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Mid & Small Cap Focused Portfolio: Rebalance update from Niveshaay smallcase

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New Stock in Portfolio:

Garware Hi-tech Films Ltd.

About the company:

Garware Hi-Tech Films Limited, holds a prominent position as a leading manufacturer and exporter of value-added specialty films in India. Notably, it stands as the exclusive producer of Solar Control window films in India and, quite possibly, the sole global entity engaged in backward integration for the production of raw materials and components essential for Solar Control window film manufacturing. Over the course of more than three decades, GHFL has established itself as a pioneer in the Solar Control Film industry, driven by continuous technological advancements.

The Company boasts well-established global brands, namely ‘SunControl Window Films’ and ‘Global Window Films,’ renowned for their exceptional quality and innovative features. GHFL offers an extensive array of products catering to diverse end applications. These encompass Solar Control Films, Paint Protection Films, Thermal Lamination Films, Low-Oligomer Films, high shrink films, and BOPET / Polyester Films, among others.

Investment Rationale:

1.Increasing share of value added products

Over the past five years, the company has undergone a remarkable transformation, shifting its focus from being a high-volume-low-margin commoditized polyester film company to becoming a value-added-margin-accretive specialty films company. This strategic shift in their business approach has resulted in a substantial change in their business mix, with value-added products accounting for a significant portion. Specifically, this transformation has seen their business mix evolve from 48% value-added products to an impressive 83%.

As a direct consequence of this shift towards a higher proportion of value-added products, the company has been able to achieve not only higher but also stable margins.

2. Integrated Manufacturing

The company has established a fully vertically integrated manufacturing setup, encompassing everything from chips to film production. This strategic move provides a significant advantage to the company, as it ensures the production of the requisite high-quality raw materials for its final products.

3. Strong Global and Domestic Brand

Garware Hi-Tech has developed strong brands and presence in the global market for UV stabilized dye films and Solar Control window films by a strong distribution network in 90+ countries. The Solar Control window films are sold under the brand name ‘Global Window Films’ registered in USA and ‘Garware Sun Control’ in domestic and export markets. In the Sun control film segment, it has 2nd largest global capacity and 3rd largest branded player in the USA and European markets.

4. High growth in Paint Protection Film Business

The company is diligently working to expand its presence and boost revenue within the Paint Protection Film (PPF) business segment, recognizing it as a high-growth industry with substantial revenue potential. In the preceding year, this segment accounted for a modest 5% of the total revenue. However, the company is poised for a significant transformation as it expects this contribution to escalate to an impressive 20-25% this year.

EXIT:

Gravita India Ltd.

Rationale:

We are capitalizing on our gains in the company and shifting towards more promising opportunities. Consequently, we have made the decision to exit from the same.

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Users must make their own investment decisions based on their specific investment objective and financial position and using such independent advisors as they believe necessary. For more information and disclosures, visit our disclosures page here

Arvind Kothari

Founder - Niveshaay Investment Advisors | The content in this article is purely the author’s personal opinion and is for informational and educational purposes only. It should not be construed as professional financial advice and nor to be construed as an offer to buy /sell or the solicitation of an offer to buy / sell any security or financial products. The views and opinions stated in the content belong to the author. NIVESHAAY INVESTMENT ADVISORS does not uphold nor promote any of the views / opinions. | NIVESHAAY INVESTMENT ADVISORS is a SEBI registered research analyst (Regn. No. INA000017541)

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