Q2FY17 Result Review (Wholly owned subsidiary of Bank of Baroda)

Dis

BUY $CompanyN ame$

SECTOR: Plastic Products

Fiberweb (India) Ltd. (FIL)

17th October, 2016

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 the company. Also decrease in depreciation aided increase in PAT.

Rs.158

Up/Down (%) 26%

Bloomberg Code

Reuters Code

FWB IN

-

Share Holding (%)

As on June 2016

Promotor holding

55.5

Public

44.5

Stock Data Nifty

8,520

Sensex

27,530

52 week high/low

129/14.5

Maket Cap Full (Rs. bn)

1.6

Price performance (%)

1M

3M

6M

1Y

Absolute

25.1

65.8 271.7

291.1

Relative to Sensex

28.8

66.9 264.3

289.9

Relative Performance 450 350 250 150

BSE Sensex

Sep-16

Aug-16

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

50 Jan-16

EBITDA margins expanded by 877bps YoY: FIL posted EBITDA of Rs.36.3mn vs Rs.12 mn / Rs. 31mn, a growth of 203% / 16% YoY/ QoQ respectively. EBITDA margin expanded by 877 bps YoY and contracted by 744 bps QoQ to 16.4% led by fluctuation in crude oil prices. Other expenditure as percentage of sales has increased to more than double (149% YoY), however, reduction in staff cost as a percentage of net sales to 4.6% from 7.3% / 8% YoY/ QoQ respectively contributed to the margin expansion. The company expects to maintain EBITDA margin to 14-16% in FY17. We believe, FIL would be able to maintain its EBITDA margin in mid-teens. On a conservative basis we are expecting EBITDA margins to be at 15.1% in FY17e which would further expand to 19.2% in FY19e led by better capacity utilization and change in product mix.

Rs. 125

Dec-15

Revenues stood at Rs. 221 mn:- The revenue stood at Rs. 221 mn with strong growth of 41.3%/ 68% YoY/QoQ respectively led by increase in price realisation and new customers. FIL’s current order book is ~Rs. 730 mn till October 2016 and the management is expecting few more orders in November. Its current capacity utilization is 80% - 85%. In line with our expectation, FIL 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. We expect the revenues to grow at a CAGR of 36% over FY16FY19e led by strong order book and capacity expansion. The management is expecting 18-20% revenue growth in FY17.

Price Target

Nov-15

Fiberweb (India) Ltd. reported robust results in Q2FY17 with a revenue of Rs. 221 mn and 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%.

Price

Oct-15

Affirming expectations; Maintain BUY

Fiberweb India Ltd.

Source:-Bloomberg

Valuation: At CMP of Rs.125, the stock trades at PE of 20.5x/17.4x/14.3x of FY17e/18e/19e respectively. 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, we expect revenue and earnings to grow at a CAGR of 36%/26% respectively over FY16-FY19e. We maintain our BUY rating with a price target of Rs. 158 with an upside of 26% (18x of FY19e).

Exhibit 1: Financial summary (Rs mn) Year end: March Net sales Growth (%) PAT Adjusted PAT EPS (Rs) Growth (%) P/E(x) ROE (%) ROCE (%) Net debt/equity (x) P/Bv (x)

FY14 640 26.4% -7 -8 -0.7 -676.0 -182.9 1.2 -1.0 -2.1 -2.3

FY15 681 6.5% 20 20 1.8 -370.3 67.7 -3.5 3.1 -2.1 -2.4

FY16 616 -9.7% 71 53 4.2 128.8 29.6 -15.9 7.8 -2.3 -3.5

FY17e 710 15.4% 77 77 6.1 44.3 20.5 8.4 4.5 0.9 1.7

FY18e 1,137 60.0% 118 118 7.2 18.0 17.4 11.0 7.6 0.7 1.9

FY19e 1,542 35.6% 144 144 8.8 21.8 14.3 11.8 11.7 0.7 1.7

Source: Company, BOBCAPSe

Padmaja Ambekar | [email protected] | +91 22 6138 9381

Fiberweb (India) Ltd. | 17 October 2016

(Wholly owned subsidiary of Bank of Baroda)

Exhibit 2: Q2FY17 Financial Results (Rs Mn)

Q2FY17

Q2FY16

YoY (%)

Q1FY17

QoQ (%)

Net Sales

220.7

156.2

41.3

131

68.0

Raw material consumed

157.2

111.6

40.8

65

141.3

71.2

71.5

10.1

11.3

4.6

7.3

27.2

10.9

12.3

7.0

EBITDA

36.3

12.0

EBITDA Margin

16.4

7.7

8.1

11.2

28.2 0.0

(%) of net sales Staff cost (%) of net sales Other Expenses (%) of net sales

Depreciation EBIT Interest Other Income PBT Less: Taxation Tax / PBT Recurring PAT Exceptional items Reported PAT NPM (%)

50 -11.2

10

-0.7

8 148.7

35

-22.0

27 202.9

31

15.6

23.9 -27.8

8

-0.6

0.8

23

21.3

0.1

0.1

0.0

0.0

0.0

28.2

0.6

23

0.0

0.0

0

0.0

0.0

28.2 0.0 28.2 12.8

0.6 0.0 0.6 0.4

21.6

0.0 4378 4378

23 0 23 17.6

21.6 21.6

Source: Company, BOBCAPS

| Equity research |

2

Fiberweb (India) Ltd. | 17 October 2016

(Wholly owned subsidiary of Bank of Baroda)

Financials Exhibit 3: Income Statement Year end: March

FY14

FY15

FY16

FY17e

FY18e

FY19e

Net sales

640

681

616

710

1,137

1,542

Growth yoy (%)

26.4

6.5

(9.7)

15.4

60.0

35.6

Total income

642

683

617

713

1,140

1,545

Expenditure

630

663

541

606

952

1,248

EBITDA

12

20

76

107

187

297

(39.0)

69.9

280.7

40.9

74.5

58.3

EBITDA margin (%)

1.8

2.9

12.3

15.1

16.4

19.2

Depreciation

23

1

32

31

46

62

PBT

(7)

20

71

77

118

191

Tax

-

-

-

-

-

47.8

Effective rate (%)

-

-

-

-

-

25.0

Change (%)

PAT

(7)

20

71

77

118

144

Growth yoy (%)

(18.5)

(373.2)

249.4

8.3

53.2

21.8

PAT Margin (%)

(1.2)

3.0

11.5

10.8

10.3

9.3

FY14

FY15

FY16

FY17e

FY18e

FY19e

110

110

126

126

163

163

Reserves

(706)

(686)

(573)

788

906

1,050

Net worth

(596)

(576)

(447)

914

1,070

1,213

-

-

-

-

-

-

1,233

1,216

1,035

801

801

801

678

688

588

1,716

1,871

2,015

Net Fixed Assets

540

543

409

378

1,332

1,370

Capital WIP Curr.Assets, L & adv. Inventory

-

-

-

-

-

-

177

182

209

1,373

590

709

76

84

75

86

134

177

42

32

53

61

97

132

26

43

64

1,207

335

374

34

23

17

20

23

26

-

-

-

-

-

-

39

38

30

35

51

65

34

35

25

30

46

60

Exhibit 4: Balance Sheet Year end: March Sources of funds Share Capital

Net deferred tax Loans Capital employed Application of funds

Sundry Debtors Cash & Bank Balances Loans & advances Other current assets Current Liab. & Prov. Current liabilities Provisions Net Current Assets Application of Funds

5

3

4

5

5

5

138

144

179

1,338

539

644

678

688

588

1,716

1,871

2,015

Source: Company, BOBCAPSe

| Equity research |

3

Fiberweb (India) Ltd. | 17 October 2016

(Wholly owned subsidiary of Bank of Baroda)

Exhibit 5: Cash Flow Statement Year end: March

FY14

FY15

FY16

FY17e

FY18e

FY19e

-11

19

44

77

142

235

Interest/div. received

4

2

2

0

0

0

Depreciation & amort.

23

1

32

31

46

62

OP/(loss) before tax

Direct taxes paid

0

0

0

0

0

-48

(Inc)/dec in wkg. capital

74

12

-15

-16

-72

-67

CF from op. activity

92

39

17

92

115

182

(Inc)/dec in FA+CWIP

-5

-4

103

0

-1000

-100

CF from inv. activity

-5

-4

103

0

-1000

-100

Inc./(dec) in networth Inc/(dec) in debt Interest paid Dividends paid

0

0

58

1284

38

0

-87

-16

-181

-234

0

0

-1

-1

0

0

-24

-43

0

0

0

0

0

0

-88

-17

-124

1050

13

-43

Inc/(dec) in cash

-2

18

21

1142

-871

39

Add: beginning balance

28

26

43

64

1207

335

Closing balance

26

43

64

1207

335

374

FY14

FY15

FY16

FY17e

FY18e

FY19e

-0.7

1.8

4.2

6.1

7.2

8.8

CF from fin. activity

Exhibit 6: Key ratios Year end: March Per share data (Rs.) EPS Cash EPS Book Value per share DPS

1.4

2.0

8.2

8.5

10.0

12.6

-0.5

-0.5

-0.4

0.7

0.7

0.7

0.0

0.0

0.0

0.0

0.0

0.0

-182.9

67.7

29.6

20.5

17.4

14.3

Valuation (x) P/E (diluted) Cash P/E

90.2

64.0

15.3

14.7

12.5

9.9

1269.4

745.5

219.5

142.9

111.6

70.4

EV/sales

23.4

21.9

27.2

21.6

18.4

13.5

Price to book value

-2.3

-2.4

-3.5

1.7

1.9

1.7

Dividend yield (%)

0.0

0.0

0.0

0.0

0.0

0.0

1.2

-3.5

-15.9

8.4

11.0

11.8

RoCE

-1.0

3.1

7.8

4.5

7.6

11.7

RoIC

1.7

3.1

13.1

20.8

18.3

18.7

-2.1

-2.1

-2.3

0.9

0.7

0.7

EV/EBITDA

Profitability ratios (%) RoE

Leverage ratio Debt/equity (x) Source: Company, BOBCAPSe

| Equity research |

4

Fiberweb (India) Ltd. | 17 October 2016

(Wholly owned subsidiary of Bank of Baroda)

Sales and Dealing Team Anil Pawar – Senior Manager – Dealing

+91-22-6138 9325

[email protected]

Sachin Sambare – Manager– Dealing

+91-22-61389331/33

[email protected]

Ashwin Patil – Executive – Dealing

+91-22-6138 9326

[email protected]

Research Team

Sectors

Vaishali Parkar Kumar – Analyst

Agri, Auto, Defence

+91-22-6138 9382

[email protected]

Padmaja Ambekar – Analyst

Auto Ancillary, Infra, Midcap

+91-22-6138 9381

[email protected]

Akanksha Tripathi – Analyst

Footwear, FMCG Textile, FMCG, Chemicals, Metals Bio Technology, Pharmaceuticals

+91-22-6138 9383

[email protected]

+91-22-6138 9384

[email protected]

+91-22-6138 9351

[email protected]

Kshitij Kelkar

+91-22-61389386

[email protected]

Kiran Sawardekar

+91-22-61389385

[email protected]

Nisha Rasal

+91-22-61389328

[email protected]

+91-22-61389336

[email protected]

Rishabh Mehta – Analyst Hareesha Kakkera – Associate Retail Dealing Team

Debt Dealing Team Minaxi Tiwari

UTI Tower, 3rd Floor, South Wing, Bandra-Kurla Complex, Bandra (E), Mumbai - 400 051. India. Ph.: +91.22.6138.9300 || Fax: +91.22.6671.8535 || Email: [email protected]|| Web: www.bobcaps.in NSE SEBI No. (CASH): INB231304537 NSE SEBI No. (DERIVATIVES): INF231304537 BSE SEBI No. : INB011304533 SEBI Registered Research Analysts: INH000000040 valid till 03rd February, 2020

Disclaimer BUY. We expect the stock to deliver >15% absolute returns. HOLD. We expect the stock to deliver 5-15% absolute returns. SELL. We expect the stock to deliver