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Healthy demand with operational efficiencies to drive growth…

About the stock: BWR, incorporated in 1986, is one of the leading manufacturer of specialty steel wire, steel wire ropes, slings & strands, with wide range of products. Products have applications across industries including elevators, shipping, oil & gas, cranes, mining etc

• Company’s ~83% of revenue is from exports while ~17% from domestic markets. In exports, Europe contributes 30-35% of revenue followed by ~20% by US & South America and balance 45-50% by South Asian & Middle East markets

• Revenue and EBITDA have grown by 31.7% and 68.5% CAGR in the last 3 years during FY20-23. PAT recovered sharply from net loss of | 61 crore in FY20 to | 62.2 crore net profit in FY23. During FY23, company reported revenues of ? 589 crore (+43.4% YoY) and EBITDA of | 138.8 crore (+123% YoY). PAT in FY23 stood at ? 62.2 crore, which increased by 4.5x YoY

Key Investment Thesis:

• Solid presence in global markets led by strong competitive edge: BWR has a strong presence in international markets (~83% of revenue is from exports), driven by solid competitive edge in terms of manufacturing capabilities, cost of production and on-time delivery of products. With focus on expansion of product portfolio and entry into newer geographies, company is looking to gain market share further in global markets

• Buoyant domestic capex presents sizable opportunity; Focus on continuous improvement in product portfolio: With healthy capex cycle scenario in domestic market (led by infra, real estate, industrials, oil & gas etc) and improving product mix, company is focused on increasing its domestic share (target to reach ~50% of sales in longer term from ~17% at present)

• Healthy volume growth with operational efficiency measures: Volume growth is expected at 15-20% YoY for the next 3 years (with capacity utilisation reaching at 80-85% from 62% at present). Margins expected to improve led by operational efficiencies (improvement in capacity utilisation & reduction in energy cost) and positive operative leverage benefits

Rating and Target Price

• BWR is strongly positioned to benefit from healthy demand of its products in global and domestic markets led by buoyant capex outlook in Infra & Industrials and growing replacement demand. Moreover, operational efficiencies and positive operating leverage would drive company’s margins and profitability. We estimate revenue, EBITDA and PAT to grow at ~15%, ~26% and ~47% CAGR respectively over FY23-25E

• We recommend BUY on Bharat Wire Ropes. We value the stock at | 300 per share (based on 15x FY25 EPS)

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