Not Rated Garware Hi Tech Films Ltd for the Target Rs.NA by Emkay Global Financial Services Ltd
We visited the Aurangabad facility and met the management of Garware Hi-Tech Films (GHFL), a leading global manufacturer of hi-tech, value-added specialty polyester films with a global franchise (75% export revenue) and a fully integrated chips-to-film set-up (one of the few vertically integrated players). The core PPF/SCF automotive business provides a strong cash-generating base (~55% of 1QFY27 revenue from SCF), while Architectural films and TPU are emerging as key incremental growth engines (~30% revenue CAGR target for Architectural; new TPU vertical adding a ~Rs2-5bn topline opportunity over 3Y). GHFL is expanding beyond its traditional automotive-led portfolio (~75% of SCF revenue in 1QFY27), with i) Architectural SCF mix expected to rise to ~40% of SCF (vs 25% now); ii) Garware Application Studios (GAS) and Garware Home Solutions (GHS) providing a scalable high-margin D2C opportunity; and iii) TPU opening up entirely new applications across auto interiors, architectural membranes, medical, footwear, and tubes. This is complemented by rising exports (particularly to ME, Europe) and differentiated technologies such as deep dyeing/nano films. As highlighted earlier (refer to: Global specialty film champion), GHFL has posted a strong print over FY21-26 (revenue/EBITDA/EPS CAGR of 16%/15%/22%; net cash of ~Rs7.7bn in FY26 vs net debt of Rs1.1bn in FY18; adjusted for revaluation reserve, ROE/ROCE of 19%/25% vs 7%/11% in FY18), with management reiterating its stance of ~15- 20% revenue CAGR and 23-27% EBITDAM (FY26: 23.6%, including other income) for FY27 and beyond.
Visit note KTAs
1) GHFL is setting up India's first TPU manufacturing facility (36msf/pa capacity), with pilot testing expected to commence shortly and commercialization targeted in 3QFY27. While backward integration into PPF could potentially improve EBITDAM by ~150-200bps, the larger opportunity lies in new TPU applications across auto interiors, architectural membranes, tubes, medical, and footwear, thus opening a new TAM opportunity. Management estimates that ~25% of TPU utilization directed toward new applications could generate ~Rs1bn revenue initially, with the potential ramp up to ~Rs2-5bn over next 3Y.
2) Management believes the Architectural business can register ~30% CAGR, driven by increasing market awareness and adoption of solar-control films. GHS contributes <10% to Architectural revenue, but management expects the D2C business to account for 30-40% of the segment over the next few years. The company currently has 13 GHS outlets and targets 50 stores by FY27-end and ~200 stores over the long term.
3) GHFL sees limited risk from incremental capacity additions by US competitors, with the company continuing to white-label products for global players.
4) GHFL is targeting a substantial increase in its ME share from ~6% in FY26 to 15-20%, aided by a new local leadership team and recent wins such as Dubai Mall. While US growth remains relevant, management sees India, ME, and Europe as the more significant growth opportunities.
5) GHFL has added 120msf/pa of new SCF capacity, expected to commission from 1HFY28 and ramp up to full utilization in 2-3Y of commissioning.
6) Deep-dyeing and nano-technology remain key differentiators, with management indicating that only 2 global players currently possess these.
7) GHFL expects ~15-20% revenue CAGR and ~23-27% EBITDAM over FY27 and beyond.
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