Garware Hi-Tech Films Ltd (GHFL) has incurred a capex of Rs. 270 crore over the last two years. With the help of this capital
expenditure, GHFL was able to vertically integrate its business, strengthen its dealer network, launch its new product (PPF), and
increase the capacity of its current goods (SCF). Thus, ramping up of capacity provides the company with strong medium-term
growth visibility.
• GHFL has continuously increased the share of value-added products within its sales mix. Value-added products, which accounted for
48% of total sales in FY2017, increased to 80% in FY2023. This led to an improvement in its margin to 18.7% in FY2023 from 9% in
FY2017. As the company is planning to ramp up the capacity of value-added products and add new products, margins will continue
to improve going forward.
• The company has fully vertically integrated chips-to-film manufacturing facilities. These capacities are fungible and capable of
delivering customised products across a range of over 3,000 SKUs. Backward integration also helps the company’s R&D department,
as it leads to greater customization, faster time-to-market, and improved quality.
• Key risks: Sharp surge in oil price could impact margin/earnings. Sluggish demand in the automotive and real estate Industry
Results are out, please go to the below link -
https://www.bseindia.com/xml-data/corpfiling/AttachLive/57cd927c-6e41-4ee9-8e5e-24919d2cc8ab.pdf
Almost no change in topline yoy and degrowth of 5% in bottomline.
You was right @phreakv6 their PPF line is operating at peak capacity backed by orders from US clients.
Also the company is debt free and has 350cr of cash which can utilised for expansion.
Disclosure - Invested and holding.
@phreakv6 Could you please share your views on Garware Results and how things are looking for future. Thanks.
Saw this reel on Garware PPF product quality, just thought of sharing it
XPEL seems to be on a troubled path.
We are short XPEL, Inc. (“XPEL”, “the Company”) for two reasons. First, we believe the Company has grossly understated its reliance on Tesla, which just last week signaled that it would be disintermediating XPEL. The Company responded by claiming in a Form 8-K that Tesla represented just 5% of YTD revenues, yet we believe the true figure is many multiples higher.1
As per Culper research XPEL revenues highly correlates with TESLA new car sales. It also states that Entrotech is going to disrupt PPF market by integrating their technology directly into paints.
In May 2023, XPEL’s long-time supplier entrotech formed a JV with PPG.
The announcement saw little fanfare, yet we believe presents an existential risk to XPEL’s business. In fact, we spoke with a representative of the JV who indicated to us that entrotech and PPG have effectively integrated protection technology directly into OEM paint, hence disintermediating XPEL’s aftermarket solution. Moreover, they indicated to us that the technology is already being rolled out among the “Big 3” automakers with the anticipation that within the next 5 years, the entire aftermarket industry will be disrupted.
research report can be availed at Latest Research
A few snaps from XPEL’s Q3 concall (8th Nov) that maybe of relevance to Garware:
- XPEL CEO addresses the Entrotech-PPG JV and how the product compares with PPF in quite a bit of detail. The competing product is called Aero, a demo video can be seen here - https://www.youtube.com/watch?v=OQ3YDZh_tlw
- XPEL CFO highlights that one of their suppliers has had quality issues as a result of which they had to increase supplies majorly from alternate suppliers during Q2-Q3 CY23 (Apr-Sep). They don’t specify which product line, I assume the supplier was present in both segments. Coincidentally, this timeline coincides roughly with Garware’s spike in PPF exports. Could it be that Garware has been the beneficiary of this mishap at the other supplier’s end? If so, then the question to be answered is, is this PPF run-rate sustainable beyond Dec when XPEL expects inventories to get normalized?
- XPEL is opening an India facility (I assume its an office rather than a factory) with a view to taking a more direct approach to the Indian market. How will this play out vis-a-vis Garware’s own ambitions of dominating the local market? Would there be any collaboration here or pure competition?
It would be nice to get Garware management’s thoughts on these aspects in upcoming management meets or concalls.
Disc: Invested.
GARWARE HITECH FILMS -
Q2 and H1 FY 24 highlights -
Financial outcomes in Q2-
Revenues - 397 vs 395 cr
EBITDA - 65 vs 67 cr ( margins @ 16 vs 17 pc )
PAT - 46 vs 48 cr
SunControl, PaintProtection businesses - did well. Industrial products division witnessed some decline
Value Added sales @ 90 pc of total sales - very positive for long term. Commodity products sales now @ 10 of the total
Consumer Products division - ( includes sun control, paint protection films ) grew by 53 pc !!!
Industrial products division reported a decline of 32 pc in revenues
Paint protection film revenues doubled in Q2 vs Q1 FY 24 !!! This happened due robust demand from US and Indian distributors
Company has tied up with over 500 OEM car retailers for installation of PP films. Aim to tie up with over 900 dealers by next yr
Sun Control films grew by 8 pc vs Q1 FY 24
Expanding into architectural and decorative sun control films - should have a bright future going forward
Industrial Products business (IPD) de-grew sharply in Q2 due strategic focus on Consumer products division (CPD) and headwinds in IPD business. Seeing some recovery in IPD business in Q3
Company’s Gross Debt at - NIL
Cash Balance @ 350 - indicating strong financial position
Company has ramped up its marketing expenses wrt to both SCF and PPF business. This capped the EBITDA margin expansion in Q2. CPD is an invest to grow business with higher margins. That’s why the higher initial spends
Currently, the company is receiving overwhelming response in the CPD division
For SCF,PPF, Shrink films etc - company is the only fully backward integrated player in the world
Have spent additional 8 cr towards pushing the CPD in Q2. Likely to continue this kind of spending in Q3, Q4 and then revise it in FY 25
IPD business demand from North America was subdued in Q2 which led to business decline and a hit on margins. Hence, despite clocking much higher CPD sales, overall margins remained at similar levels as LY
Expecting North American IPD business to see some recovery in Q3
Have got commercial approvals from M&M for PPF coatings on XUV-700. Expecting approval from another 3-4 OEMs going forward. This should lead to more than decent volume uptick in domestic PPF volumes
Company still maintains a sales guidance of Rs 2500 cr for FY 26 - company is confident of achieving the same !!!
For FY 25, Architectural and Paint protection films should be the primary growth drivers
The new SCF lines are fungible and can be used to produce PPF products as well. Can be used in accordance with demand from these two segments. De-Bottlenecking can be resorted to further expand capacities
Company sees structural improvement in Gross Margins 18-20 months down the line
PPF sales in Q2 @ 120 cr ie 30 pc of topline. This percentage should further improve going forward
Sales from SCF @ 36 pc of topline in Q2. Business momentum in SCFs is also strong
In 2-3 yrs, expect 80 pc of business to come from SCF + PPF ( 40 pc each ). Expect remaining 20 pc of business to come from IPD
PPF penetration in Indian Auto Mkt is about 0.5 pc of total Cars. In China, US the penetration is > 10 pc. Company aims to take Indian penetration to around 2 odd pc of the cars
Disc: holding, biased, may add more if performance improves, not SEBI registered
Q3 FY24 -Blockbuster Results
Records Highest ever quarterly revenues and profitability
Q3FY24 consolidated revenue up by 40% YoY at Rs. 454 crores and
PAT up by 84% YoY at Rs 56 crores
Paint Protection Film business continues robust performance, driven by significant demand increase, contributing one-third of revenue
Solar Control Film continues growth trajectory back with global demand recovery
Launched world’s first Rooftop series for the automobile segment
Robust response received in Expo - Automechanika and ACE Tech (Architectural)
Dr S. B. Garware, Chairperson and Managing Director of GHFL
"…Going forward, product innovation remains our cornerstone, coupled with aggressive
sales and marketing strategy, to drive us towards higher value-added products and
profitability.”
Ms Monika Garware, Vice Chairperson and Joint Managing Director of GHFL
" While the industry faced geo-political challenges, including “red sea crisis” and supply chain
issues in the later part of the quarter, our performance remained strong. This resilience is
attributed to strong demand for PPF, solid recovery in SCF across domestic and international
markets, supported by effective shipping and logistics.”
Business Updates:
Paint Protection Film (PPF)
The PPF business achieved a substantial 35% sequential revenue growth in Q3FY24 compared
to Q2FY24, due to strong demand primarily from USA, Middle East and India. Recent launch
of Ceramic Coating, complementing our PPF product line, aims to further enhance growth
prospects. The business delivered a significant 36% contribution to total revenue in Q3FY24.
The PPF plant is running at optimal capacity with intermediate processes supported by other
lines.
Solar Control Film (SCF)
SCF business accounts for around one-third of the company’s total revenue and has achieved
a 10% sequential revenue growth in Q3FY24 compared to Q2FY24, due to improved global
macroeconomic environment and surge in automobile sales. This growth momentum is
expected to continue with strategic diversification into the architectural film segment. The
architectural films products have made a successful debut at the recent ACE Tech expo,
garnering considerable interest from key stakeholders.
The company foresees accelerated growth in the untapped domestic market. The recent
unveiling of Rooftop series products at the Automechanika Expo underscores the company’s
dedication to meeting specific domestic market demands. Furthermore, the exhibition of PPF
products at the expo garnered significant interest from OEMs, retailers, and car enthusiasts,
reinforcing the company’s focus on domestic market potential.
IPD Business
The IPD business experienced a decline in Q3FY24 compared to Q3FY23 due to industry
headwinds. The capacity utilization of IPD plants stood at 72% in this quarter as compared
82% in Q3FY23. Despite this, the Company’s strategic emphasis on expanding its specialty
segments and improving capacity utilization underscores its commitment to strengthening
market presence and increase future profitability for the IPD business.
Revenue Growth
GHFL delivered a robust performance in Q3FY24, achieving its highest-ever revenue and
profitability. Consolidated revenues surged 40% to Rs. 454 crores and consolidated PAT
increased by an impressive 84% to Rs. 56 crores, compared to the corresponding quarter last
year, demonstrating the company’s strong financial momentum. The key growth driver in
Q3FY24 was the CPD segment, encompassing PPF and SCF businesses, which witnessed a
remarkable 80% YoY revenue growth. This remarkable performance was partially offset by a
9% YoY decline in the IPD segment. Notably, 82% of GHFL’s revenue comes from exports,
primarily driven by North America and Asian markets. Additionally, the company’s focus on
value-add films contributes approximately 91% of its total revenue, positioning it for superior
growth in the industry.
Margin
GHFL reported outstanding EBITDA growth in Q3FY24, demonstrating continued financial
strength. EBITDA surged 61.2% YoY to Rs. 85 crores, with the margin expanding to 18.7%
compared to 16.2% in the corresponding quarter last year. This improvement was primarily
driven by higher volumes in the PPF and SCF film segments. However, margin pressure on IPD
products and strategic investments in marketing and sales initiatives partially tempered the
EBITDA gains. While an aggressive marketing strategy has led to strong sales performance, it
has also resulted in temporary margin pressures. The company is confident that these
investments are expected to pave the way for sustainable growth and market leadership in
the long term.
GHFL IS cheap at fy 25 pe of 15 n 90 percent value added play n exports a B2C play UNDER OWN BRAND WORLDWIDE. GOOD RND TEAM MOSTLY FROM UDCT leading to innovative products like ppf,suncontrol n architectural films.its new MD deepak joshi is an intelligent fanatic executing beautifully a visionary in right age bracket of 40s. just buy on all dips.
marquee investors like ashish kacholia invested and guiding the next gen Monika garware who seems very keen to increase mkt cap like her cousin Vayu Garware of garware tech fibre n has appointed repute ENY as IR. gOOD CONCALLS N PLANT VSISTS BEING ARRANGED FOR VARIOUS PMS N AIFS. discl invested n biased
