Wires & Fabriks (SA) Limited BSE Scrip Code: 507817 Textiles September 17, 2012 Equity Statistics Current Market Price Rs. 77.0 52 Week High / Low Rs. 106.80/68.50 Market Capitalisation Rs. crores 23.5 Free Float Rs. crores 7.0 Dividend Yield % 2.3 One Year Regression Beta Times 0.3 BSE Volumes Trend - Average = 16.48 Thousand 300 250 200 150 100 50 0 in '000s Business Summary Wires & Fabriks (SA) Ltd. (Wires & Fabriks) was incorporated in 1957 as Spinning Accessories Private Limited. It assumed its present name when it went public in 1985. M P Jatia is the Chairman, and B K Khaitan is the Managing Director. The company manufactures wire mesh, and fourdrinier wire cloth of all kinds. The company s product range now includes dryer screens (woven & spiral), pulp fabrics and technical fabrics for new industry segments where filtration/drying are required. The company was awarded accreditation under ISO 9002 system in 1994 and has been upgraded to 9001:2008 in 2009. The company is the first manufacturer of technical/industrial fabrics in the country to have in-house R&D recognized by Government of India. Currently, Wires & Fabriks is the market leader in India and the subcontinent for synthetic forming fabrics and among the few manufacturers in the world for SSB Fabrics, which represents the latest in synthetic forming fabrics technology. The company is able to maintain its leadership due to continuous thrust on R&D and technology up-gradation. 150 125 100 75 50 25 0 Relative Returns Sensex Wires & Fabriks In FY12, the company reported net sales of Rs.84.1 crore and net profit of Rs.5.1 crore. Geographically, the Indian market continues to be the key market contributing around 70% of net sales in FY12. Wires & Fabriks is currently trading at 4.6 times the FY12 EPS and 0.7 times the adjusted book value. Returns (%) 1M 3M 6M 1Yr Absolute 10% -15% -9% -24% Relative to Sensex 5% -23% -14% -31% Shareholding Pattern 100% 50% 0% Sep '11 Dec '11 Mar '12 Jun '12 Promoter DII FII Others Board of Directors Person Role M K Khaitan Executive Director & CEO K K Khaitan Joint Managing Director B K Khaitan Chairman & Managing Director S Ajmera Director M L Bhagat Director D D Trivedi Director Source: AR, Capitaline and CARE Research 1 Initiative of the BSE Investors Protection Fund
Background Wires & Fabriks was incorporated in 1957 as Spinning Accessories Private Limited. It assumed its present name when it went public in 1985. M P Jatia is the Chairman, and B K Khaitan is the Managing Director. The company manufactures wire mesh, and fourdrinier wire cloth of all kinds. The company s product range now includes dryer screens (woven & spiral), pulp fabrics and technical fabrics for new industry segments where filtration/drying are required. In November 1992, it came out with a rights issue aggregating Rs.3.66 cr. The amount was raised to part-finance the modernization of two of its weaving looms to produce higher-value-added multi-shaft double-layer synthetic fabrics. It entered into a technical collaboration with Hutter and Schrantz, Austria, for the same. As a part of its diversification process, it promoted Khaitan Paper Machines to rebuild paper machines, in technical collaboration with Neve Bruderhaus Machinen Fabrik, Germany. In 1995-96, the company earned the distinction of being the first ISO 9002 company, in its field in India. Continuous inhouse R & D has resulted in the development of new fabric design facilitated to offer products matching to specific customer requirements. Business overview Wires & Fabriks derives its revenue primarily from two segments i.e. manufacturing of paper mill products (which comprise finished woven wired cloth and chemicals & equipments mainly for paper industry) and wind power. Geographically, the Indian market continues to be the key market contributing around 70% of net sales in FY12. Sales from the Indian market grew by around 4% in FY12 y-o-y, while the sales from overseas market exhibited a higher growth of around 28% y-o-y. Mono-filament yarn and chemicals are major raw materials (formed around 94% of the total cost of raw materials consumed in FY12) for Wires & Fabriks in manufacturing of wire mesh, and fourdrinier wire cloth. Strengths and growth drivers The company s core strength is in-house R & D. Due to continuous thrust on R & D and technology up gradation the company is able to maintain its leadership. The company mainly deals with technical products for the paper industry. The paper industry is growing higher than GDP growth rate and besides domestic sector growth opportunities also exist in the export sector. Risk and concerns Reduction in growth rate of Indian paper industry and increased competition both from domestic and overseas suppliers are main areas of concern. Foreign currency rate is also an area for concern given that about 75 % of the raw material is imported. Future strategy and expansion plans The company plans to add capacity through a new expansion-cum-modernization initiative for its new line of SSB forming fabrics with the help of the existing collaborator, M/s Albany International Corp. U.S.A Its future plans include development of new fabric design, new products and new types of seams for fabric joints. Industry outlook Indian textile industry largely depends on textile manufacturing and export. It also plays a major role in the economy of the country. India earns about 27 per cent of its total foreign exchange through textile exports. Furthermore, it contributes about 14 per cent to industrial production, 4 per cent to the gross domestic product (GDP), and 17% to the country's export earnings. The sector is the second-largest provider of employment after agriculture. It not only generates jobs in its own industry, but also opens up scopes for other ancillary sectors. The industry currently generates employment to more than 35 million people. The fibre and yarn produced in India is comparable to the best in the world. Indian fabrics are known for their excellent workmanship, colours and durability. Due to heavy investments in world-class manufacturing plants, continuous innovation, new product mix, and strategic market expansion, Indian man-made fibres (MMF) are all set to take centre stage in the global arena. The potential size of the Indian textile and apparel industry is expected to reach US$ 221 billion by 2021, according to Technopak's Textile and Apparel Compendium 2012. 2 Initiative of the BSE Investors Protection Fund
Peer comparison Year ended March 31, 2012 Income statement (Rs. crore) Wires & Fabriks Lambodhara GTN Indian Total income 84.1 79.0 150.7 76.5 Net sales 82.5 75.6 140.1 67.7 EBITDA 17.9 9.6 8.9 15.5 Ordinary PAT 4.7 (0.7) (4.4) 11.2 Adjusted PAT 4.7 (0.7) (4.4) 8.8 Per share data (Rs.) Adjusted BVPS 108.0 24.0 27.6 191.1 Diluted EPS 16.6 - - 24.7 Growth (Y-o-Y) (%) Growth in total income 11.0 5.0 (0.1) 28.3 Growth in net sales 12.5 0.2 (6.2) 36.3 Growth in EBITDA 34.1 10.4 (48.7) NM Growth in adjusted PAT 30.6 NM NM NM Growth in EPS* 19.6 NM NM NM Profitability ratio (%) EBITDA margin 21.7 12.6 6.4 22.9 Adjusted PAT margin 5.6 NM NM NM Valuation ratios (Times) Price/EPS (P/E) 4.6 NM NM NM Price/Book value (P/BV) 0.7 4.1 0.3 0.6 Enterprise value (EV)/EBITDA 3.9 8.2 4.6 3.4 Note: Lambodhar: Lambodhar Textiles Limited., GTN: GTN Textiles Limited., Indian: Indian Card Clothing Co. Ltd. NM: Non Meaningful Quarterly financials Quarter ended June 30, 2012 Income statement (Rs. crore) Q1FY13 Q4FY12 Q3FY12 Q2FY12 Q1FY12 Total income 19.4 22.7 21.3 22.8 19.1 Net sales 19.4 22.2 21.2 22.8 19.1 EBITDA 6.3 6.6 6.9 6.8 5.5 Ordinary PAT 0.6 2.1 0.9 1.5 0.6 Adjusted PAT 0.6 2.1 0.9 1.5 0.6 Growth (Q-o-Q) (%) Growth in net sales (12.6) 4.4 (6.9) 19.2 Profitability ratio (%) EBITDA margin 32.4 29.6 32.3 29.7 28.6 Adjusted PAT margin 3.3 9.0 4.1 6.4 3.2 3 Initiative of the BSE Investors Protection Fund
Financial analysis In FY12, the company reported net sales of Rs.82.5 crore up 12.5% y-o-y. Total income witnessed a growth of 11% during the same period. Raw materials form the largest portion of cost for the company. In FY12, raw materials cost as a percentage of net sales was at around 29%. The company reported EBITDA margins and adjusted PAT margins of 22.1% and 5.6%, respectively in FY12. The operating cycle of the company is around 106 days, i.e. around 3.5 months in FY12. Interest coverage ratio is comfortable, i.e. 2.3 times and the company s current ratio is 3.6, which shows that the company s liquid position to pay its current liability is comfortable. The company has paid a dividend of Rs.1.8 per share for FY12, resulting in a dividend yield of 2.3% at the current market price of Rs.77 per share. Annual financial statistics FY08 FY09 FY10 FY11 FY12 Income statement (Rs. crore) Total income 51.2 55.1 63.7 75.8 84.1 Net sales 50.5 53.0 62.6 73.4 82.5 EBITDA 10.5 11.4 13.4 13.4 17.9 Depreciation and amortisation 5.4 5.0 6.0 7.1 8.8 EBIT 5.1 6.4 7.4 6.3 9.1 Interest 1.5 2.6 3.1 2.9 4.0 PBT 4.3 4.3 5.2 6.5 6.0 Ordinary PAT 2.5 2.6 3.5 4.3 4.7 Adjusted PAT 2.4 2.8 3.5 3.6 4.7 Balance sheet (Rs. crore) Adjusted networth 19.7 21.7 25.2 28.9 33.0 Total debt 28.4 48.9 46.1 53.0 48.6 Cash and bank 1.4 1.0 1.0 1.0 1.7 Investments 1.4 0.0 0.0 0.0 0.0 Net fixed assets (incl. CWIP) 32.7 54.5 53.1 61.9 56.1 Net current assets (excl. cash, cash equivalents) 18.6 21.7 24.6 27.4 32.1 Per share data (Rs.) Adjusted BVPS 64.3 70.8 82.5 94.6 108.0 Diluted EPS* 7.9 8.1 11.1 13.9 16.6 DPS 1.5 1.5 1.5 1.8 1.8 Growth (Y-o-Y) (%) Growth in total income 7.7 15.6 19.0 11.0 Growth in net sales 4.9 18.2 17.2 12.5 Growth in EBITDA 8.6 17.4 (0.1) 34.1 Growth in adjusted PAT 14.0 26.7 2.8 30.6 Growth in EPS* 2.0 36.9 25.4 19.6 Key financial ratio EBITDA margin (%) 20.8 21.5 21.4 18.2 21.7 Adjusted PAT margin (%) 4.7 5.0 5.5 4.8 5.6 RoCE (%) 7.0 7.3 4.8 8.7 RoE (%) 12.3 14.8 16.0 15.2 Gross debt - equity (times) 1.4 2.3 1.8 1.8 1.5 Net debt - equity (times) 1.4 2.2 1.8 1.8 1.4 Interest coverage (times) 3.5 2.5 2.4 2.2 2.3 Current ratio (times) 2.9 2.4 2.8 2.8 3.6 Inventory days 140.8 140.1 92.9 80.6 Receivable days 123.7 122.6 125.6 124.0 Financial Year (FY) refers to period from April, 1 to March, 31 4 Initiative of the BSE Investors Protection Fund
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