Why is Fiberweb India Ltd a multibagger stock
Fiberweb India is set to grow at a rapid pace. It is a focused player of non-woven products and could be a key beneficiary in the Technical Textile space.
The growth will be led by
(1) improving global demand for Technical Textile (TT) products
(2) robust order book
(3) proposed expansion plan
(4) increasing per capita income and changing perception of consumers towards disposal products.
Fiberweb India can achieve revenue growth at a CAGR of ~36% over FY16p-19e.
The stock can become a multibagger because Fiberweb India has superior quality, product development and global presence. It has state of art facility with unique double beam technology which has diverse applications supplied by the renowned manufacturer, REIFENHAUSER Gmbh of Troisdorf, Germany.
The products of Fiberweb India 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.
Why Fiberweb India deserves to be bought now is because the proposed capacity expansion will boost the topline. There is increasing demand across the markets (domestic & international) and so the company is planning expansion in FY17-18. It plans to buy two more machines which would add the capacity (~10000 MT / ~2000 MT respectively) to fulfill the current market demand. Also it has plans to improve manufacturing efficiency by incorporating various balancing equipment’s. Post expansion capacity of ~17000 MT (current 5000 MT + additional 12000 MT) would grow revenues at a CGAR of ~36% over FY16-19e.
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Fiberweb India’s order book is strong. It stands at order book of Rs.789 mn including export order worth of Rs. 489 mn and domestic worth of Rs. 300mn executable over FY17-18. In agriculture, Hygiene and laminated segment, Fiberweb India’ products command premium in USA, UK, Europe and Middle East. Its order book has grown at a CAGR of 72% / 62%, domestic / international respectively over FY12-FY17. Recently the company has done a pilot marketing of the products and experienced a good response from developed countries like USA, UK and Europe which will help to grow order book going forward.
Valuations of Fiberweb India
Fiberweb India can be multibagger because stock is quoting at cheap valuation at 24.1x/ 16.7x / 14.2x / 11.6x of FY16/17/18/19e. 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.
The stock 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.
Good Results of Fiberweb (India) Ltd for Q2FY17. The revenue was Rs. 221 mn with growth of ~41% / 68% from ~156 mn / Rs. 131 mn YoY / QoQ respectively. The EBITDA margin expanded by 877 bps / – 744 bps YoY/QoQ respectively to 16.4% (Rs.36.3 mn) led by change in raw material prices and decrease in operating expenses. Reported PAT stood at Rs. 28 mn with YoY/ QoQ growth of 4378%. /21.6%.
Order Book of Fiberweb India
The order book of Fiberweb India is ~Rs. 730 mn till October 2016. The management is expecting few more orders in November. The current capacity utilization is 80% – 85%. Fiberweb India has expanded its current capacity from 5000 TPA to 7500 TPA through leasing out additional 2500 TPA machinery which would increase its current capacity by 50%. The new capacity will cater to the increasing demand from US which is a result of strong marketing strategy undertaken by the company. The revenues are expected to grow at a CAGR of 36% over FY16- FY19e led by strong order book and capacity expansion. The management is expecting 18-20% revenue growth in FY17.
Good Buy at cheap valuation
Fiberweb India’s is at PE of 20.5x/17.4x/14.3x of FY17e/18e/19e respectively. With the increasing visibility in revenues led by order book of ~ Rs. 730 mn, high potential from newly launched products with better margin, capacity expansion and change in product mix, the revenue and earnings are expected to grow at a CAGR of 36%/26% respectively over FY16-FY19e.