Garware Hi-tech films (Earlier Garware polyester)

hemanghigandhi · June 29, 2017, 7:39am

My first post in the forum.-

The Company : Garware Polyester Limited (GPL) founded in the year 1957, is the pioneer and the largest exporters of polyester films in India. GPL is the only manufacture of sun control window films in India and a trend-setter in Sun Control Film industry with a history of more than 3 decades of technological development. The Company has four manufacturing plants for Polyester Film and manufactures Film of thickness ranging from 10 micron to 350 micron.

The Company possesses Patented Technology for Dyed Polyester Film in India and USA and is the Second Company in the world to possess such Technology. The Company is already backward integrated through the establishment of a Batch Process Polyester Chips plant which ensures a steady stream of supply of chips for the Film Lines. The BOPP line set up by Company in last year was part of the Company’s efforts to ensure forward integration too. Thus Company’s strength is its integrated manufacturing facilities, R&D Center and development of specialty products for various applications.

Products : The Company manufactures Bi-axially oriented polyethylene terephthalate (BOPET) / Polyester Films, Sun Control Films, BOPP Films, Thermal Lamination Films and Specialty Polyester Films of high quality for a variety of end applications. GPL also manufactures the premium grade heat rejection films based on the latest `Nano Technology’ developed in its in-house R&D facility center. The Company has introduced Infrared rejection films which can reduce infrared heat up to 92%. It has also developed the film to reduce the impact of mobile tower radiation.

Domestic Business : Growing Retail sector, increasing preference towards packaged items, liberalization and rising middleclass is expected to increase in consumption of Polyester Films thereby adding to growth of this segment in the domestic market. Increased usage of window films in offices, commercial buildings and malls will continue to add to the growth of the Company’s business in the premium segment of window films. GPL has well recognized brands and integrated manufacturing facilities which are expected to augur well for the company’s future growth.

Global Business : Through its subsidiaries situated in USA and UK the company has developed a wide network of dedicated customers in Europe, USA, Far East, Middle East, Brazil, Australia, China, Russia, New Zealand, Eastern Europe, Mexico and Africa. The quality of GPL products is rated amongst the best in the world and the Company pays special attention on customer service and satisfaction due to which the customer base is consistent and increasing. The aim is to expand export base and catapult international operations into a major growth driver. GPF is the marketer of the brand ‘GLOBAL WINDOW FILMS’ which is registered in the US and is one the most popular brands. The subsidiary is catering to Russia, Europe, Asia-Pacific and Africa market film under the brand “Garware Sun Control”.

Future Strategy : The strategy is to focus on the specialty films, launch new products, strengthen network and Services and speed up brand building initiatives. Plans are afoot on a marketing warpath, overhauling the product portfolio and penetrate newer markets, launch aggressive advertisement campaigns. The shrink label application film is very well stabilized in the market. With demand outlook for High Shrink films remaining robust, the Company has plans to shift to the specialty PET shrink Films, where it sees a tremendous opportunity. In thermal film, GPL has developed Gold & Feather feel films. With foray into BOPP, GPL has now become the only company in the segment which will be manufacturing BOPET, Sun control Films, Thermal Lamination and BOPP.

Valuation : GPL, a six decade old company with promoter holding of 61% (Zero Pledge) posted a Consolidated total revenue for FY 17 of 925 Cr & Net Profit of 19.9 Cr on an equity of 23.23 Cr giving an EPS of Rs 8.57 per share. Borrowing stands at 267 Cr (Short Term) and 19.9 Cr (Long Term) Finance cost remained 32 Cr. The company is having 4 Lakh shares of Garware Wall Ropes (At current market price of 850 per share, the value is close to 33 Cr)Freehold Land, Lease hold land and an entire Building in Vile Parle, Mumbai, near Airport, the value of which should be many times of current market cap (300 Cr).

If company can sell even part of its mentioned asset and retire the entire debt than savings on interest alone directly gets added to the bottom line, which can boost the EPS by 15 Rs per share. Debt to Equity Ratio is 0.63, Debtor Days at 19.31. With bottoming out of the Polyfilm Industry in near future and Softening of interest rates, and falling Crude price, the profitability of the company with reducing debt, may improve going forward by 15 to 20% CAGR for the next few years, plus the company is back on dividend paying list after 5 years, that shows confidence of management towards future growth of the company, hence Investor may study this asset rich company for long term investment.

Jayantrichur · June 30, 2017, 4:50am

QoQ growth -ve, ROE very low…primafacie looks like a risky one.

Tarak · November 17, 2018, 8:52am

Some major points for AR 2018 are:

Reasons of loss or inadequate profits: During the financial
year 2016-17 & 2017-18, the turnover and profitability of the
Company has not adequate due to:-
a) Supreme Court’s Judgments;
I) Imposing ban on the usage of polyester film for
‘Gutka / Pan Masala’ packaging thereby reducing
the domestic market size by around 1,00,000 MT
per annum and drop in annual turnover to the
extent of 150 Crores. II) Prohibiting usage of solar control polyester films of any visual light transmission for automotive application has drastically affected the top and bottom-lines of the Company and impacting a drop in annual turnover of 130 Crores
approximately.
b) Sharp reduction in sale price of the film in domestic and
international market,
c) Tough competition in domestic and international
market.
d) Recession in Europe and USA hit the air-conditioning
and compressor industry in South East Asia which is a
major manufacturing center for the business.
e) Recession in automobile industry, internationally
affected the sales in China and USA which are the
major market players for automobiles.
Steps taken or proposed to be taken for improvement:
 The Company will continue to focus on cost control and cost
effective measures and give dedicated and specified thrust
to exports.
 The Company launched multiple brands, new products and
with aggressive and innovative marketing strategies the
major growth in Sun Control films is expected to be sustained
during the coming years. Sun Control films are presently
being marketed throughout the world and the Company’s
consistent high-class quality and better customer orientation
are highly valued in the market.
 Expected growth of the retail sector, increasing preference
towards packaged items, liberalization and growing
middleclass is expected to fuel growth of Polyester Film in
the domestic market.
 The Company expects that there will be improvements in the
top-line and bottom-line, as the commercial production of
BOPP film has already commenced.
 The Company is trying to explore for new market of specialty
and Sun Control films in Europe.
 Focusing on the biggest market for automobile i.e. China (18
million cars were sold during the year 2010-11) & USA.
 Introduction of new anticipated products will boost the higher
contribution.
The Solar control film market is growing internationally due to
increasing awareness of advantages of solar control films that is
reduction of energy costs, carbon emission reduction, reduction
of ultra-violet (UV) rays and infrared (IR) emissivity. The surge
in both, automobile sales in export markets and in real estate
development globally is also helping in the growth of solar control
films and we see good potential for growth in this segment. The
new products are introduced which will continue to be the driver
for growth.

The Consumer Products division has well established Suncontrol
film brands in the International Market that is “Sun control’ and
‘Global’. The company has been catering to customers across
North America, South America, Russia, Europe, China, Far East,
Middle East and Africa. ‘Global’ brand received good acceptance
in American Market. The market share in matured markets like
USA have grown exponentially. In continuation of the efforts for
Exports, the Company representatives are posted in strategic and
important markets like Russia, Malaysia, and UAE to develop and
grow the business. The efforts are made in the domestic market
with new products under Sun control brand for building application.
The Company has created strong Brand presence for Building

segment window glass application films in India with dominant
market share.
The Company has lowered down the BOPP operations to focus on
value added Nish Products.

Indebtedness has increased from 118 Cr in 2017 to 171 Cr in 2018
In continuation of our focus in Exports, we
have posted our Sales persons in strategic and important markets
like Russia, Malaysia, UAE to develop and grow the business. In
addition to this, we also market our film in “Garware Sun Control”
brand. In the domestic market in India, we are market leaders and
have a strong brand recall. We also sell laminated material under
neutral/customized packaging, dyed film and release liner, thus
offering marketing opportunities to distributors world-wide.The Global Solar control film market is growing due to increasing
awareness of advantages of solar control films, reduction of
energy costs & carbon footprint, reduction of ultra-violet (UV)
rays and infrared (IR) emissivity. The surge in both, automobile
sales in export markets and in real estate development globally is
also helping in the growth of solar control films and we see good
potential for our growth in this segment. We have also introduced
new products and CPD division will continue to be the driver for
growth in 2018.The Company through its Step Down Subsidiary Global Pet
Films Inc. (GPF) USA has been catering to customers across
AMERICAS. GPF is the marketer of the brand ‘GLOBAL WINDOW
FILMS’ which is registered in the US and is one of the most popular
brands. The subsidiary is catering to Russia, Europe, Asia-Pacific
and Africa market under the brand “Garware Sun Control”.

devgroup · January 20, 2019, 2:57pm

Garware polyster is posting operating cash flow of more than 100 crs since last two years. 600 crs valuation is just too cheap considering huge land bank and building

gurjeev · January 21, 2020, 4:34pm

If one notices their cash flows closely. You will see that money from working capital is been released from last 2-3 years. Which in all shows good cash flows.

My point here is to what level reduction of cash working capital possible

Secondly the fixed asset turns have dropped below 1. Either the promoter had built so many assets which he is not able to run fully as of now or the business requires more than 1 rs of asset to generate 1 rs of sale.

anandsharp · January 22, 2020, 4:31am

Even as allegations of gross corporate misgovernance have cropped up against the promoters of Garware Polyester Ltd, the 85-year-old Chairman and MD of the company, Shashikant Bhalchandra Garware has been reappointment for another five-year term.

https://www.outlookindia.com/newsscroll/garware-cmd-seeks-fresh-term-amid-charges-of-corporate-misgovernance-ians-exclusive/1620440

cupawar · April 29, 2020, 3:31pm

In the last two years, Garware Polyester Limited has moved away from concentrating on commodity grade products to the inclusion of more value-added products into its product
portfolio. The increased contribution of value-added products(with improved sales realization) as a result of better product mix initiative may have seen the operating cash flow for Garware Polyester Limited improving particularly well in the last two years. This can be seen when we go through the Income Vs Operating Cash Flow chart of Garware Polysters for the last 10 years :

As we can see, operating cash flows have improved significantly in the last six years. Also, the net profits were gradually improving as well in those six years with OCF well above the net income, which is a good sign from the point of view of transparent & efficient business practices. But what is more interesting to see is that the gap between income & OCF has been closing on in the last two years which could be an indication of stronger and improved business operations.

This possible improvement in the business operations owing to the tweaking of the product portfolio can thus be coincided with the significant improvement in the Net Profit Margin in the last two years as can be seen from the following chart :

This improvement on the margin front coupled with improvement in the operating cycle has led Garware Polyester to improved cash accruals and strengthen its balance sheet with improved debt coverage indicators such as improved interest coverage ratio and a significant reduction in its debt levels in the last few years :

An improved focus on shifting to better product mix in the last few years ( with emphasis on higher-margin yielding products ), has thus helped Garware Polyester in garnering better operating cash flows, expansion in profit margins, and reduced debt levels. This improvement in key metrics along with presumably subdued oil prices in the near future should help Garware Polyesters in improving and sustaining its earnings quality much to the comfort of long term investment perspective.

chittoa · April 29, 2020, 5:57pm

I have come across the name of Garware when we installed the piegon net in our flat. I found it is a trend emerging for people living in Flats. So it was common to look for company whose material you use and see a growing potential.
Though I am still not sure which Garware business that belongs to, as there are so many Garware listed companies in similar space. Garware Synthetics, Garware Polyester, Garware Technical Fibres. Not sure if promoter of these companies is same, if that is the case, there are always chances of manipulations.

nikhil_chowdhary · December 18, 2020, 7:13am

mohammedpatel · December 30, 2020, 5:51pm

Hi @gurjeev , the Fixed Asset Turnover was 1.31 in FY16 and it dropped to 0.71 in FY17 and is lower than 1 since then. The reason for the same is because in FY18 they did a fair value measurement for land. (They restated FY17 numbers in FY18)

Attaching snapshot from FY18 annual Report:

gurjeev · December 31, 2020, 7:33am

Thanks for the update. Appreciated

sjsandesh · February 12, 2021, 11:36pm

Bulk Deals:
12/02/2021 GARWARPOLY ASHISH RAMESHCHANDRA KACHOLIA B 148,000 669.82

sharemarketgen_ · March 9, 2021, 12:49pm

Company has been meeting with many investors over the last few months.I don’t recall any company sharing the minutes of such meetings.They posted this update on the exchanges today.This is indicative of very high quality corp governance imho:

sahil_vi · May 23, 2021, 5:59am

One line in specific from this filing really reinforced this corporate governance standard as well: In response to a question about maintenance capex
“Mr. Mehta replied that the company hasn’t publicly disclosed the number”. Wow.

Investment thesis has been clearly outlined by management in IP:

To explain this in numbers, management is focussed on scaling up the Paint protection film to 300cr by FY23 end. Also expects this to be 20% of revenues. We can calculate from this that revenues would be 1500cr. Even if we assume no change in product mix for the rest of 1200cr (worst case scenario) this means the share of value added would go up from 74% in 9MFY21 to 79% in FY23. Value added has in fact been increasing at 2.5-3% per year, resulting in increasing NPM at 2-3% every year. On a TTM basis NPM are 12.5% and could go up to 18% in FY23 based on improvement in product mix. That gives us a net profit of 270cr in FY23. This means that company is currently valued at a P/E of 7 basis its FY23 earnings. Even if we assume that the mean P/E of 14 sustains, this is a reasonable investment if management can deliver the revenues which they have guided for.

The unit economics are fantastic. The 1280cr of fixed assets contain 1000cr of land as highlighted here:

Ex that, fixed assets are 280cr. The WC is very light at 70cr. Capital deployed is 350cr. EBIT is 187cr. That is a cool 53% ROCE. And the co has 1000cr of land. What am I missing?

I have only recently started studying, would take me some time to track management in terms of walking the talk. Does any existing long term investors have views on whether management is conservative in terms of guidance and then achieving it, or do they overpromise and underdeliver?

Disc: Studying

harshitgoel · May 24, 2021, 3:34am

XPEL Inc is a US based company in a similar line of business. Company gave good results for March 2021 quarter. Following are the notes from it’s earning’s call held earlier this month. It provides good insights into the demand for Window Films and PPF in US and Europe.

XPEL Inc Q1CY21 Earnings call notes

The U.S. business grew 64.6% to $25.6 million, another record quarter for the region. Sequentially, the U.S. revenue increased around 20% compared to Q4 .
Looking at that, Q1, U.S. auto sales were strong. The U.S. SAAR was at almost $18 million in March on an annualized basis. And this certainly has been reflected in the results of the public dealership consolidators as well. So it’s been a great time to be in the car business in the U.S. Most of our business on the auto side is correlated with new car sales versus new car production. So we’ve done very well there. Some of our business is tied to vehicle production, whether it would be the small segment of our OEM business or dealership business that involves preloading the dealership’s inventory.
China business put up great growth in Q1, given the easy COVID-related comp, revenue coming in at $10.7 million. China auto sales, like the U.S., continue to be strong, pleased with how we’re performing there. Given timing of orders, delays, ocean freight, air freight, all the factors that impact the China business, it could be pretty lumpy, but we’ve seen things kind of trend in the closest range over the past few quarters you’ve ever seen. So the business is doing very well there.
Canada also had a good quarter, revenue growing about 19%. Some lockdowns continued into Q1, but the business has done well.
The U.K. region grew 60% during the quarter, really amazing, given the lockdown implementation in the U.K., and really amazing results there given that. APAC region, which excludes China, good quarter. Revenue doubled from last year, bit of a COVID impact in APAC, in Q1 of 2020, like China. So pretty easy comp, it’s still a good quarter. Latin America, another great quarter, talk about it being led by our Mexico business.
European regions continued to perform very well. Continental Europe grew 54.8%, seen great performance in France following our acquisition last year. I
From a product line standpoint, window film continued to outperform, revenue growing almost 132% to $7.2 million, great for the segment. We continue to make progress on architectural window film, another record quarter. The dollars in the window film product line still concentrated in the automotive segment, as you know
Sequentially, the window film business was up almost 28% versus Q4, so really good result .
Given the seasonality in the business, it’s unusual for us to have sequential growth in Q1 from Q4 .
Normally, we’ll see Q1 revenue decline from Q4, as it’s typically the seasonally slowest quarter. In many respects, I think we’re seeing the economy in overdrive. As a result, supply chain, logistics, the labor market, they’re pretty messy at the moment .
And I think you’re probably hearing that from a lot of people. The chip shortage as it impacts new vehicle production is a concern for the end of Q2, perhaps into Q3, as I mentioned earlier, but this is largely offset, in our view, by a seemingly voracious appetite for vehicles from consumers and positive momentum in our core products and their respective attach rates to new cars sold and then excellent execution by our team. If you put all that together, we expect to grow Q2 2021 revenue, approximately 65% when compared to Q2 2020.
The product revenue in the quarter grew 89.2% to approximately $44.9 million, which was another record high. And in this product revenue category, paint protection film grew 81% to $35.8 million, which was again another record. This strong growth was broad – pretty much broad-based, led by U.S. and China.
window film product line had amazing growth of 131.7% to $7.2 million, which was another record, and it represented 13.8% of total revenue.
Gross margin for the quarter grew at 77.6% to $18.3 million, which was another record, and our gross margin percentage was down slightly to 35.3% versus 36.3% in Q1 2020, but it was up sequentially from Q4 2020, which came in at about 32.8%. And while our gross margin percentage was down 100 basis points relative to Q1 2020, we did finish near the top of our historical range of 32% to 35%.

Disc: Invested

sahil_vi · May 24, 2021, 4:00am

Thanks for posting the concall notes. I was also going through their concall. My only note of caution would be that there definitely seems to be a lot of pent up demand in this Quarter and year. It was not clear to me going through this concall how much of this demand would be sustainable beyond this year.

Posting some additional notes I made going through their Investor Presentation which is attached:

Paint Protection Film Low Penetration to New Cars Sold (shows market growth opportunity)
Fragmented Market Provides Opportunity Ripe for Consolidation. (opportunity for market share gain)
Currently, Operations in 9 Countries. Will Build Out Sales Team In Under-penetrated Geographies. (GHTF exports to 80 countries. Is it fair to assume that GHTF does not have sales presence in majority of these countries and thus has small/minor market shares in these countries? [FY20 annual report mentions that they do have sales presence in USA, UK, Russia, Malaysia, Brazil, UAE & Australia] Could ask question in concalls regarding strategy for growing market share in these countries.)
Economics of PPF films. Shows the opportunity size for the market (there are 276M cars in USA alone).
Some products which Xpel makes which GHTF does not (as per my understanding) showing Future product area in which GHTF could expand:
Gets 92% revenue from Products, 8% from services. 65% directly from end customers, 35% by selling to international distributors. (In the Q3FY21 concall, GHTF management had made a remark about how Xpel is valued like a software company. This sets some context for that statement).

xpel-q1-cy21.pdf (2.3 MB)

Disc: Took a tracking position today, still studying the company.

harshitgoel · May 24, 2021, 6:00am

Fixed Assets include Revaluation Reserve of Rs. 650 cr appprox as per AR2017, so that will bring down the ROCE number to 26% which is still very good. Rs. 1000 cr could be the current price of land as indicated by an analyst in earnings call.

harshitgoel · May 24, 2021, 6:20am

Few Observations from following data.

Company has done well on the export front as all the sales growth in the past 4 years has come from export markets (Majorly US and Europe as China is stagnant), domestic sales has declined post 2017 due to discontinuance of BOPP line in FY2018.
Margins have increased due to increased share of vap from 49% in 2015 to 74% now.
Although margins have increased for Garware so has for rest of the players in the industry. This is the key monitorable and we have to figure out is it due to the industry tailwinds or solely due change in product mix as claimed by the management because all the players have shown improved profitability from 2019 onwards.

garware hitech segment1472×612 24 KB

sahil_vi · May 24, 2021, 6:34am

Short Answer

For the product mix part, I think one should look at Gross margins. They have been steadily inching upwards which validates the management’s claims. (Gross margins are even better in 9MFY21). Jindal and Cosmo gross margins are roughly the same since last few years. Polyplex have improved (dont know much about polyplex to comment on why).
The interesting thing is that manufacturing costs seem to have fallen dramatically in FY20. Could this be due to the upgradation of the lines that they did? It is possible. Might help to clarify this in subsequent concalls.

Long Analysis

Attribute/Year		TTM	FY20	FY19	FY18	FY17	FY16	CAGR %
Garware Hi-Tech	Sales	922	925	948	833	874	857	1.5
	Gross Profit Margins	62.70%	55.60%	50.30%	46.30%	44.80%	44.80%
	Selling, General & Admin Expenses	105.5	95.9	80.7	76.9	77.3	79.5	6.1
	Depreciation & Amortization	23	20	13.8	13.6	13.1	16.9	6.7
	Other Operating Expenses	261	254.7	250.9	225.1	240.3	222.7	3.3
	All Operating Expenses	389.5	370.6	345.4	315.6	330.7	319.1	4.2
	Operating Income	188.594	143.7	131.444	70.079	60.852	64.836	25.2
	Operating margins	0.204	0.155	0.138	0.084	0.069	0.075
Polyplex	Sales	4814	4487	4570	3572	3200	3202	8.9
	Gross Profit Margins	48.80%	43.10%	37.90%	38.90%	38.60%	39.50%	4.5
	Selling, General & Admin Expenses	444.6	399.4	354.4	311.5	301.4	303.6	8.3
	Depreciation & Amortization	291.6	253.3	209.1	185	196.6	208.9	7.2
	Other Operating Expenses	770.9	699	639.4	538.9	487.6	547.8	7.4
	All Operating Expenses	1507.1	1351.7	1202.9	1035.4	985.6	1060.3	7.6
	Operating Income	842.132	582.197	529.13	354.108	249.6	204.49	34.7
	Operating margins	0.174	0.129	0.115	0.099	0.078	0.063
Jindal Poly Films	Sales	3801	3533	3623	6448	7015	7225	-12.6
	Gross Profit Margins	45.60%	37.50%	28.80%	41.20%	43.70%	43.30%
	Selling, General & Admin Expenses	109	103	96	82	101.6	93.6	3.2
	Depreciation & Amortization	137.7	118.3	103.9	255.1	282.2	240.4	-11
	Other Operating Expenses	531.2	522.8	475.6	1219.1	1368.3	121.6	36.3
	All Operating Expenses	777.9	744.1	675.5	1556.2	1752.1	455.6	11.9
	Operating Income	955.356	580.775	367.924	1100.376	1313.455	2672.825	-19.4
	Operating margins	0.251	0.164	0.101	0.17	0.187	0.369
Cosmo Films	Sales	2137.4	2203.5	2156.5	1846.5	1586.9	1620.6	6
	Gross Profit Margins	38.60%	33.20%	26.90%	28.30%	36.70%	36.70%
	Selling, General & Admin Expenses	195.7	174.5	141.9	139.5	135.7	128.8	9.2
	Depreciation & Amortization	56.6	54	53.7	50.2	42.1	35.5	10.3
	Other Operating Expenses	266.9	284.2	269.8	229.9	288.9	275.2	-0.6
	All Operating Expenses	519.2	512.7	465.4	419.6	466.7	439.5	3.5
	Operating Income	305.8364	218.862	114.6985	102.9595	115.6923	155.2602	15.3
	Operating margins	0.143	0.099	0.053	0.055	0.072	0.095

We can see a few trends:

While Garware and Polyplex Gross margins have been increasing steadily since FY16, Cosmo and Jindal margins have been cyclical, reverting to what they had been like in FY16 and FY17. You are right that all players have shown improved profitability since 2019.
For garware sales has not gone up, whereas all the operating expenses between GPM and OPM have shown slow growth over the years. Thus, OPM has not gone up as much as the GPM. This also means that if expenses between GPM and OPM continue to grow slow, higher sales could result in operating leverage.
For polyplex, sales has compounded at 9% CAGR. Gross margins expanded by 9%. Operating Expenses only grew at 7.4% and thus OPM expanded more than GPM.
For Jindal Poly, sales degrew, operating expenses degrew at roughly the same cagr. The Gross margins and operating margins were both cyclical.
For Cosmo Films, Sales grew at 6% cagr, operating expenses did not grow as fast. Gross margins were cyclical but operating margins have marginally expanded due to some operating leverage.
All in all, I would say cosmo and jindal look like commoditized players. Garware and Polyplex seem to have some value added part (which possibly grew) which resulted in non-cyclical margins. Margins have improved for all players over last 2 years.

aga.ayush11 · May 24, 2021, 11:47am

Hello everyone, I have been doing some work on Garware for quite some time now. I will share my findings and try to break up the business into several posts to avoid making it complex and easy to understand.

Garware has 2 main divisions, Industrial and Consumer. My focus is mainly on the consumer and value-added segment. Under the industrial segment, the company manufactures PET films that are used in packaging, lidding, electrical insulation, Shrink Film Labels for PET bottles, Thermal FIms, etc.

In the consumer segment, Garware manufactures Sun Control films for automobiles and real estate (residential and commercial buildings). The sun control Window Film business is mostly branded under 3 brands, Global Window Films, SunControl Films, and Garware. Their main brand is Global which is present in the US and European markets. Global has grown from a 30cr brand in FY12 to 200cr in FY20. Source- Past Annual Reports Data.

The latest presentation has a good overview of the company; it’s history, manufacturing facilities, products, divisions, and revenue segments.

Let me now share some highlights from the FY20 Annual Report-

Garware took 45 days long shutdown of two film line for upgradation
○ This has ensured 100% fungibility of the existing plant. A conscious move towards the specialty products.
Garware claims itself to be the only company in the world with backward integration for manufacturing of Solar control films. Extract from their website-

1087×388
- Extract from a User Manual that I found online-
  854×563
Strategy- Company continues to focus on the specialty films and increase the share of value added products and reduce the volumes of commodity films
Company has a long term agreement on import parity price for supply of main raw material.
“one of the premier Solar Control window film manufacturers and have been a trend-setter in sun control/window film industry with a history of more than 30 years of technological development”
GLOBAL WINDOW FILMS’ is one the most popular brands in the US

Interesting insights on recent numbers in the Value Added Segment- They give product break up data in percentage terms in their presentation and if one looks very closely at those numbers in the last 2 presentations, then this is what they will see-

Geography breakup 9MFY21-
- USA- 31% (This was 20% in H1FY21)
  - 217cr in 9MFY21 (83.6cr in H1FY21). Which means 133cr or 47% from USA in Q3 out of 283cr (this was around 22% in full-year FY20 ).
Product Mix 9MFY21-
- Commodity- 26% (H1FY21- 36%)
- Value-added- 74% (H2FY21- 64%)
  - Translates into 518cr in 9MFY21 (268cr in H1FY21- Which means a sale of 250cr in Q3FY21 under their value-added segment and Total Sales in Q3 was 283cr. Strategic shift towards Value-Added segment?
Sun-control- 47% (H1FY21- 38%)
- 329cr in 9MFY21 (159cr in H1FY21)- Which means a sale of 170cr or 60% of total sales in Q3FY21. This is very high given they did 38% in H1FY21.
  The management indicated in the private call that around 60-70% of the Window Films sales are under their own brand.

Highlights from the latest concall (first ever)-

PPF Plant went online- 300cr by FY23 with 30%+ margins
○ most popular product in the Western (Automotive) world and this is a recent development which is a really technical product
“Want to be a key player in the PPF market”
- the largest player in that market is XPEL
the people who apply the PPF are the same, who apply the window films on
automobiles
- Already have a set distribution in place, no investment in supply chain
Claims to have about 4000 tinters/installers with whom we are in touch with or in
contact within US alone. This is a penetration of 50% as mentioned in the private call.
only manufacturer and exporter in India for Sun Control film
Dyeing or coloring of polyester film is a very critical process and only two companies in the world have that technology, GPL is one of them
- Could find their patent which seems to have expired in 2020- US6316531B1 - Process for dyeing UV stabilized polyester film - Google Patents
Presence of China- They have low-value and low-quality products where GPL does not
compete
“We are a high chemistry company which works on developing newer and better
products"
No credit is given to the dealers (visible in their low debtor days)

Dis: Invested at lower levels and a major part of my holding.