Fiberweb India Multibagger

Fiberweb (India) Ltd Multibagger Buy Target Price Rs. 275

Fiberweb (India) Ltd is a strong multibagger candidate stock. It has posted strong results in Q3FY17 with a revenue of Rs 265 mn and growth of ~64% / 20% from ~162 mn / Rs 221 mn YoY / QoQ respectively. The EBITDA stood at Rs 48.4 mn, margin expanded by 521 bps / 184 bps YoY/QoQ respectively to 18.3% led by better product mix, strong order book and decrease in operating expenses. Reported PAT was Rs 40.4 mn with YoY/ QoQ growth of 4.4% / 43.8%.

Good product mix:-

Fiberweb reported revenue of Rs 265 mn in Q3FY17 FIL portraying a robust growth of ~64%/ 20% YoY/QoQ respectively led by change in product mix, increasing demand from developed and developing countries (avg. growth of ~10% p.a.), and new customers.

The current order book is ~Rs 820 mn till January 2017 (expected to be executed in next 6 to 9 months) and it is expecting more export orders.

In last two quarters Fiberweb performed very well. It increased its order book substantially. The revenue estimates for FY17 are Rs 893mn (~25.7% change in growth). The growth is expected to be 45% on the back of healthy order book, high margin product mix, and growing exports (72% revenue contribution from exports).

The revenues of Fiberweb is expected to grow at a CAGR of 47% over FY16-FY19e led by all above points coupled with capacity expansion plan in FY18.

Fiberweb’s EBITDA grew by 129% YoY. It increased to Rs 48.4mn vs Rs 21.1mn / Rs 36.2mn, a growth of ~129% / ~34% YoY/ QoQ respectively. The EBITDA margin expanded by ~521 bps / ~184 bps, YoY/QoQ to 18.3% despite surged raw material prices which was balanced by better product mix and reduction in other expenditure. We expect EBITDA to grow at a CAGR of 72% over FY16- FY19e and margin expansion of ~759 bps which would derive to ~19.9% by FY19 on account of better capacity utilization (current 90%) and increasing demand for high margin products.

Capex plan:

Fiberweb 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. The impact of proposed expansion will be seen by the end of H2FY18.

The revenue growth of ~45%/56%/40% is expected for FY17/FY18/FY19 due to capacity expansion plan, strong order book, surge in sales growth, and growing demand from price sensitive customers in Middle East. This would result in substantial increase in EPS to Rs 9.4/12.5/14.0 vs. earlier estimation of Rs.6.1/7.2/8.8 in FY17e/FY18e/FY19e respectively.

Valuation: At CMP of Rs.202, Fiberweb trades at PE of 21.2x/16.1x/13.2x of FY17e/18e/19e respectively. The increasing visibility in revenues led by strong order book of ~Rs 820 mn, addition in capacity and better product mix will lead to revenue / earnings to grow at a CAGR of 47%/45% respectively over FY16-FY19e. The stock deserves is a BUY with a price target of Rs 275 with an upside of 36% (18x of FY19e).


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