Religare's 'buy' on Garware Wall Ropes

MUMBAI: Religare Research has maintained ���buy��� on Garware Wall Ropes for a target price of Rs 210. The company has reported lower-than-expected results for Jan-Mar 2007-08 owing to sluggish growth in the cordage segment. Net sales increased 19 per cent year on year to Rs 120 crore, 8 per cent short of the brokerage estimate as the revenue share of the cordage business declined to 64 per cent against the full-year average of 73 per cent.

Export sales have also been comparatively lower, comprising 33.4 per cent of revenue in Jan-Mar 2007-08 as compared to 42 per cent in 2006-07 and 36 per cent in 2005-06. The EBITDA margin, at 13.2 per cent, was 100 basis points lower than the brokerage estimate due to rising crude prices, which led to higher input costs for cordage products.

Religare expects the company to record a 23 per cent CAGR in topline during FY08-FY10 on the back of higher execution in the geo-synthetics business. The current order book in this segment stands Rs 100 crore which will be fully executed by December 2008.

The company has raised Rs 5.97 crore by allotting 9,98,000 equity shares to the promoters against convertible warrants, these funds will be utililsed to meet the ongoing capital expenditure. The equity share capital has increased to Rs 23.7 crore on account of the preferential allotment.

At market price of Rs 94, the company would discount its FY09E EPS of Rs 13.9 by 6.8x which is reasonable vis-a-vis peers.