Ventura has initiated coverage on Garware Wall Ropes (GRW) as a BUY with a Price Objective of Rs 124 (target PE of 8x for FY2012) over a period of 15-18 months. At CMP of Rs 79.9, the stock is trading at 5.7x and 5.2x its estimated earnings for FY2011E & FY2012E representing a potential upside of ~55.2%. GWR is a world leader in the synthetic cordage business with more than 8% global market share and is the leading player in the emerging geo-synthetics infrastructure space.
Expect strong earnings growth of 31.5% CAGR over the next two years on the back of steady growth in its cordage business (10% CAGR) and new applications, traction in its geo synthetic space (32% CAGR), modular capex (Rs 15 crore p.a.) from internal accruals and improved profitability despite loss of EOU status and tax shelter. In addition GWR is also looking at a tie-up with an international major for its foray in the waste management business. GWR has consistently paid out dividends to share holders and carries an attractive dividend yield of 3.08%.
