FiberWeb India - Bouncer (growth) or yorker (trap)?

sravanind · September 11, 2017, 3:27am

I have started this thread, since other thread doesn’t have much info and is locked.

company website:http://fiberwebindia.com

CMP: Rs 312
Book Value: Rs 54.47
Market Cap 449.15Cr
Face Value: 10
Promoters Stake: 52% (39.89 Mr.Seth Family)
Pledged: 0%
Debt Free

About FIL

Established in 1985, is 100% export oriented Spun bound nonwoven fabric manufacturer. once declared sick unit by BIFR, has come out of preview of BIFR and gained Star Export House status and now has positive net worth and is debt free.
Spunbound nonwoven fabric has variety of applications in hygiene products (baby diapers, adult diapers and sanitary napkins). Agriculture products like crop covers, wind and insect protection. Textiles like protective garments in hospitals.
Being Export Oriented Unit, FIL enjoys tax benefits from the Govt. and automated machinery procured from Germany reduces the manual labor cost.

Investor Presentation: http://www.bseindia.com/xml-data/corpfiling/AttachHis/d37ee2ef-9e66-4a4f-a372-89ed2f6c7f3a.pdf

What makes it interesting to invest?

Growing demand for technical textiles

Her is the link for the paper (http://www.reuters.com/brandfeatures/venture-capital/article?id=15814) (thanks to @madhavikkutti for the link)
As per the paper, Spunbond Nonwoven Market will grow by 8.5% CAGR from 2017 to 2025.

Value Added Products

Since FIL turned to manufacture VAPs from synthetic fabrics, turnover has inceased from 5-8% from FY16 to 15-16% in FY17. VAPS has high realization and margins.

Robust Orderbook
Link
Company order book is worth Rs105Cr till Q4, which grew by 29%, and bagged order worth Rs 10.9Cr on 28Aug.

Capacity Expansion
Demand for technical texteils in the global market is huge and gap between demand and supply is about 25%., to tap into this opportunity management has decided to expand the capacity from current 7500 tons to 15000tons.
From ConCall,
3000tons expansion is due September 2017 will start contributing to topline and bottom line growth

100% subsidiary in UAE
as per concall, there are clients in US who need spunbound nonwoven fabric at less cost, they are ok to compromise on quality, since management do not want to spoil the reputation of FIL, 100% subsidiary of FIL is started in UAE which procures material from china and sell in US for 10% commission. Which is contributing to topline growth.
Here is the link for transcript of ConCall http://www.bseindia.com/xml-data/corpfiling/AttachHis/5fa95037-b651-42cb-9e95-4d7f31cd9856.pdf

Good QoQ performance:

Risks

Forex fluctuations

Raw material cost
Fluctuations in crude oil prices will have impact on the raw material cost. FIL has consistent raw material supplier for over a decade now, which is competitively priced and good quality material provided by supplier.

Complying to Regulatory Checks
From company website, FIL has plant established to manufacture samples from the spunbound nonwoven fabric to check for quality compliances.

My personal opinion: catch it young watch is grow

Please do your own research before investing.

Desc: I have invested in this

Source:
http://www.reuters.com/brandfeatures/venture-capital/article?id=15814

https://www.screener.in/company/507910
http://www.bseindia.com/stock-share-price/fiberweb-(india/#stock-opportunities)-ltd/fiberweb/507910

Alphin · September 11, 2017, 3:36am

Opportunity is very good based on your write-up. However can you please include the competition details also.

Is there anything that restricts other players from getting into this market??

sravanind · September 11, 2017, 3:37am

sure, will update on the competition soon

seeankur · September 11, 2017, 7:05am

Stock has risen from 10 odd ₹ to 300+ (30 times ). Book value is negative as per money control… Normally I have seen the stock corrects and moves sidewards for 2-3 years after such a good runup.

sravanind · September 11, 2017, 7:58am

yes, it rose from 10 to 300 over period of 3yrs. precisely movement has started in Dec’2016 when it was around 20.
it took 1.5yrs for reaching 300. it’s in time consolidation rather than price consolidation currently.
about book value, I’m seeing negative book value in moneycontrol from long time. I really don’t understand when do they update. so I referred to Screener
I’m hoping for a similar runup on back of capacity expansion and raising demand for Spunbound nonwoven / technical fabric globally

dhiresh17 · September 11, 2017, 11:04am

Fiberweb had CDR (Debt restructuring) and then the share price moved quickly. As per the recent concall management is now focusing much on value added products and demand for their product is good in US market. They have a good order book now and their customers are giving them repeat orders. Also capacity expansion is going on. I think it still has more steam left in it, just some patience is needed.

Disc: Invested

bramhaputra · September 11, 2017, 12:02pm

Promoter Shareholding has come down over 20% in last 12 months. i.e. from 66.17% in Sep 2016 to 52.7% now. If the story is too good as claimed (demand outstrips supply, customer asked Fiberweb to install high margin new capacity / product line etc), why are they selling?

~ bramha

sravanind · September 11, 2017, 12:45pm

selling was mostly done by Gayathri Pipes and Sulochana Devi & Abhisek Agarwal.
if you go through the Conference Call transcript
Mr Seth as clarified that Gayathri Pipes and Sulochana Devi & Abhisek Agarwal are not promoters, they are erroneously clubbed in promoters.

Family Mr. Pravin Seth are the only promoters and infact they have increased their holding.

Sulochana Devi & Abhisek Agarwal are running a business named RADHAMADHAV CORPORATION and in need of liquidity. it has nothing to do with the fundamentals of FiberWeb. it`s that they need liquid cash to run their business.
@madhavikkutti please add more details, if necessary.

madhavikkutti · September 11, 2017, 1:43pm

Please note that, my below view is only related to Sulochana Devi & Abhisek Agarwal selling their stocks. I have no clue why Gayatri Pipes & Fittings Pvt Ltd are selling their stake, as very limited information is available regarding them in the public media.

Based on my best judgement (please correct if I am wrong), the family of Sulochana Devi & Abhisek Agarwal are promoting the business RADHAMADHAV CORPORATION, as per the following BSE disclosure: http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/B7F9C4FD_8F59_4B29_BFA6_FAD34B5A40D2_142756.pdf. Also, there are good reasons to believe that, the above business is badly in need of money to payoff its debt and strengthen its e-commerce ventures. Sharing two related links:

bramhaputra · September 11, 2017, 3:42pm

Soniya Sheth, Director of Fiberweb (and wife of Pravin Sheth) is a Director of Gayatri Pipes & Fittings. Between 21st April and 5th May, Gayatri has sold 324,000 shares amounting to approximately 2.5% of outstanding shares.

sravanind · September 12, 2017, 1:31am

after detailed scrutiny of SHP,
if we exclude Gayatri Pipes & Fittings from promoters then Mr.Seth family owns 39.89%, which they have increased from 37.07%.

in public share holders, LIC of India holds 1.79%.

one more thing I should have included in the initial writeup was, Management had Issued 1800000 (18L) Convertible Equity Warrants for funds needs for expansion on 11 March http://www.bseindia.com/xml-data/corpfiling/AttachHis/0448cf99-ed94-4283-ae05-9c576de2c69a.pdf.

out of which 700000 (7L) shares were allotted on 29Mar http://www.bseindia.com/xml-data/corpfiling/AttachHis/52dafa37-15e7-4e4d-b796-accd89a78224.pdf

and 100000 (1L) shares were allotted on 15Apr http://www.bseindia.com/xml-data/corpfiling/AttachHis/b5a82874-2ed4-4a50-ad76-a13dbaeddfda.pdf

remaining 1000000 (10L) shares were allotted on 6July http://www.bseindia.com/xml-data/corpfiling/AttachHis/5a498ae4-a44c-4d19-b5dd-712fdfc102d1.pdf

total 18Lakh shares were allotted to group of Strategic Investors, not forming part of the Promoter Group of the Company, in records time of just 4months

bullrun1988 · September 13, 2017, 3:59am

Do you think latest stromes in USA will affect the crude price and that effect could also be seen at fiberweb’s sales in future.

anupkalani · September 13, 2017, 5:47am

The story looks very interesting and it always bounces back from 300-310 odd levels.

Few questions from my side though:

How are they funding the capex program - internal accruals or debt or preferential allotment?
Who are the other players in this industry in India and abroad?

sravanind · September 13, 2017, 10:00am

@anupkalani

How are they funding the capex program - internal accruals or debt or preferential allotment?
they chose to issue preferential shares, refer above post (FiberWeb India - Bouncer (growth) or yorker (trap)? - #11 by sravanind)

Who are the other players in this industry in India and abroad?
below is the excerpts from research paper (http://www.reuters.com/brandfeatures/venture-capital/article?id=15814)

For instance, in June 2017, Asahi Kasei announced plans to invest USD 45 million for establishing disposable diaper production lines in Thailand. Similarly, in June 2017, Fiberweb India announced plans to expand its spunbond production capacity from 7,500 tons to 15,000 tons to cater to its U.S. customers. In May 2017, Gulsan announced plans to purchase Reifenhauser’s Reicofil 5 line. The new line will be located in Turkey adding 35,000 tons to Gulsan’s existing capacity. Fibertex Personal Care announced plans to expand its nonwovens printing operations in the U.S. in August 2017.

phreakv6 · September 13, 2017, 2:01pm

Why doesn’t the company from China export directly to the US? Its better for both the exporter in China and the importer in the US.

Something doesn’t smell right going through the Concall transscript and Investor presentation. There seems to be a general reluctance to get deeper into product related discussion. See this for example.

This reminds me so much of the interviews that the Shilpi Cable CEO used to give.

As for the Promoter selling, take a look at this.

This can’t be further from the truth.

Soniya Pravin Sheth is a director at Gayathri Pipes and also at Fiberweb. This is the actual reasoning by Mr.Pravin Sheth in the concall.

which again sounds gibberish.

Please be very wary and dig more on these lines because everyone knows what happened to Shilpi Cables. There is a similar warrant and preferential allotment fiasco there as well. Even charts look pretty similar.

And then this happened to Shilpi…

jayesh265 · September 13, 2017, 2:50pm

Hi,

I think here it is not clear how much control and influence does Ms Soniya P Sheth have in Gayatri Pipes. There might be other directors who are in need of cash and hence selling. Further, while promoters’ buying can be seen positively, selling is not always a sign of something “gibberish”. I would like to give a “benefit of doubt” to the company looking at its results.

It might be because the subsidiary is in “Free Trade Zone” in UAE and hence the company might get tax benefits.

However, I agree that we need to not only get a clarification on the both points but also verify the claims of the company that their products are superior and are liked by companies in USA (as per con call).

I think that the information is only fed by the company in this case and it is a more alarming thing in this story.

I am more uncomfortable with this reply:

Instead, the company should work on a dividend distribution policy if the business is doing well and the profits are real.

Disc: I have a tracking quantity and views may be biased.

Request @nagesh_reddy to look at this since I think he was invested in this.

Regards,

Jayesh

phreakv6 · September 13, 2017, 3:03pm

Here is something even more alarming. Here is the latest Annual Report.

http://fiberwebindia.com/pdf/FIL_Annual%20Report%202017.pdf

I really wanted to understand what these “value added products” (or just their products for that matter) are, so that I could see what the demand is, who the competitors are and what their pricing power could be and so on.

I searched for products in the document and found 18 occurrences and went through each of them. There is absolutely no specifics anywhere on what these products are although they wax eloquent about their quality and their demand and how their Customers love it and so on. I didn’t find the info in the Investor Presentation so I thought their AR might have it but there is absolutely nothing here too. This seriously is like Shilpi Cables. I request you guys to read concall transcripts of Shilpi Cables from earlier in the year or watch their interviews with CNBC TV18 (Or just go through Shilpi Cables thread on VP).

To contrast it, please go through the AR of something like DCM Shriram or Gravita and see the amount of detail you can see about their products, segment revenues, outlook, capacities, demand, margins and so on.

http://www.gravitaindia.com/wp-content/uploads/pdf/gravita-annual-report-2016-17.pdf

nagesh_reddy · September 13, 2017, 4:03pm

Yes Jayesh,
You are right I invested in it very early and exited subsequently seeing the red flags identified by many investors.

jayesh265 · September 13, 2017, 7:27pm

Sir,

I think it will be too early to pass a judgement like this… specially only on the basis of what info you can/can’t find on the electronic media.

Honestly, I think not sufficient homework has been done on this from my side…

What if the products of the company are not specifics but of high/premium quality (I have not checked them personally)
As far as demand of products is concerned, we need to get the answers ourselves.
Rather than going through Shilpi Cables thread on VP, I request to go through the thread of Caplin Point Lab, which is an eye opener where the Team ValuePickr met the Management, also visited their new injectibles facility and advised investor to exercise caution which, I think was in the interest of investors. However, the stock proved a multibagger (100X for some investor as per thread) in a very short time …

fiberwebindia-brochure.pdf (304.4 KB)

phreakv6 · September 13, 2017, 8:04pm

@jayesh265 - Companies usually talk more about their business first up in their Annual Reports. This company has nearly nothing about its actual business. There is no mention of who its Customers or Competitors are. No outlook on the sector in terms of demands and risks. I request you to take a look at Gravita which is again a smallcap company but see the detail in their report. How can you buy a business without knowing what its prospects are?

The only information you can glean from the report is that their products are well-accepted and high-quality and demand is always high and Customers keep asking for more value added products which the company is going on supplying them at higher margins and is buying and selling low quality products from China to USA via UAE at 12-15% margins. This simply doesn’t inspire confidence for me. In essence, its a trading company if its the UAE subsidiary that is contributing to its topline.

Also the promoter has held 84 lakh shares in Sept 2016 when the share price was Rs.100. This has progressively reduced every quarter and now is at 76 lakh as of June 2017. After June, there is 4 lakh shares which have been sold by the promoter which means the shareholding in September will be 72 lakh shares or less! 12 lakh shares is nearly 15% of the promoter’s holding and that a lot of shares being sold just as the business is looking up dont you think?