Garware-Wall Ropes gives 260% gain since recommendation by anonymous blogger
When I first read the recommendation by the anonymous blogger called ‘aceinvestortrader’ to buy Garware-Wall Ropes, my reaction was one of scorn.
“Who wants to mess around with a stupid company making wall ropes,” I mumbled to myself even as I hurried to hit the back button and look for something else to read.
Now, this is the sort of buffoonery that has caused me to stay in a poverty stricken state despite my 24×7 vigil on the stock markets.
If I had bothered to read even a few paragraphs of the write-up, I would have realized that Garware-Wall Ropes is not just making “ropes” but is making sophisticated “technical textiles” products which are used in a variety of industries like Deep-sea fishing, Acquaculture, Shipping, Agriculture, Sports, Infrastructure, Defense and Transportation.
Aceinvestortrader made several cogent points in his report including that Garware Wall Ropes has (a) healthy dividend payout, (b) good cash flows, (c) low debt, (d) increasing promoter holding, (e) good capital structure, (f) dominant market share etc, etc.
It is unbelievable that Garware Wall Ropes is up a fabulous 260% since that fateful day.
It is also notable that Garware Wall Ropes is not a flash-in-the-pan recommendation for aceinvestortrader.
Instead, he has several multibagger stocks to his credit such as Prima Plastics, V2Retail, Aimco Pesticides, Katwa Udyog, Cupid, Ambika Cotton etc.
Some of the recommendations have given mind-boggling 10-bagger gains in a short period of time.
Garware-Wall Ropes is still a good buy: Saurabh Mukherjea
While novice investors are rightly wary of acting on the recommendations of anonymous bloggers, we need not nurture any such fear when the recommendation stems from reputed personalities like Saurabh Mukherjea of Ambit Capital.
Saurabh has a stellar track record when it comes to picking multibagger stocks (e.g. TVS Motors, PI Industries). He also knows the temperament of novice investors and is careful to recommend stocks which have high degree of safety and low volatility coupled with the potential to give multibagger gains.
“Garware Wall Ropes is the top manufacturer of nets and ropes in the world. It exports 3000 SKUs to 80 countries,” Saurabh told the distinguished audience at the Sohn India 2017 Conference.
“Its’ expertise in blending high end polymer chemistry with high labor intensity is unmatched”, he added.
“Growth will come from Defense, Agri, Infra etc. The management is prudent in capital allocation,” he emphasized, making it clear that he has done his homework and studied the stock meticulously.
|GARWARE-WALL ROPES LTD – KEY FUNDAMENTALS|
|MARKET CAP||(Rs CR)||1,828|
|EPS – TTM||(Rs)||[*S]||38.05|
|LATEST DIVIDEND DATE||02 AUG 2016|
|BOOK VALUE / SHARE||(Rs)||[*S]||205.28|
[*C] Consolidated [*S] Standalone
|GARWARE-WALL ROPES LTD – FINANCIAL RESULTS|
|PARTICULARS (Rs CR)||MAR 2017||MAR 2016||% CHG|
(Source: Business Standard)
Garware-Wall Ropes is a “market leader” with “high entry barriers” and “inexpensive valuations”: Ambit Capital
Bhargav Buddhadev and Karan Khanna of Ambit Capital have conducted a meticulous study of Garware-Wall Ropes in which they have amplified the salient points made by Saurabh Mukherjea.
The rationale for recommending Garware-Wall Ropes as a must-buy is explained in cogent terms:
“Netting the benefits of innovation
GWRL is a niche player in technical textiles with a strong export franchise (46% of revenue). Expertise in fibre technology and polymer processing holds it in high repute among makers of high wear & tear and high impact products. Diversifying from a twine/rope manufacturer
(shipping) in FY94 to netting (fishing, sports, agri), GWRL is evolving into a leading player in geosynthetic (infra) and coated fabric (Defence). CMD Vayu is aggressive with focus on premiumisation, export and professionalising the team; hired Rehman as COO and host of professionals. Valuation of 25.8x FY16 (20x TTM) is inexpensive for a market leader given 18% RoE (FY16) and ~40% EPS CAGR over FY13-16, low capital intensity and GWRL’s balance sheet strength to invest for 20%+ growth. Rising exposure to GOE and attrition are key risks.”
It is emphasized that the valuations of the stock are “inexpensive” given its stature as a market leader with strong balance sheet:
“Valuations inexpensive for a market leader with strong balance sheet
Valuation of 20x TTM appears inexpensive when seen in light of GWRL’s low capital intensity, robust balance sheet and strong FCF to fund capex to double its revenue. This is critical given huge growth potential led by: (a) new product offerings in coated fabric, agriculture, geosynthetic, (b) new export markets; for instance fishing market in Japan; and (c) new innovation given GWRL’s focus on consistently launching valued-added products.”
Clean chit by Stalwart Advisors
The experts at Stalwart Advisors have also conducted a detailed study of the affairs of Garware-Wall Ropes and given it the all-clear signal.
It is pointed that the technical textiles market is worth a colossal 100,000 crore in India and that Garware-Wall Ropes has only a small share of it as of it.
This implies that if the Company flexes its muscles, it can effortlessly capture more market share.
The entire investment thesis is nicely summed up in the following points:
– Market leader in profitable and expanding niche.
– Focussed on customers and solutions, foray into categories like Defence & Protected Cultivation to drive growth.
– Owner-Operated (promoter family owns 51% stake).
– Debt-free & cash rich balance sheet & fantastic capital allocation.
– Negligible institutional holding & boring business (classic Peter Lynch type stock).
Research reports by Angel Broking and Anand Rathi
Angel Broking has recommended a buy on the logic that:
“Going ahead, we expect GWRL to report a healthy top-line in anticipation of strong domestic as well as export sales. On the domestic front, we expect demand to pick up with an expected growth in the agriculture and fisheries segments in the country. Further, we expect the company to continue reporting strong numbers on the back of higher demand for aquaculture and sports products globally coupled with the company tapping new geographies.”
Angel Broking’s target price of Rs. 710 has been effortlessly breached by Garware-Wall Ropes. Obviously, a higher target will now have to be projected for the stock.
Anand Rathi has recommended a buy of Garware-Wall Ropes with the assurance that it has a target price of Rs. 1025.
By ignoring the stock recommendation of aceinvestortrader, we missed out on massive multibagger gains that were handed over on a platter. We must ensure that we don’t commit the same blunder again by ignoring Saurabh Mukherjea’s recommendation!