Bharat Wire Ropes - Healthy Demand With Operational Efficiencies To Drive Growth: ICICI Direct

Solid presence in global markets led by strong competitive edge.

<div class="paragraphs"><p>Wire ropes manufactured by Bharat Wire Ropes Ltd. (Source: Company website)</p></div>
Wire ropes manufactured by Bharat Wire Ropes Ltd. (Source: Company website)

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ICICI Direct Report

Key Investment Thesis:

Solid presence in global markets led by strong competitive edge:

Bharat Wire Ropes Ltd. 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 and gas etc.) and improving product mix, Bharat Wire Ropes 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 three years (with capacity utilisation reaching at 80-85% from 62% at present).

Margins expected to improve led by operational efficiencies (improvement in capacity utilisation and reduction in energy cost) and positive operative leverage benefits.

Rating and target price

Bharat Wire Ropes is strongly positioned to benefit from healthy demand of its products in global and domestic markets led by buoyant capex outlook in Infra and Industrials and growing replacement demand.

Moreover, operational efficiencies and positive operating leverage would drive company’s margins and profitability. We estimate revenue, Ebitda and profit after tax to grow at ~15%, ~26% and ~47% compound annual growth rate respectively over FY23-25E.

We recommend 'Buy' on Bharat Wire Ropes. We value the stock at Rs 300 per share (based on 15 times FY25 earnings per share).

About the company:

Bharat Wire Ropes, incorporated in 1986, is one of the leading manufacturer of specialty steel wire, steel wire ropes, slings and 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 U.S. and South America and balance 45-50% by South Asian and Middle East markets.

Revenue and Ebitda have grown by 31.7% and 68.5% compound annual growth rate in the last three years during FY20-23. Profit after tax recovered sharply from net loss of Rs 61 crore in FY20 to Rs 62.2 crore net profit in FY23.

During FY23, Bharat Wire Ropes reported revenues of Rs 589 crore (+43.4% YoY) and Ebitda of Rs 138.8 crore (+123% YoY). Profit after tax in FY23 stood at Rs 62.2 crore, which increased by 4.5 times YoY.

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ICICI Direct Bharat Wire Ropes.pdf
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