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FairWealth Equity Research

23 rd October’2010

BANSWARA SYNTEX LIMITED

TEXTILES

23 r d October’2010 BANSWARA SYNTEX LIMITED TEXTILES BUY Long Term Buy CMP Rs.135 Target price

BUY

Long Term Buy CMP Rs.135 Target price Rs.175 Potential Upside 30+ Estimated EPS Rs.36.11 Projected
Long Term Buy
CMP
Rs.135
Target price
Rs.175
Potential Upside
30+
Estimated EPS
Rs.36.11
Projected PE
5-6
Investment period
12 months
Stock Info
(TTM Basis)
Sector
Textiles-Spinning-
Synthetic/Blended
Market cap
Rs.190.27cr
Face value
10.00
Book Value
88877 82.16
EPS
Rs.20.89
52 week H/L
6666 142/59.10
Avg. Daily Vol (2wk)
0.32lacs
K88
Dividend
20%
Managing Director
R.L Toshniwal
Listed At
NSE/BSE
Equity capital
Rs.14.75cr

Shareholding Pattern

Promoter Holding

: 53.19%

FIIs

: 0.00%

DIIs

: 0.03%

Public & Others

: 46.78%

FairWealth Equity Research Desk www.fairwealth.in/research.aspx

E-mail: research@fairwealth.in DirectLine: 0124-3009218/216

Banswara Syntex Limited is a 34 year old vertically integrated textile company. The company’s business profile includes spinning, weaving & processing and garmenting. It manufactures man-made synthetic blended yarn, all type of suitings and Jacquard Furnishing and technical fabrics. BSL also produces Readymade Garments and made-ups.

Key Investment Rationale:

Huge expansion plans: The company is undergoing rapid expansion, modernization and diversification in textiles, spinning, dyeing, weaving, fabric processing and readymade garments.

Strong Clientele Base: BSL is the key supplier to well known brands across the globe which includes Allen Solly, UCB, Wills, Arrow, Peter England, NEXT, GAP and Carreman. The key customers of BSL includes Aditya Birla, ITC and Arvind.

JV with Carreman, France: BSL has entered into a 50:50 JV with a French company, Carreman France. Carreman Fabrics India Ltd. was incorporated in 2006 and has state-of-art weaving plant that has 60 brand new Picanol Rapier Looms. It is being managed by the French technicians who do the job weaving work for BSL.

Future Valuation:

At the current price of Rs.135, the stock is trading at 3.73x and 2.62x of our estimated FY11E & FY12E earnings. We thus recommend a ‘BUY’ with a Price target of Rs 175.

Particulars (In crores)

FY10

FY11E*

FY12E*

Net Sales

622.25

777.81

917.82

%change in Sales

-

25%

18%

Expenditure

532.95

668.91

780.15

PBIDT

107.08

131.21

159.98

Profit After Tax

30.88

47.23

67.37

%change in PAT

-

52.95

42.64

EPS

23.55

36.11

51.51

PE Ratio

5.73

6.73

4.72

OPM %

17.21

16.87

17.43

NPM %

4.96

6.07

7.34

E* stands for Estimated

Banswara Syntex Limited

Banswara Syntex Limited

COMPANY PROFILE

Banswara Syntex is a Rajasthan-based manufacturer. The company manufactures

namely polyester, viscose, woolen, acrylic an d cotton. It also manufactures

fabrics and garments on made to order basis retail brands. Banswara has entered into a 50% joint company Carreman for a weaving plant of

and supplies them to all top

blended yarn and fabric all types of blended yarns,

venture with French textile 60 looms. The company has

started production of technical textiles an d also manufactures Lycra branded fabrics especially for women fas hion clothing, women office clothing and school uniforms.

S egments of BSL

Spinning

Weaving

Rea dymade Markets

Installed Capacity

Installed Capacity

Installed Ca pacity

 

Ring Spindles – 119188

Shuttle-less looms – 198

Jacquard m adeups– 12500pcs/mnth

Worsted Yarn Spindles – 14400

Jacquard looms – 20

Readymad e

trousers

–250000

pcs/mnth

Air Jet Spindes - 576

Fabric- Processing Capacity – 4 million mtrs/mnth

Readymad e

Jackets–

10000

pcs/mnth

Segmental Revenue

e Jackets– 10000 pcs/mnth Segmental Revenue 9.27 4 % 40.97 45.83 Yarn Fabrics Garments O thers

9.27

4%

40.97

45.83

10000 pcs/mnth Segmental Revenue 9.27 4 % 40.97 45.83 Yarn Fabrics Garments O thers blends of

Yarn

pcs/mnth Segmental Revenue 9.27 4 % 40.97 45.83 Yarn Fabrics Garments O thers blends of viscose,

Fabrics

Segmental Revenue 9.27 4 % 40.97 45.83 Yarn Fabrics Garments O thers blends of viscose, staple

Garments

Revenue 9.27 4 % 40.97 45.83 Yarn Fabrics Garments O thers blends of viscose, staple fibre,

O thers

blends of viscose, staple

fibre, polyester staple fibre, acrylic stapl e fibre, cotton, lycra, linen

yarn per annum which

comprises 28000 tones polyster blende d dyed yarn & 2000 tones wool mix yarn. The company specialize s in production of various

types of fancy spun yarns.

& wool. It produces 30000 tones of

Spinning: BSL specializes in producing

produces high-quality, hi-

performance textile wear, technical & ja cquard finished fabrics for both domestic & exports. The company produces technical fabrics from fibre stage to yarn, weaving, fin ishing & garments. BSL specialises in stretch fibres, fire retarda nt fabrics, fabric design & development innovations and laminated technical fibre.

Fabric-Weaving & Processing: BSL

readymade garments is

located in Daman & SEZ Surat. BSL s pecialises in trousers and jackets.

Readymade Garments: The plant for

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Fairwealth Research Desk

Banswara Syntex Limited

Banswara Syntex Limited

Key Investment Rationale

Consistent Revenue Growth: BSL’s revenues have been consistently growing from the past five years. The revenues have grown at a CAGR of 18.60% for the past 5 years.

Robust growth in bottomline: The company robust bottom line numbers were mainly on account of new product development and the strong relation that the company shares with its valued customers. In FY10, the PAT grew massively by 222% thereby posting the number to Rs.30.88cr from Rs.9.59cr.

Huge Expansion Plans: The company is undergoing rapid expansion, modernization and diversification in textiles, spinning, dyeing, weaving, fabric processing and readymade garments. The company will add about 7000 spindles in spinning and 64 looms in weaving. It will also increase processing capability from 28 lakh meters to 40 lakh meters. BSL has also started additional lines for production of trousers and jackets at its Surat SEZ Plant.

Rich Dividend payments: BSL management believes in wealth maximization of its shareholders. The regular payment of dividend show that the company has been enjoying handsome profit.

Strong Clientele base: The company enjoys valuable customer base across the globe. The key customers of BSL include Aditya Birla, GAP, Marks & Spencer, Arrow, Provogue, Westside, Blackberrys, Park Avenue, Banana Republic, Pantaloon etc.

Backward Integration: The company has set up first unit of 15/18 MW Thermal power plant in the year 2006 and has also planned for an additional 15/18 MW thermal based power plant which is expected to commence operation at the end of 2010. The power generated by this plant would primarily be used for internal consumption and surplus for sale.

Recognized Exporter: The company is a well recognized exporter of quality dyed blended yarns in 100% acrylic, 100% viscose, 100% polyster. The company exports to more than 50 countries worldwide and approximately 65% of the total revenues come from exports.

JV with Carreman, France: BSL has entered into a 50:50JV with a French company, Carreman France. Carreman Fabrics India Ltd. was incorporated in 2006 ans has state of art weaving plant having 60 brand new Picanol Rapier Looms. It is being managed by the French technicians and also does the job weaving work for BSL.

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Fairwealth Research Desk

Banswara Syntex Limited

Banswara Syntex Limited PEER ANALYSIS Particulars (In crores) Bans wara Textiles RSWM APM Indus Sangam India

PEER ANALYSIS

Particulars (In crores)

Bans wara Textiles

RSWM

APM Indus

Sangam India

Market Cap

195.66

399.22

42.42

196.9

Sales

651.32

1601.13

206.29

911.65

PBIDT

104.34

206.27

20.33

136.07

Net Profit

30.82

62.36

8.68

22.9

EPS

20.89

26.94

20.09

5.81

P/E

6.46

7.13

4.98

8.78

EV/PBIDT

6.06

7.11

5.01

6.49

P/BV

1.61

1.74

0.96

1.04

Equity

14.75

23.15

4.32

39.42

OPM %

16.02

12.88

9.86

14.93

Banswara Textiles is available at a relatively lo w P/E of 6.46. The Industry P/E stands at 11.23. Th e OPM of BSL is 16.02 which is highest among its peers. The EV/PBIDT and P/BV stands at 6.46 and 1.61 respectively.

Debt-Equity Ratio

800 4.5 4 700 3.5 600 3 500 2.5 400 2 300 1.5 200 1
800
4.5
4
700
3.5
600
3
500
2.5
400
2
300
1.5
200
1
100
0.5
0
0
2006
2007
2008
2009
2010
Total Debt LHS
Debt-Equity Rati o RHS

Dividends

25%

20%

15%

10%

5%

0%

20% 20% 20% 18% 12% 12%
20%
20%
20%
18%
12%
12%
LHS Debt-Equity Rati o RHS Dividends 25% 20% 15% 10% 5% 0% 20% 20% 20% 18%

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Fairwealth Research Desk

Banswara Syntex Limited

Banswara Syntex Limited

QUARTERLY ANALYSIS:

Particulars (In crores)

Q1FY10

Q1FY09

Var %

Q4FY09

Var %

Net Sales

178.9

149.9

19.35

179.44

-0.30

Other Operating Income

2.06

0.9

128.89

2.92

-29.45

Other Income

1.64

4.17

-60.67

0.9

82.22

Total Income

182.6

154.97

17.83

183.26

-0.36

Total Expenditure

152.73

128.76

18.62

154.54

-1.17

PBIDT

29.87

26.21

13.96

28.72

4.00

Interest

9.78

9.01

8.55

7.84

24.74

PBDT

20.09

17.2

16.80

20.88

-3.78

Depreciation

7.87

7.47

5.35

8.07

-2.48

Tax

3.59

3.31

8.46

3.35

7.16

Profit After Tax

8.63

6.42

34.42

9.46

-8.77

Extra-ordinary Items

0.39

2.33

-83.26

0.6

-35.00

Adjusted Profit After Extra-ordinary item

8.24

4.09

101.47

8.86

-7.00

EPS (Unit Curr.)

6.04

4.91

23.01

7.22

-16.34

OPM %

16.70

17.48

-4.51

16.01

4.32

NPM %

4.82

4.28

12.63

5.27

-8.50

Banswara Syntex Limited posted good set of numbers for its quarter ended June 2010.On Y-O-Y Basis, the top-line increased 19.35% to Rs 178.9cr in comparison to Rs.149.9cr in the corresponding quarter previous year. The operating profit of the company witnessed a growth of 13.96% to Rs 29.87cr as against Rs.26.21cr. The bottom line of the company grew 34.42% to Rs.8.63cr in comparison to Rs.6.42cr in the similar period previous year. The OPM and NPM stood at 16.70% and 4.82% respectively. The EPS for the quarter ended June’10 is 6.04.

On Q-O-Q Basis, the top line decreased marginally by 0.3% to Rs.178.9cr. The bottom line declined by 8.77% to Rs.8.63cr in comparison to Rs.9.46cr.

Stock Performance 160 140 120 100 80 60 40 20 0 Banswara BSESMALLCAP
Stock Performance
160
140
120
100
80
60
40
20
0
Banswara
BSESMALLCAP

During the 52 week period, BSL stock price was highest in the month of Dec’09. Since Apr’10 the stock has been moving in line with the SMALLCAP Index.

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Fairwealth Research Desk

Banswara Syntex Limited

Banswara Syntex Limited

PAST YEARS PERFORMANCE

Particulars (In crores)

201003

200903

200803

200703

200603

Net Sales

622.25

546.14

436.39

377.74

314.13

Other Income

9.07

3.72

0.89

4.77

6.57

Other Operating Income

8.71

2.79

1.71

-

-

Total Income

640.03

552.65

438.99

382.51

320.7

Total Expenditure

532.95

475.68

387.79

325.66

277.31

PBIDT

107.08

76.97

51.2

56.85

43.39

Interest

33.01

36.29

23.73

17.81

14.37

PBDT

74.07

40.68

27.47

39.04

29.02

Depreciation

30.73

29.39

21.8

16.26

13.31

Tax

12.46

1.7

1.25

7.84

6.45

Profit After Tax

30.88

9.59

4.42

14.94

9.26

Extra-ordinary Items

4.34

-6.6

-0.09

-

-

Adjusted Profit After Extra-ordinary item

26.54

16.19

4.51

14.94

9.26

Equity

13.08

13.08

13.08

12.52

7.77

Face Value

10

10

10

10

10

EPS (Unit Curr.)

23.55

7.29

3.34

11.93

11.92

OPM %

17.21

14.09

11.73

15.05

13.81

NPM %

4.96

1.76

1.01

3.96

2.95

BSL Reven ues

80 70 60 50 40 30 20 10 0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
80
70
60
50
40
30
20
10
0
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
Exports
60.86
64.23
65.22
64.26
66.75
65.15
Domestic
39.14
35.77
34.78
35.74
33.25
34.85
In %

BSL reven ues come majorly from

exports. In

were Rs.62 2.25cr out of which 65.15%

FY10, the total revenues

came from

from dom estic sales. The company

exports and rest 34.85%

exports to

approx 50 countries across

the globe.

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Fairwealth Research Desk

Banswara Syntex Limited

Banswara Syntex Limited

BALANCE SHEET

Particulars (In crores)

2009-10

2008-09

2007-08

2006-07

2005-06

Net worth

117.81

91.03

84.26

81.73

60.76

Loans-term

279

257.46

250.33

178.18

122.34

Loans-working capital

162.66

111.12

94.87

67.54

69.57

Deferred tax liability

27.23

21.93

20.53

19.56

18.41

TOTAL

586.7

481.54

449.99

347.01

271.08

Net block including WIP

362.55

330.9

319.15

244.52

170.38

Investments

6.67

6.63

6.63

6.53

2.78

Net working capital

217.48

144.01

124.21

95.96

97.7

Deferred revenue expenses

0

0

0

0

0.22

TOTAL

586.7

481.54

449.99

347.01

271.08

1000

800

600

400

200

0

 

300

219

238

260

311

345

390

505

2006

2007

2010

2015

Apparel

Apparel

Apparel Textiles

Textiles

Source: Company’s report

Industry Over-View

Textile Sector Contribution:

According to the Annual Report 2009-10 of the Ministry of Textiles, the Indian textile industry contributes abou t 14 per cent to industrial production, 4 per cent to the country's g ross domestic product (GDP) and 17 per cent to the country’s expor t earnings, according to thereport Industry Over-View Textile Sector Contribution: of Textiles. It provides direct and is the second largest

of Textiles. It provides direct and is the second largest

Annual Report 2009-10 of the Ministry employment to over 35 million people provider of employment after agriculture.

According to the Ministry of Textiles, the35 million people provider of employment after agriculture. cumulative production of cloth during April’09-March’10

cumulative production of cloth

during April’09-March’10 has increased b y 8.3 per cent as compared to

the corresponding period of the previous

year.

Total textile exports have increased to US $ 18.6 billion during April’09-compared to the corresponding period of the previous year. the corresponding period of the previous year,

the corresponding period of

the previous year, registering an increa se of 4.95 per cent in rupee terms. Further, the share of textile e xports in total exports has increased to 12.36 per cent during April ’09-January’10 (according to the Ministry of Textiles).

January’10, from US$ 17.7 billion during

As per the Index of Industrial Productio n (IIP) data released by the Central Statistical Organisation (CSO), c otton textiles have registered a growth of 5.5 per cent during April-Ma rch 2009-10, while wool, silk and man-made fibre textiles have registe red a growth of 8.2 per centof Textiles). January’10, from US$ 17.7 billion during apparel have registered a while textile products including

apparel have registered a

while textile products including wearing growth of 8.5 per cent

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Fairwealth Research Desk

Banswara Syntex Limited

Banswara Syntex Limited

Technical Textile Segment:

According to the Ministry of Textiles, technical textiles form an important part of the textile industry. The Working Group for the Eleventh Five Year Plan has estimated the market size of technical textiles to increase from US$ 5.29 billion in 2006-07 to US$ 10.6 billion in 2011-12, without any regulatory framework and to US$ 15.16 billion with regulatory framework.Banswara Syntex Limited Technical Textile Segment : The Scheme for Growth and Development of Technical Textiles

The Scheme for Growth and Development of Technical Textiles aims to promote indigenous manufacture of technical textile to leverage global opportunities and to cater to the domestic demand.and to US$ 15.16 billion with regulatory framework. Government Initiative for Textile Industry: According to the

Government Initiative for Textile Industry:

According to the Ministry of Textiles, investment under the Technology Upgradation Fund Schemes (TUFS) has been increasing steadily. During the year 2009-10, 1896 applications were sanctioned at a project cost of US$ 5.23 billion. The cumulative progress as on December 31, 2009, includes 27,477 applications sanctioned, which has triggered investment of US$ 45.5 billion. The amount sanctioned under TUFS is US$ 18.9 billion of which US$ 16.4 billion had been disbursed till the end of April, 2010.domestic demand. Government Initiative for Textile Industry: Future Prospects:In May 2010, the Ministry of Textiles

Future Prospects:In May 2010, the Ministry of Textiles informed a parliamentary panel that it proposes to allocate US$ 785.2 million for the modernisation of the textile industry.16.4 billion had been disbursed till the end of April, 2010. The Scheme for Integrated Textile

The Scheme for Integrated Textile Park (SITP) was approved in July 2005 to facilitate setting up of textiles parks with world class infrastructure facilities. 40 textiles park projects have been sanctioned under the SITP. According to the Minister of State for Textiles, Panabaaka Lakshmi, under the SITP, a cumulative expenditure of US$ 204.3 million has been incurred against allocation of US$ 220.7 million in the last three years.it proposes to allocate US$ 785.2 million for the modernisation of the textile industry. 8 Fairwealth

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Fairwealth Research Desk

Banswara Syntex Limited

Banswara Syntex Limited

Facts & Figures related to report taken from Capitaline database, Company’s website and Company’s reports.

Stock Ratings

BUY

The stock's total return is expected to exceed 20% over the next 12 months

ACCUMULATE

The stock's total return is expected to be within 10-15% over the next 12 months

REDUCE

The stock's total return is expected to be within 0-10% over the next 12 months

SELL

The stock's total return is expected to give negative returns over the next 12 months

NOT RATED

The Analyst has no recommendation on the stock under review

Disclaimer:

This publication has been solely prepared for the information purpose and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed reliable investors are advised to satisfy themselves before making any investments. Fairwealth Securities Ltd does not bear any responsibility for authentication of the information contained in the reports and consequently is not liable for any decision taken based on the same. Further Fairwealth Research report only provides information updates and analysis. All opinions for buying and selling are available to investors when they are registered clients of Fairwealth Investment advisory services. As a matter of practice, Fairwealth refrains from publishing any individual names with its reports. As per SEBI requirements it is stated that, Fairwealth securities Ltd, and/or individuals thereof may have positions in securities referred herein and may make purchases or sale while this report is in circulation.

referred herein and may make purchases or sale while this report is in circulation. 9 Fairwealth

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Fairwealth Research Desk