Angel Broking’s research report on Garware Wall Ropes
Garware Wall Ropes (GWRL)’s 2QFY2016 results outperformed our estimates on the bottom-line front. The company’s top-line for the quarter grew by a subdued 6% yoy. On the operating front, the company reported margin improvement, primarily on account of lower raw material costs. Further, on the bottom-line front, the company reported strong growth on account of a favorable operating performance and lower interest costs.
Subdued top-line growth: The company’s top-line grew by ~6% yoy to ~Rs 214cr (which is below our estimates of ~ Rs 232cr), mainly due to lower growth in the Synthetic Cordage segment (of ~3% to Rs 180cr). The Fibre & Industrial Products segment reported a strong growth of ~14% to Rs 39cr.
PAT grew ~42% yoy: The reported net profit grew by ~42% yoy to ~Rs 15.4cr (our estimate was of ~Rs 12.7cr) on account of falling material prices and lower interest costs with the company having repaid a significant amount of its debt in FY2015.
Outlook and valuation: Going ahead, we expect GWRL to report a top-line CAGR of ~11% over FY2015-17E to ~Rs 967cr owing to strong domestic as well as export sales. On the bottom-line front, we expect the company to report ~20% CAGR over FY2015-17E on account of expansion in operating margin (due to lower material prices and higher exports, which is a high margin business). Further, the company has reduced its debt significantly which will lead to cost savings. Hence, we recommend a Buy rating on the stock with a target price of Rs 423.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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