Fiberweb (India) Ltd. share price target

Fiberweb (India) Ltd. reported robust results above our expectation with a revenue of Rs. 427 mn and growth of ~139% / ~61% YoY/ QoQ respectively led by growing demand from export markets. EBITDA stood at Rs.54.6 mn, with contraction in margin by ~720 bps / ~549 bps YoY/QoQ respectively to 12.8% due to traction in commodity prices....

Preferential allotment to fund capex plan: FIL has announced expansion plan of Rs 1 bn for which the company has proposed Rs 300 mn by preferential allotment and Rs 700mn by loan from banks. The proposed funds will be used for enhancement of the capacity from 5,000 MT to 15,000 MT p.a., to meet working capital requirement and other general corporate purposes. We expect the impact of proposed expansion by the end of H2FY18. We have considered (QIP of Rs 300mn) equity dilution in our earlier valuation where our estimated share capital was Rs 163 mn but as per company press release of...

Strong growth in PAT, margin expansion of 1,236 bps YoY: FIL enjoys tax benefit from BIFR till FY18. This helps to surge absolute PAT of the company to Rs. 28.2 mn vs Rs. 0.6 mn last year along with the better performance by...

FIL has state of art facility with unique double beam technology which has diverse applications supplied by the renowned manufacturer, REIFENHAUSER Gmbh of Troisdorf, Germany. Hence the products of the company are of best quality and have been accepted by giant companies as end-users in many advanced countries. It has certificates like ISO 9001-2008, 14001-2004, OHSAS 18001:2007 Certified by quality Registrar Intertek and UKAS. Apart from the above, the Company also holds authorization/accreditation conforming to Oeko-Tex standards from Hohenstein Textile Institute, Germany. The company’s ability to produce superior quality product and continuous Research & Development would help the company to sustain its revenue growth from export markets.

Valuation: We believe, going forward the non-woven Technical Textile sector would grow globally as well as in India led by 1) changing perception of consumers towards disposable products 2) increasing per capita income 3) increasing awareness of hygiene. We like the stock as it is uniquely placed in the organized sector with low cost of production, strong order book and robust expansion plan by FY18 due to growing demand in TT products. The stock is currently trades at 24.1x/ 16.7x / 14.2x / 11.6x of FY16/17/18/19e. We initiate a coverage on FIL with BUY rating and a price target of Rs. 158 with a potential upside of 55% (18x PE multiple to FY19e EPS;10 year average PE).