We hereby present you our investment idea for Equity Investment i.e “Pick of the Week”. A thorough analysis of company, industry and economy goes behind our stock ideas for you. With the “Pick of the Week”, you may earn superior returns in stock market over a time horizon of 6 – 9 months.

INVESTING RATIONALE

• Increasing capacity in Glass Line Equipment (GLE) business: GMM Pfaudler is the market leader in manufacturing of glass line equipments (>50% market share). In Q3FY18, GLE business grew by 7.2% Y-o-Y and constituted 61% of GMM’s revenues. Investments in the Agrochemical and Specialty chemicals sectors have been the main drivers for growth with the companies in this space putting up capacities. The current capacity utilization is 80%. It on its course to expand its capacity to 2000 vessels p.a which would require no major cap-ex. We expect this segment to grow at 12% CAGR over FY17-FY20E.

• Increasing revenue contribution from Non Glass Line Equipment (Non-GLE) business: In 9MFY18, GMM showed an exceptional growth in the Non-GLE segment with Heavy Engineering and Proprietary Products (Mixing systems, engineered systems, filtration & drying) growing by 20% and 36% respectively on a Y-o-Y basis due to high order execution and robust inflow of the orders. The Non-GLE business contributed 33% of the total revenues in 9MFY18 vs 28% in 9MFY17. The company has a healthy order backlog in this segment and we expect it to grow at 22% CAGR over FY17-FY19E.

• Focus on exports in both GLE and Non GLE: Exports contributed ~14% of GMM’s revenues in Q3FY18 which was merely <5% in H1FY18. This can be attributed to increased interaction between Pfaudler and GMM.

• We maintain a BUY with a target of Rs.812.