the business is generating sufficient income well above their Cost Of Capital.

GTFL also has lowered their D/E significantly, though debt has increased over the period, but considering that it isn't a LONG TERM DEBT makes it comfortable for the company to earn Cash.

GTFL CFO has also been consistently rising along with Profits. This means that the conversion of NP to CFO has been very good for the company indicating they don't any issue in doing CAPEX with the available CASH FLOWS.

FINAL THOUGHTS :-

I feel that GTFL along with its Technocrat Promoters has been doing very well in their Domestic as well as International businesses. The diversification of industries makes earnings less volatile for the company over the long run.

Overall, I feel GTFL could go on generating mid to high teens topline growth over the long term, a major advantage being that the company is a Dominant and almost a Monopoly in their businesses.

Source:- AMBIT REPORT ON GTFL, CAPITALMIND ARTICLE ON GTFL, TIJORI FINANCE, TICKERTAPE, SCREENER, GTFL ANNUAL REPORT, GTFL WEBSITE.

Disclaimer:- This is not a recommendation to buy/sell any stock. I have a holding in GTFL.