Additionally, the growing preference for personal transport has led to a strong uptick in vehicle sales. The ongoing urbanisation and recovery in the rural segment have further contributed to the growth prospects of the 2W and 4W segments.
As vehicle sales grow, the need for components and spare parts also rises, boosting the performance of auto ancillary companies. Additionally, growth in aftermarket sales and exports has further boosted the volume of auto parts.
Also Read: Auto ancillary vs OEMs: Which industry is better for investment? Here’s what Motilal Oswal says
Amid this backdrop, stocks in this sector have seen substantial gains, with Garware Hi-Tech Films being a notable performer. Although not a manufacturer of auto parts, the company’s products are extensively used in automobiles for safety purposes.
It is a leading manufacturer and supplier of high-quality, durable, and highly tensile polyester films, solar control films, and paint protection films internationally.
The company is the only producer of professional-grade Premium Paint Protection (PPF) film in India. It currently sells its products in around 90 countries, with exports accounting for 77% of its sales.
In 2018, Garware Hi-Tech Films underwent a significant shift in its business strategy, which led to strong performance in the specialty films industry. This shift resulted in higher margins and a highly differentiated product portfolio, enhancing the company’s market position and growth prospects.
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In FY24, 89% of the company’s revenues were derived from value-added specialty films, including solar control film, paint protection film, and shrink film. The company boasts a production capacity of 42,000 MT per annum in its Industrial Product Division (IPD) and 4,500 LSF per annum in its Consumer Product Division (CPD).
Wealth creator
The company’s shares have been on a consistent winning streak, concluding the last 14 months with impressive gains. From their March 2023 trading price of ₹533 apiece, they have surged by a remarkable 236% to trade at the current price of ₹1,795 apiece.
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Over the last one year, the shares have jumped 167%, and in the last four years, they have gained 1060%. For CY23, the stock delivered a stellar return of 114%, while it continued to surge for the current year as it is already up by 28%.
Q4FY24 report card
For the March ending quarter, the company posted a revenue of ₹446.6 crore, an increase of 28% YoY compared to a revenue of ₹349.0 crore in Q4 FY23, led by continued growth momentum in the PPF and Sun Control Film (SCF) business.
The company introduced multiple variants of PPF like titanium, mat, black, and white to meet customers’ demand from all segments, which led to a quantum jump in PPF business.
It has approved a capital expenditure of ₹125 crore to establish a new PPF line with a capacity of 300 LSF per annum to meet future demand. Commercial production is expected to commence by Q2 FY26.
By introducing a full range of products to cater to all customer categories, the company is confident in sustaining its growth momentum.
Its net profit jumped to ₹12.9 crore from ₹12.3 crore on account of a better product mix and higher sales of speciality products.
For the full fiscal year, the company reported a revenue of ₹1,677.0 crore, a 16.6% YoY jump, while the net profit crossed the ₹200 crore mark, reaching ₹203.3 crore, which is an improvement of 22.4% compared to a net profit of ₹166.1 crore.
Growth expected in domestic market
Many owners of high-end cars in India desire to install PPF on their vehicles but face difficulties finding qualified applicators. Unlike developed countries, which have dedicated training institutions for applicators, India lacks such facilities.
The adoption rate of PPF in India is approximately 1%, compared to 10–12% in the US and China.
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To bridge this gap, Garware Hi-Tech Films has established the Garware Application Studio, where 50 applicators are being trained each month. This initiative is expected to boost demand for PPF products significantly. According to the company’s Q4 investor presentation, it has conducted 35 training programs across 34 cities, training a total of 700 applicators.
Disclaimer: We advise investors to check with certified experts before taking any investment decisions.
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Published: 30 May 2024, 06:01 PM IST
