4QFY2010 Result Update | Packaging-Polyester Films
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Polyplex Corporation | 4QFY2010 Result Update
Exhibit 1: 4QFY2010 performance
(Rs cr) 4QFY20...
Polyplex Corporation | 4QFY2010 Result Update
Exhibit 3: Quarterly Revenue trend
(R...
Polyplex Corporation | 4QFY2010 Result Update
Exhibit 5: Strong turnaround in Net Profit
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Polyplex Corporation | 4QFY2010 Result Update
Investment Rationale
Capacity expansion ...
Polyplex Corporation | 4QFY2010 Result Update
Exhibit 7: One-year forward P/BV band
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Polyplex Corporation | 4QFY2010 Result Update
Profit and Loss Statement (Consolidated)
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Polyplex Corporation | 4QFY2010 Result Update
Exhibit 8: Balance Sheet (Consolidated)
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Polyplex Corporation | 4QFY2010 Result Update
Key Ratios
Y/E March ...
Polyplex Corporation | 4QFY2010 Result Update
Research Team Tel: 022 - 4040 3800 E-mail: research@ange...
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Polyplex Corporation

Published on: Mar 4, 2016
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Transcripts - Polyplex Corporation

  • 1. 4QFY2010 Result Update | Packaging-Polyester Films July 22, 2010 Polyplex Corporation BUY CMP Rs300 Performance Highlights Target Price Rs418 (Rs cr) 4QFY2010 4QFY2009 %chg (yoy) 3QFY2010 %chg (qoq) Investment Period 12 Months Net Sales 321 269 19.4 310 3.4 Stock Info EBITDA 59 52 13.0 55 6.7 Sector Packaging EBITDA Margin (%) 18.4 19.5 (104)bp 17.9 58bp Market Cap (Rs cr) 480 Net Profit 41 27 50.2 25 59.8 Beta 0.4 Source: Company, Angel research 52 Week High / Low 305/164 Polyplex Corporation (PCL) has reported higher-than-estimated 4QFY2010 Avg. Daily Volume 6472 numbers. Net sales grew 19.4% yoy to Rs321cr (Rs269cr). The company Face Value (Rs) 10 reported 104bp contraction in OPM to 18.4% (19.5%), but above our estimate BSE Sensex 18,113 of 17.9%, mainly due to the increase in raw material costs. Net profit jumped by Nifty 5,442 50.2% yoy to Rs41cr (Rs27cr) on the back of the substantial increase in other Reuters Code PLYP.BO income. Bloomberg Code PPC@IN FY2010 results above expectation: PCL reported 9.1% yoy growth in net sales to Rs1223cr mainly on the back of better economic conditions, which led to a rise Shareholding Pattern (%) in capacity utilizations to 93% in FY2010 v/s 85% in FY2009. PCL reported OPM of 18.3% (20.9%) for FY2010, which contracted by 260bp yoy but was Promoters 46.9 slightly above our estimate of 18.2%. Net profit for FY2010 declined by 14.9% MF / Banks / Indian Fls 19.2 to Rs94cr (Rs110cr) but was still above our expectation of Rs72cr. FII / NRIs / OCBs 11.6 Indian Public / Others 22.3 Outlook and Valuation: PCL holds 70% stake in its listed Thailand subsidiary Polyplex Thailand (PTL), which has a market cap of Rs950cr and is available at 1.3x P/BV. However, PCL has a market cap of Rs480cr or 0.7x FY2010E P/BV, Abs. (%) 3m 1yr 3yr which is at more than 50% discount to PTL's market cap and at a discount of Sensex 3.1 22.0 16.4 nearly 28% to PCL's 70% stake in PTL, which works out to around Rs665cr. In Polyplex 34.2 60.9 93.8 comparison to its peers too, PCL is available at inexpensive valuations of 0.5x FY2012E P/BV, with Cosmo Films, Jindal Poly and Ester Industries trading between 0.8x-1.1x FY2010E P/BV, respectively. Considering the 26% estimated CAGR in earnings over FY2010-12E, we maintain a Buy on the stock, with a Target Price of Rs418. Key Financials (Consolidated) Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E Net Sales 1,121 1,223 1,581 1,733 % chg 11.9 9.1 29.3 9.6 Net Profit 110 94 124 150 % chg 10.4 (14.9) 32.5 20.1 EBITDA Margin (%) 20.9 18.3 18.5 19.0 FDEPS (Rs) 69.0 58.8 77.8 93.5 P/E (x) 4.4 5.1 3.9 3.2 RoE (%) 19.4 13.9 16.1 16.7 RoCE (%) 14 10 13 14 Sharan Lillaney P/BV (x) 0.8 0.7 0.6 0.5 022-4040 3800 Ext: 338 EV/Sales (x) 0.9 1.0 0.7 0.5 sharanb.lillaney@angeltrade.com EV/EBITDA (x) 4.5 4.1 2.6 1.8 Source: Company, Angel Research Please refer to important disclosures at the end of this report 1
  • 2. Polyplex Corporation | 4QFY2010 Result Update Exhibit 1: 4QFY2010 performance (Rs cr) 4QFY2010 3QFY2010 %chg 4QFY2009 %chg FY2010 FY2009 %chg 4Q 3Q (qoq) 4Q (yoy) (yoy) Net Sales 321 310 3.4 269 19.4 1,223 1,121 9.1 Total Expenditure 262 255 2.7 216 21.0 999 886 12.8 EBITDA 59 55 6.7 52 13.0 224 235 (4.6) Depreciation 16 15 5.0 14 14.1 60 54 10.8 EBIT 44 41 7.4 39 12.6 164 181 (9.3) Interest 7 5 36.1 8 (5.9) 25 35 (29.6) Other Income 13 1 1,562.0 8 59.3 17 21 (16.0) PBT 49 36 37.3 39 26.3 156 166 (5.8) Tax (6) (0) - 2 - 19 12 61.0 Minority Interest 14 10 36.8 10 41.9 43 44 (0.6) Net Profit 41 25 59.8 27 50.2 94 110 (14.9) Basic EPS (Rs) 25 16 59.8 17 50.2 59 69 (14.9) Source: Company, Angel Research Exhibit 2: 4QFY2010- Actual v/s Angel estimates Rs cr Estimates Actual Variation (%) Net Sales 299 321 7.5 EBITDA 54 59 9.1 EBITDA Margin (%) 17.9 18.4 2.8 Tax - (6) - Net Profit 19 41 115.0 Source: Company, Angel Research Revenues up 19.4%, substantially above expectation: The company’s net sales grew by 19.4% yoy to Rs321cr (Rs269cr) for the quarter, driven by better capacity utilisation and commencement of new biaxially oriented polypropylene (BOPP) and PET units in 4QFY2010. On qoq basis, the company managed a marginal 3.4% growth in revenues. For FY2010, capacity utilisation stood at 93% v/s 85% in FY2009. For FY2010, revenues increased marginally by 9.1% to Rs1,223cr (Rs1,121cr). July 22, 2010 2
  • 3. Polyplex Corporation | 4QFY2010 Result Update Exhibit 3: Quarterly Revenue trend (Rs cr) (%) 330 25 320 20 310 321 15 300 310 301 10 290 290 5 280 0 270 260 269 (5) 250 (10) 240 (15) 4QFY2009 1QFY2010 2QFY2010 3QFY2010 4QFY2010 Net Sales (LHS) Growth (qoq) Growth (yoy) Source: Company, Angel Research OPM contracts yoy on higher raw materials costs but increases qoq: PCL reported 104bp contraction in OPM to 18.4% (19.5%) for the quarter, which however exceeded our estimate of 17.9%. On a qoq basis, the company managed to increase its OPM by 58bp on strong demand for PET films. For FY2010, the company’s OPM declined to 18.3% (20.9%) mainly due to higher raw material costs. Exhibit 4: Quarterly OPM trend (%) 20.0 19.5 19.5 19.0 18.5 18.5 18.4 18.4 18.0 17.9 17.5 17.0 4QFY2009 1QFY2010 2QFY2010 3QFY2010 4QFY2010 Source: Company, Angel Research Bottom-line increases on tax reversal and higher other income: In 4QFY2010, PCL reported net profit of Rs41cr (Rs27cr), up 50.2% yoy on the back of higher other income, which stood at Rs13cr (Rs1cr) and tax reversal of Rs6cr. For FY2010, the net profit fell 14.9% to Rs94cr (Rs110cr) largely on the back of weak 1HFY2010. July 22, 2010 3
  • 4. Polyplex Corporation | 4QFY2010 Result Update Exhibit 5: Strong turnaround in Net Profit (Rs cr) (%) 45 12.7 14 40 12 41 35 10.1 10 30 8.2 25 7.2 8 27 25 20 6 21 15 2.3 4 10 5 2 7 0 0 4QFY2009 1QFY2010 2QFY2010 3QFY2010 4QFY2010 Net Profit (LHS) NPM (RHS) Source: Company, Angel Research July 22, 2010 4
  • 5. Polyplex Corporation | 4QFY2010 Result Update Investment Rationale Capacity expansion to drive robust growth in revenues: PCL has recently forayed into the lucrative, high-growth BOPP and cast polypropylene (CPP) segments. In FY2010, global demand for BOPP far exceeded supply, with an estimated BOPP production of ~6,046kilo tonne/year v/s ~6,648kilo tonne/year of demand. To meet such growing demand, PCL has set up new BOPP capacity of 35,000tpa in India as well as a new 10,000 tpa CPP plant in Thailand. In PET films, PCL increased capacity in India by 155% in FY2010. Overall, on the back of the company's capacity expansion moves, we expect it to post 19% CAGR in sales over FY2010-12E. Valuation - Available at discount to subsidiary (PTL) and peers: PCL holds 70% stake in its listed Thailand subsidiary Polyplex Thailand (PTL), which has a market cap of Rs950cr and is available at 1.3x P/BV. However, PCL has a market cap of Rs480cr or 0.7x FY2010E P/BV, which is at more than 50% discount to PTL's market cap and at a discount of nearly 28% to PCL's 70% stake in PTL, which works out to around Rs665cr. In comparison to its peers too, PCL is available at inexpensive valuations of 0.5x FY2012E P/BV, with Cosmo Films, Jindal Poly and Ester Industries trading between 0.8x-1.1x FY2010E P/BV, respectively. Over the past five years, PCL has traded in the range of 0.3-0.7x one-year forward P/BV, considering the 26% CAGR in earnings over FY2010-12E, we value PCL at the upper band (0.7x) FY2012E P/BV. Outlook PCL is well placed to cater to future demand on account of having one the largest PET film production capacities in the world, which is complemented by its excellent geographical reach through its plants in Thailand, Turkey and India. Pertinently, PCL garners a major part of its revenues from the packaging industry, which is expected to register around 15% CAGR over FY2010-12E. Moreover, the company's foray into the BOPP segment is expected to yield good returns for it, as demand for BOPP far exceeds supply. The company's profitability is expected to improve with the company expanding capacity of its PET film unit in India along with the setting up of new BOPP and cast polypropylene (CPP) units. Exhibit 6: Key Assumptions Estimates (%) FY2011 FY2012 Sales Growth 29.3 9.6 Capacity Utilisation-BOPP 60.0 85.0 -CPP 50.0 70.0 Operating Margins 18.5 19.0 Source: Company, Angel Research July 22, 2010 5
  • 6. Polyplex Corporation | 4QFY2010 Result Update Exhibit 7: One-year forward P/BV band 600 500 400 300 200 100 0 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Price 0.2x 0.4x 0.6x 0.8x 1x Source: Company, Angel Research July 22, 2010 6
  • 7. Polyplex Corporation | 4QFY2010 Result Update Profit and Loss Statement (Consolidated) Y/E March (Rs cr) FY07 FY08 FY09 FY10 FY11E FY12E Net Sales 767 1,001 1,121 1,223 1,581 1,733 % chg 44.36 30.51 11.92 9.14 29.27 9.62 Total Expenditure 674 834 886 999 1,289 1,404 Net Raw Materials 550 691 681 771 996 1,092 Other Mfg costs 126.7 144.9 198.6 277.2 308.3 329.3 Other (2.8) (1.9) 6.2 (48.6) (15.8) (17.3) EBITDA 92.9 167.6 234.6 223.7 292.2 328.9 % chg 7.77 80.55 39.92 (4.64) 30.62 12.58 (% of Net Sales) 12.1 16.7 20.9 18.3 18.5 19.0 Depreciation& Amortisation 35.1 21.2 54.0 59.9 62.5 65.6 EBIT 57.7 146.5 180.5 163.8 229.7 263.3 % chg (3.2) 153.8 23.3 (9.3) 40.2 14.6 (% of Net Sales) 7.5 14.6 16.1 13.4 14.5 15.2 Interest & other Charges 20.4 19.4 35.3 24.8 46.5 38.6 Other Income 10.7 9.9 20.6 17.3 19.0 18.1 (% of PBT) 22.2 7.2 12.4 11.1 9.4 7.5 Recurring PBT 48.0 137.0 165.9 156.3 202.1 242.8 % chg (16.6) 181.9 22.4 (5.8) 29.3 20.1 PBT (reported) 48.0 137.0 165.9 156.3 202.1 242.8 Tax 3.5 5.1 11.9 19.0 20.2 24.3 (% of PBT) 7.3 3.7 7.1 12.2 10.0 10.0 PAT (reported) 44.5 131.9 154.0 137.3 181.9 218.5 Less: Minority interest (MI) 12.7 30.4 43.6 43.3 57.4 69.0 PAT after MI (reported) 31.9 101.6 110.4 94.0 124.5 149.6 ADJ. PAT 31.9 101.6 110.4 94.0 124.5 149.6 % chg (16.6) 213.6 10.4 (14.9) 32.5 20.1 (% of Net Sales) 4.2 10.1 9.9 7.7 7.9 8.6 Basic EPS (Rs) 21.8 62.6 69.0 58.8 77.8 93.5 Fully Diluted EPS (Rs) 21.8 62.6 69.0 58.8 77.8 93.5 % chg (16.6) 187.2 10.4 (14.9) 32.5 20.1 July 22, 2010 7
  • 8. Polyplex Corporation | 4QFY2010 Result Update Exhibit 8: Balance Sheet (Consolidated) Y/E March (Rs cr) FY07 FY08 FY09 FY10E FY11E FY12E SOURCES OF FUNDS Equity Share Capital 15 17 17 17 17 17 Reserves& Surplus 392 483 622 701 811 945 Shareholders Funds 407 500 639 718 827 962 Minority Interest 138 158 198 241 299 368 Total Loans 335 455 681 854 696 591 Deferred Tax Liability 16 14 15 - - - Total Liabilities 897 1,127 1,533 1,813 1,823 1,921 APPLICATION OF FUNDS Gross Block 827 825 1,205 1,643 1,715 1,800 Less: Acc. Depreciation 191 227 293 353 415 481 Net Block 636 598 912 1,290 1,299 1,320 Capital Work-in-Progress 26 264 218 72 - - Goodwill 1 0 1 1 1 1 Investments 52 15 50 50 50 50 Current Assets 291 390 503 568 683 781 Cash 29 20 93 121 115 159 Loans & Advances 28 43 52 57 63 69 Inventories 106 122 160 174 225 247 Debtors 128 205 198 216 279 306 Current liabilities 110 150 153 168 210 231 Net Current Assets 181 241 350 401 473 551 Mis. Exp. not written off 0 8 3 - - - Total Assets 897 1,127 1,533 1,813 1,823 1,921 Cash flow Statement (Consolidated) Y/E March (Rs cr) FY07 FY08 FY09 FY10E FY11E FY12E Profit before tax 37 126 145 139 183 225 Depreciation 35 21 54 60 63 66 Change in Working Capital 5 (68) (36) (21) (75) (32) Other income 11 10 21 17 19 18 Direct taxes paid 6 1 3 5 12 19 Cash Flow from Operations 83 88 181 190 178 258 (Inc)./ Dec. in Fixed Assets (159) (236) (333) (292) - (86) (Inc)./ Dec. in Investments (23) 37 (35) - - - (Inc)./ Dec. in loans and adv. 15 (16) (9) (5) (6) (6) Cash Flow from Investing (167) (215) (377) (297) (6) (92) Issue of Equity - - - - - - Inc./(Dec.) in loans 37 120 226 173 (158) (105) Dividend Paid (Incl. Tax) (7) (11) (13) (15) (15) (15) Others 60 10 56 (23) (5) (2) Cash Flow from Financing 91 118 269 135 (178) (122) Inc./(Dec.) in Cash 6 (9) 73 27 (6) 44 Opening Cash balances 23 29 20 93 121 115 Closing Cash balances 29 20 93 121 115 159 July 22, 2010 8
  • 9. Polyplex Corporation | 4QFY2010 Result Update Key Ratios Y/E March FY07 FY08 FY09 FY10E FY11E FY12E Valuation Ratio (x) P/E (on FDEPS) 13.8 4.8 4.4 5.1 3.9 3.2 P/E (on basic, reported EPS) 13.8 4.8 4.4 5.1 3.9 3.2 P/CEPS 6.6 3.9 2.9 3.1 2.6 2.2 P/BV 1.1 1.0 0.8 0.7 0.6 0.5 Dividend yield (%) 1.3 2.0 2.3 2.7 2.7 2.7 Market cap. / Sales 0.6 0.5 0.4 0.4 0.3 0.3 EV/Sales 1.0 0.9 0.9 1.0 0.7 0.5 EV/EBITDA 8.0 5.4 4.5 5.4 3.6 2.8 EV / Total Assets 0.8 0.8 0.7 0.7 0.6 0.5 Per Share Data (Rs) EPS (Basic) 22 63 69 59 78 94 EPS (fully diluted) 22 63 69 59 78 94 Cash EPS 56 115 144 131 164 191 DPS 4.0 6.0 7.0 8.0 8.0 8.0 Book Value 278 313 399 449 517 601 ROE Decomposition (%) EBIT margin 7.5 14.6 16.1 13.4 14.5 15.2 Tax retention ratio 92.7 96.3 92.9 87.8 90.0 90.0 Asset turnover (x) 0.9 0.9 0.8 0.7 1.0 1.0 ROIC (Post-tax) 6.6 12.9 12.1 8.8 12.5 13.8 Cost of Debt (Post Tax) 6.0 4.7 5.8 2.8 5.4 5.4 Leverage (x) 0.6 0.7 0.7 0.9 0.7 0.5 Operating ROE 6.9 18.4 16.8 13.8 17.7 17.9 Returns (%) ROCE (Pre-tax) 6.9 14.5 13.6 9.8 12.6 14.1 Angel ROIC (Pre-tax) 7.3 17.7 15.4 10.4 13.9 15.4 ROE 8.5 22.4 19.4 13.9 16.1 16.7 Turnover ratios (x) Inventory / Sales (days) 53 41 46 50 46 50 Receivables (days) 54 61 66 62 57 62 Payables (days) 43 42 41 38 35 38 Working capital cycle (ex-cash) (days) 78 68 78 80 74 79 July 22, 2010 9
  • 10. Polyplex Corporation | 4QFY2010 Result Update Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report. Disclosure of Interest Statement Polyplex Corporation 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock Yes 3. Angel and its Group companies' Directors ownership of the stock Yes 4. Broking relationship with company covered No Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors. Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%) July 22, 2010 10