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Plant Visit Note

We recently visited Garware Hi-Tech Films' manufacturing facility at Waluj, Chhatrapati Sambhajinagar, which houses the production of Sun Control Films (SCF), Paint Protection Films (PPF), Architectural Films, Safety Films and Privacy Films. The upcoming TPU manufacturing facility, which is expected to commence operations within this year, is also located within the same premises. The visit began at the company's experience centre, where management demonstrated the applications and benefits of its various products. Seeing these demonstrations firsthand provided a much better understanding of the value proposition offered by Garware's specialty films and helped explain the premium margins that the company enjoys in its Consumer Products Division. Being fully backward integrated, Garware controls a significant portion of the manufacturing value chain. The process starts with raw materials such as PTA and MEG, which are converted into PET chips and subsequently into polyester films. These films are then subjected to deep-dyeing and coating processes depending on the final application. The facility currently operates five deep-dyeing lines and five coating lines. Management highlighted that these capabilities have been developed over many years and form one of the core technological differentiators of the company. We have a BUY rating on the stock with a Target price of INR 7,880, an upside of 19% from CMP.

Several practical demonstrations were conducted during the visit:

1)Sun Control Films- The effectiveness of Sun Control Films was evident from the significant reduction in heat experienced from a light source after application of the film.

2)Privacy films showcased their ability to switch from transparent to opaque using a very small amount of electrical current, highlighting their potential applications in offices, homes and commercial buildings.

3)Safety films were tested by dropping a heavy object on a glass panel; while the glass cracked, the film prevented it from shattering into hazardous fragments.

4)Paint Protection Films demonstrated both self-healing properties and strong resistance to damage from debris and stone impacts. These demonstrations made it clear that the products solve tangible customer problems rather than merely functioning as aesthetic upgrades. The management also walked us through the manufacturing processes for both SCF and PPF.

Sun Control Films-

In the case of Sun Control Films, polyester film is coated with an antiscratch layer on one side and adhesive on the other side. A key aspect of the process is drying, with the film undergoing an extended drying cycle after each coating stage. Management emphasized that drying is among the most critical elements in ensuring product performance and consistency. Once the process is completed, each batch undergoes rigorous testing before dispatch. Products that do not meet specifications, representing roughly 5% of output, are sold at lower realizations. The facility currently has SCF capacity of approximately 4,200 lakh square feet annually, with an additional 1,200 lakh square feet already announced and expected to become operational in FY28.

Paint protection films-

The manufacturing process for Paint Protection Films is broadly similar, but instead of polyester film, TPU-based film is used as the base material. The film receives a self-healing top coating and adhesive coating, followed by extensive drying and testing procedures. Current installed PPF capacity stands at around 600 lakh square feet. Management indicated that utilization levels are expected to remain in the 70-80% range this year and move closer to full utilization over the next year as demand continues to ramp up.

TPU manufacturing-

One of the most important developments discussed during the visit was the company's entry into TPU manufacturing. Garware is establishing TPU production as a separate business vertical, with the plant expected to start operations by December and meaningful commercialization anticipated from the first quarter of the next fiscal year. Management guided for revenues of Rs.75-100 crore from the TPU business in its first full year of operation and believes the segment has the potential to evolve into a Rs.500 crore business over time. While TPU currently serves as a key input for Paint Protection Films, management outlined several additional applications including automotive interior components, architectural membranes, tubing and glass-industry substitutes. Backward integration into TPU is expected to improve profitability, with management estimating an EBITDA margin uplift of approximately 1.5-2%.

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