Fiberweb (India) LtdQ4 FY19Textiles & Apparels

Fiberweb (India) Ltd

Q4 FY19 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

Yes

Order

Capex

Yes

2 of 5 growth signals are positive.

Revenue guidance

Category 2

→The company reported strong growth with a 221% year-on-year increase in revenue for nine months of FY2018, reaching Rs.197.6 Crores.
→Expansion plans include a Rs.125 Crores capex focused on Flat-Blown technology, expected to be operational by April 2019, targeting peak revenue potential of Rs.200-220 Crores.
→Melt-Blown capacity of 3000 tonnes is expected to contribute Rs.60 Crores in annual revenue with a PBT margin of about 22%.
→Demand in Melt-Blown and Flat-Blown markets is growing at 17-18% annually; supply currently satisfies only 45-60% of demand, indicating growth potential.
→Export orders are robust, with about 80% revenue from the USA market, supporting top-line growth.
→The company intends to maintain conservative financial management, funding part of capex through internal accruals to minimize borrowing.
→Better results and higher dividends are anticipated from FY2019-2020 onwards, driven by new product introductions and capacity expansion.

Category 3

→The company expects strong growth in turnover and profit for FY2018 and beyond, driven by expanding business and improved product mix (Pages 4, 5).
→Expansion in next-gen Flat-Blown technology with Rs.125 Crores capex, expected to start commercial production by April 2019 and contribute revenue from FY2020 (Pages 4, 10).
→Flat-Blown product PBT margin around 30%, Melt-Blown PBT margin about 22%, contributing to higher profitability (Pages 9,10).
→Converted (value-added) products expected to grow from 25% to about 30% of total export revenue, which typically have higher margins (Page 12).
→Dividend growth expected post-2019-2020 with improved results from new product lines and expansions (Page 16).
→Overall, margins may fluctuate with raw material prices, but profit growth expected as sales rise, supported by technical expertise and strong customer relationships (Pages 5, 7, 9).

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Yes

→The company is undertaking a Rs.125 Crores capex for Flat-Blown technology expansion.
→Funding sources for this include:
→ - Rs.50 Crores raised through debt from banks and material suppliers at approximately 3% interest.
→ - Rs.40 Crores raised via equity infusion from foreign portfolio investor New Horizon Opportunities Master Fund.
→ - Rs.10 Crores from promoter infusion by Mr. Bhavesh Sheth (the promoter's son).
→ - Rs.25 Crores from internal accruals.
→No specific mention of any new or additional fundraising beyond this for now.
→The capex is expected to complete by March 2019, with commercial production commencing by April 2019.
→Management prefers conservative borrowing to avoid excessive debts.

→As of December 31, 2017, Fiberweb India Limited's order book was approximately Rs.170 Crores.
→The company has stopped accepting new orders for more than a year’s supply due to full capacity utilization.
→They are fully booked and will only accept new orders at a later date.
→The expansion plans are driven by the need to satisfy existing customers and meet differentiated product demands.
→Around 80% of exports go to the USA, with about 15 major Fortune 500 customers already on board.
→There is no immediate plan to acquire new customers; focus remains on serving existing major clients.

Yes

→Fiberweb India Limited has planned a significant capex of Rs.125 Crores focused on next-generation Flat-Blown technology, a higher-margin and fast-growing segment compared to Spun Bond Non-Woven.
→The Rs.125 Crores capex funding breakdown:
→ - Rs.50 Crores via debt from bank/material suppliers (~3% interest).
→ - Rs.40 Crores from equity infusion by foreign portfolio investor New Horizon Opportunities Master Fund.
→ - Rs.10 Crores from promoter infusion (Mr. Bhavesh Sheth).
→ - Rs.25 Crores from internal accruals.
→The capex aims at expansion and diversification into Flat-Blown and Melt-Blown products, both high-margin, technical products.
→The project is expected to complete by March 2019, with commercial production starting April 2019.
→Post-2019-20, better results and dividends are anticipated due to this expansion.
→Orders are currently capped, driving the need for this capacity expansion.

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