Embed Size (px)
Citation preview
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
1
Voith Paper Fabrics India Ltd
BUY Target Price: Rs.188.00
CMP: Rs.157.00 Market Cap.: Rs.689.701mn.
Date: November 12, 2009
Key Ratios:
Particulars FY09 FY10E FY11E
OPM (%) 29 32 32
NPM (%) 15 17 17
ROE (%) 8 9 9
ROCE (%) 19 20 20
P/BV(x) 0.78 0.71 0.64
P/E(x) 9.7 7.7 7.0
EV/EBDITA(x) 4.92 4.13 3.76
Key Data:
Sector Textile Sector
Face Value Rs.10.00
52 wk. High/Low (Rs.) 186.50/67.65
Volume (2 wk. Avg.) 1077
BSE Code 522122
SYNOPSIS
• Voith Paper Fabrics manufactures various types of
Fabrics like Forming fabric, Press fabric, Dryer fabric,
Fiber cement and specialist in resistant Paper.
• The company offers forming fabrics, press fabric,
dryer fabrics and fiber cement used for making
asbestos sheets, pipes, and plain sheets.
• Company got many of certification like ISO
9001:2000), ISO 14001:2004, OHSAS 18001 and ISO
27001:2005, VPFI certified under various
categories.
• Net sales and PAT of the company are expected to
grow at a CAGR of 11% and 13% over 2008 to
2011E.
• Voith paper Fabric is a debt free company it is
positive sign for company.
Share Holding Pattern:
V.S.R. Sastry
Vice President
Equity Research Desk
91-22-25276077
Dr. V.V.L.N. Sastry Ph.D.
Chief Research Officer
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
2
Table of Content
Investment Highlights ............................................................................................................ 3
Peer Group comparison………………………………………………………………………………………………….….….4
Keyconcern………………………………………………………………………………………………………………….…………4
Financials……………………………………………………………………………………………………………………………….4
Charts………………………………………………………………………………………………………………………….………...6
Outlook and conclusions…………………………………………………………………………………………………….....7
Industry Overview…….…………………….……………………………………………………………….…………..…….. ..8
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
3
Investment Highlights
Q4 FY09 Results Update
Voith Paper Fabrics India Ltd is disclosed a result with its standalone net profit for the
quarter ended September 2009. During the quarter, the profit of the company rose by
64% to Rs.27.82million from Rs.16.95 million in the same quarter, last year. Net sales for
the quarter rose by 9% to Rs.119.66 million from Rs.109.70 million when compared to
prior period. Company earning is also increase by 64% to Rs.6.33 from Rs.3.86 compare to
its corresponding quarter.
Quarterly Results - standalone (Rs in mn)
As At Sept-09 Sept-08 %change
Net sales 119.66 109.70 9
Net profit 27.82 16.95 64
Basic EPS 6.33 3.86 64
Dividend Declare
Voith Paper Fabrics India has recommended 40% dividend i.e. Rs 4 per share of Rs 10 each
for the year ended on September 30, 2009, subject to shareholders approval.
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
4
Peer Group Comparison
Name of the company CMP(Rs. )
Market
Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend(%)
Voith Paper Fabrics 157.00 689.701 16.19 9.7 0.78 40.00
Bang overseas Ltd 48.50 653.59 1.23 39.67 0.70 0
Bombay Rayon 197.00 17089.0 17.82 11.01 1.95 15.00
Garware wall Ropes 58.50 1375.1 5.43 10.68 0.67 25.00
Key Concerns
Recession in global economy
Fluctuations in exchange rates
High competition from global players
Adverse Govt. policies
Financials Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) FY08 FY09 FY10E FY11E
Description 12m 12m 12m 12m
Net Sales 419.20 479.50 527.45 580.20
Other Income 36.27 36.57 40.23 44.25
Total Income 455.47 516.07 567.68 624.44
Expenditure -320.37 -375.76 -400.86 -440.95
Operating Profit 135.10 140.31 166.82 183.50
Interest 0.00 -0.10 -0.12 -0.13
Gross profit 135.10 140.21 166.70 183.36
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
5
Deprecation -28.92 -30.40 -32.22 -34.16
Profit Before Tax 106.18 109.81 134.47 149.21
Tax -38.27 -38.68 -45.72 -50.73
Profit After Tax 67.91 71.13 88.75 98.48
Equity capital 43.93 43.93 43.93 43.93
Reserve 791.88 842.45 931.20 1029.68
Face value 10.00 10.00 10.00 10.00
EPS 15.46 16.19 20.20 22.42
Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) 31-Mar-09 30-Jun-09 30-Sep-09 31-Dec-09E
Description 3m 3m 3m 3m
Net sales 117.57 110.07 119.66 131.63
Other income 9.20 9.01 10.96 12.06
Total Income 126.77 119.08 130.62 143.68
Expenditure -83.78 -95.83 -83.06 -96.09
Operating profit 42.99 23.25 47.56 47.60
Interest 0.00 -0.03 -0.07 -0.08
Gross profit 42.99 23.22 47.49 47.52
Deprecation -7.42 -7.35 -8.44 -8.86
Profit Before Tax 35.57 15.87 39.05 38.66
Tax -18.11 -1.34 -11.23 -12.37
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
6
Profit After Tax 17.46 14.53 27.82 26.29
Equity capital 43.93 43.93 43.93 43.93
Face value 10.00 10.00 10.00 10.00
EPS 3.97 3.31 6.33 5.98
Charts:
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
7
1 Year Comparative Graph
Outlook and Conclusion
At the current market price of Rs.157.00, the stock is trading at 7.77 x FY10E and 7.0
x FY11E respectively.
Price to Book Value of the stock is expected to be at 0.71 x and 0.64 x respectively
for FY10E and FY11E.
Earning per share (EPS) of the company for the earnings for FY10E and FY11E is seen
at Rs.20.20 and Rs.22.42 respectively.
Net Sales and PAT of the company is expected to grow at a CAGR of 11% and 13%
over 2008 to 2011E respectively.
Voith paper Fabric is a debt free company it is positive sign for company.
On the basis of EV/EBITDA, the stock trades at 4.13 x for FY10E and 3.76 x for FY11E.
We expect that the company will keep its growth story in the coming quarters also.
We recommend ‘BUY’ in this particular scrip with a target price of Rs.188.00 for
Medium to Long term investment.
Voith Paper BSE SENSEX
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
8
Industry Overview
Indian Textile and Apparel Industry
The Indian Textile and Apparel Industry is an integrated sector and occupy a significant position
in Global Trade. It not only processes high value products such as fabrics, garments and made-
ups but also grows its own raw materials (cotton, jute, silk and wool). The textile industry is
served by the organized, modern and mechanized mill sector, the small scale largely
unorganized power loom sector and the highly fragmented handloom (hand spinning and hand
weaving) sector. India is one of the few countries that has presence across the entire value
chain of the textiles and clothing business starting from raw material (fiber), spinning,
weaving/knitting, processing to highest value added products –garments and made ups.
The Textile and Garment Industry in India is a major contributor to the GDP, exports,
employment and foreign exchange earnings:
• During the year 2007-08 the sector accounted for 14% to industrial production, 4% to
the GDP and 17% to the country’s export earnings.
• It provides direct employment to over 35 million people in spinning, weaving, knitting,
processing, readymade garments, sericulture and jute sector. Textiles sector is the
second largest provider of employment after agriculture.
• The industry is self reliant to the extent that the entire value chain from raw materials to
made up garments is contained within the country.
• As on December 31, 2007, there were 1,744 textiles mills in organized sector with a
capacity of 34.87 million spindles, 4, 57,000 rotors and 56,000 looms.
• The production of spun yarn, including unorganized sector was 3,813.39 Mn. kg. in
2006-07 and about 4,000 Mn. Kg. in 2007- 08.
• Fabric production in 2006-07 was 53,389 million square meter registering an annual
growth of 4.5% during the last five years and about 57,491 Mn. sq.mt. in 2007- 08.
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
9
• During April to September 2008, readymade garments worth 4.87 billion dollars were
exported from India, up 7.04% from 4.56 billion dollars in the corresponding period of
previous year. In rupee terms, the figures work out to Rs. 20,760 cr. up 11.47% from Rs
18,631 cr. in April to September 2007.
The value chain
The broad based vertically integrated textiles industry consumes a diverse range of textiles
fibers, and yarns to produce various types of products for the domestic and export markets.
Natural fibers like Cotton, Wool etc. Synthetic fibers like Polyester, Rayon etc. form the primary
raw materials for the textile industry.
The textile value chain begins with ‘spinning’ which converts fibers into yarns. The yarns are
then converted into fabrics through weaving/ knitting. The fabric undergoes various processes
like scouring, bleaching, mercerizing, dyeing/printing, washing, finishing, etc. to produce
processed fabric that is suitable for manufacturing apparels or home textiles. The chemical
process for manufacturing fabrics with properties like anti-crease, oil repellence, water
repellence, etc, are undertaken in the processing stage.
In the final stage of ‘garmenting’, that is, before the processed fabric is converted into a ready-
to-wear garment, a series of sub-stages such as laying, cutting, stitching, etc. are involved. The
garments are finally marketed through a range of distribution channels in the domestic market
or are exported.
Indian government incentives to Textile sector
The textile industry is highly fragmented with a few organized players and a large number of
unorganized players. Hence, the industry does not enjoy economies of scale. In case of
investment in infrastructure, the weaving and processing stages are under-developed due to
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
10
lack of adequate investments, which has resulted in limited supply of good quality processed
fabric.
Technology Up-gradation Fund Scheme (TUFS) was launched in 1999 to provide firms access
low interest loans for technology up-gradation and setting up new units with state-of-art
technology. TUFS has been skewed towards the spinning sector. Of the total disbursements, 34
per cent has been disbursed for spinning while only 17 per cent has been allocated to
processing and garment manufacturing as on March 31, 2008. This has forced several large
domestic and export apparel manufacturer to depend on imported fabrics, which reduces the
turnaround time and lowers competitiveness in the industry.
As a solution to these problems, the Ministry of Textiles launched a scheme called Scheme for
Integrated Textile Parks (SITP) in 2005.
Scheme for Integrated Textile Parks (SITP)
Though the Indian textiles industry has some inherent advantages, infrastructure bottlenecks
have been a prime area of concern. To take advantage of the post Multi-Fibre Arrangement
(MFA) scenario, the Apparel Parks for Exports Scheme (APES) and the Textiles Centre
Infrastructure Development Scheme (TCIDS) were launched in 2002 to provide world class
export infrastructure at important textiles centers.
The performance of both the schemes was restrained by the nature of assistance permitted.
Therefore, both were merged into a new scheme called the 'Scheme for Integrated Textile Park
(SITP)' in 2005 to neutralize the weakness of fragmentation of various sub-sectors of the textiles
industry and non availability of quality infrastructure.
Objective of the scheme: The primary objective of the scheme is to provide the industry with
world-class infrastructure facilities for setting up textile units. The scheme would facilitate
textile units to meet international environmental and social standards. These parks would
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
11
incorporate facilities for spinning, sizing, texturing, weaving, processing, apparels and
embellishments and is based on the public private partnership (PPP) model.
Apart from SITP, the Government promoted the Textile Industry by Increase in Duty
Entitlement Passbook Scheme (DEPB) & duty drawback rates and reduction in interest rates for
exporters to compensate for US$ devaluation, continuous reduction of import duties on textile
machinery etc.
Some of the other Government initiatives are:
• Policy related to foreign investment: Upton 100% foreign direct investment allowed in
textile and apparel manufacturing industry, with approval of the Foreign Investment
Promotion Board (FIPB).
• Upgrading Infrastructure: “Scheme for Integrated Textile Parks” (SITP), based on
public94 private partnership model to build world class infrastructure facilities.
• Product specific “Cluster Approach” targeting development of 100 additional clusters in
textiles.
• Technology Mission on Cotton (TMC), focusing on cotton R&D, dissemination of
technology to farmers, improvement of market infrastructure and modernization of
ginning and pressing sector.
Conclusion
Indian textiles and apparel industry is presently at USD 58 Bn and is further expected to grow to
USD 110 Bn by 2012. Almost 2/3rd of the Indian apparel and textile industry is from domestic
consumption, which will keep it buffered from the ups and downs of the global trade and the
economic uncertainties of the developed market.
India’s home textile trade has grown at a CAGR of 9% in the last 4-5 years. However, the value
of exports in the last 2 years has remained constant at around USD 2.3 – 2.4 billion.
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
12
Interestingly the export of Bed, Table, Toilet and Kitchen Linen is growing at a much higher rate
of 29%
Indian domestic apparel market is USD 26 Bn in 2007 with urban demand contributing to more
than 60% of the total apparel market. Indian apparel export market is USD 9.7 Bn for the year
2007-08. However, India is facing intense competition not only from traditional competitors
such as China and Bangladesh, but also from smaller countries such as Vietnam and Indonesia.
Indian Government is promoting the Textile Industry by various initiatives like SITP, TUFS,
Increase in Duty Entitlement Passbook Scheme (DEPB) & duty drawback rates and reduction in
interest rates for exporters to compensate for US$ devaluation, continuous reduction of import
duties on textile machinery etc.
The Indian textile and apparel industry is well placed with its diversified production base,
abundant availability of domestic raw materials, well developed network of R & D, design and
testing institutes and growing pool of skilled workers. The labor intensive made-ups and
garment industries have witnessed vibrant growth and have the capability of meeting the
quality requirements of the global market. All these above factors, point out to the immense
potential of the Indian textile and apparel industry, which is poised to take maximum advantage
of the quota free regime.
________________ ____ _________________________
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
______________________________________________________________________________
First call India Equity Advisors Pvt. Ltd
13
Firstcall India Equity Research: Email – [email protected]
B. Harikrishna Banking
B. Prathap IT
A. Rajesh Babu FMCG
C.V.S.L.Kameswari Pharma
U. Janaki Rao Capital Goods
E. Swethalatha Oil & Gas
D. Ashakirankumar Auto
Rachna Twari Diversified
Kavita Singh Diversified
Nimesh Gada Diversified
Priya Shetty Diversified
Tarang Pawar Diversified
Neelam Dubey Diversified
Firstcall India also provides
Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO’s, QIP’s, F.P.O’s,Takeover
Offers, Offer for Sale and Buy Back Offerings.
Corporate Finance Offerings include Foreign Currency Loan Syndications,
Placement of Equity / Debt with multilateral organizations, Short Term Funds
Management Debt & Equity, Working Capital Limits, Equity & Debt
Syndications and Structured Deals.
Corporate Advisory Offerings include Mergers & Acquisitions(domestic and
cross-border), divestitures, spin-offs, valuation of business, corporate
restructuring-Capital and Debt, Turnkey Corporate Revival – Planning &
Execution, Project Financing, Venture capital, Private Equity and Financial
Joint Ventures
Firstcall India also provides Financial Advisory services with respect to raising
of capital through FCCBs, GDRs, ADRs and listing of the same on International
Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and
other international stock exchanges.
For Further Details Contact:
3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071
Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089
E-mail: [email protected]
www.firstcallindiaequity.com
