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CD Equisearch Pvt Ltd Dec 22, 2017

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Essel Propack Ltd (EPL)

No. of shares (m) 157.2

Mkt cap (Rs crs/$m) 4585/715.4

Current price (Rs/$) 292/4.5

Price target (Rs/$)

344/5.4

52 W H/L (Rs.) 316/225

Book Value (Rs/$) 71/1.1

Beta 0.9

Daily volume (avg. monthly) 58200

P/BV (FY18e/19e) 4.1/3.6

EV/EBITDA (FY18e/19e) 9.8/8.7

P/E (FY18e/19e) 24.9/21.2

EPS growth (FY17/F18e/19e) -3.7/12.9/17.6

OPM (FY17/18e/19e) 18.3/19.8/20.0 ROE (FY17/18e/19e) 17.1/17.6/18.2

ROCE(FY17/18e/19e) 12.0/12.5/13.9

D/E ratio (FY17/18e/19e) 0.8/0.6/0.5

BSE Code 500135

NSE Code ESSELPACK

Bloomberg ESEL IN

Reuters ESSL.BO

Shareholding pattern %

Promoters 57.2

MFs / Banks / FIs 5.3

Foreign 14.5

Govt. Holding 0.0

Public & Others 23.1

Total 100.0

As on September 30, 2017

Recommendation

Accumulate

Phone: + 91 (33) 4488 0011

E- mail: [email protected]

Consolidated (Figures in Rs crs)

FY15

FY16 FY17

FY18e

FY19e

Income from operation 2322.96 2127.50 2302.29 2544.91 2850.30

Other Income 26.48 26.14 50.95 21.92 22.36

EBITDA (other income included) 417.24 429.91 472.25 525.98 592.13

Profit after EO

137.34 168.86 162.65 183.75 216.10

EPS(Rs) 8.74 10.75 10.35 11.69 13.75

EPS growth (%) 26.3 22.9 -3.7 12.9 17.6

Highlights • EPL recorded a growth of 11.5% (y-o-y) in its revenue from Rs 573.59 crs

($85.7m) to Rs 639.71 crs ($99.5m) in Q2FY18 accentuated by high growth in

revenues from Europe and East Asia Pacific (EAP) at 50.6% and 8.9%

respectively. The inclusion of Essel Deutschland Germany (EDG), which was

acquired effective 30th Sept, 2016, helped fortify revenue growth in Europe due

to increased opportunity for synergies in European operations. Revenue in

Europe (excluding EDG) dipped by 12% y-o-y due to its poor offtake from key

European customers.

• Revenue from America grew by 2.1%, while that from AMESA fell by 7.8% on

y-o-y basis. The negative growth rate in AMESA is largely due to currency

devaluation in Egypt and weak growth in India on account of transition to GST

which came into effect this July.

• EPL is working towards its long term strategy of 20:20:20 (EBITDA margin,

ROE and ROCE of 20% each) and 50:50 (increase the revenue share of its non

oral care business globally to 50% of its revenue, and at the same time also

grow its oral care business). Its revenue share from non oral care category,

which is more profitable as compared to the oral care, increased to 40.9% in

Q2FY18 as compared to 39.9% in Q2FY17.

• Net profit in Q2 dipped by 25.8% to Rs 52.49 crs ($8.2m) y-o-y due to one time

gain on EDG acquisition recorded in Q2FY17. The operating profit for the

quarter grew by 19.6% suggesting increased operational efficiency. The EBIT

margin in America grew strongly to 16.4% from 9.4% y-o-y due to increased

volume and operating efficiency while that in Europe fell from 11.2% to 4.8%

(though not comparable) on account of off take issues with key customers.

• The stock currently trades at 24.9x FY18e earnings and 21.2x FY19e earnings.

Profit in H1FY18 slacked (up by just 2.7%) as a result of destocking by

customers due to GST migration in India as well as weaker off take in Europe

and America. However, with GST reform to benefit India in the long run,

synergies from EDG acquisition, traction in volumes in major markets in

Germany, US and China, innovations such as ‘Mystik’ (packaging premium

hair colorant - commercial production line to be installed in Europe) and

‘Green Maple Leaf’ (fully recyclable eco-friendly laminated tube) being actively

promoted in the market place, would stimulate demand. More profitable non

oral care category gaining share and revamping of capabilities to meet demand

would also buoy earnings. We assign ‘accumulate rating on the stock with a

target price of Rs 344 (previous target: Rs 283) based on 25x FY19e EPS of Rs

13.75 (PEG ratio ~1.4 on FY19 earnings growth) over a period of 6-9 months.

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CD Equisearch Pvt Ltd


Outlook & Recommendation

Industry overview

MarketsandMarkets postulates that the global tube packaging market size will grow from USD 6.7 billion in 2016 to USD 9.3 Billion

by 2021, at an estimated CAGR of 6.9% with 2015 as the base year. Increase in consumer preference for convenient, safe, and

sustainable packaging will be one of the main drivers of such growth. Asia-Pacific is projected to be the fastest-growing region-level

market because of the rising middle-class population of the region and rise in disposable income which is expected to drive the

demand for convenient packaging, thereby boosting the tube packaging market. The laminated segment is projected to grow at the

highest CAGR during the forecast period, as a result of the increase in demand for packaging with excellent barrier protection,

which is essential for packaging pharmaceutical products. According to Edible Packaging Report 2017 by Stratistics Market Research Consulting Pvt Ltd, the global edible packaging market is

expected to grow from $715.3 million in 2016 to reach $1245.1 million by 2023 with a CAGR of 8.2%. Raising urbanization coupled

with increasing demand for packaged food, growing awareness about food safety, and recent technological advancements in

packaging techniques are some of the factors driving the market growth during the forecast period. However, high costs of

machineries, stringent regulations are the restraints limiting the market growth.

Source: Best Industri 2017 Source: Best Industri 2017

According to Report Buyer, the global tube packaging market is likely to grow at a CAGR of 7.4% during the period 2016-2022,

accentuated by packing innovations and increased investment of FMCG manufacturers due to better brand and health. The oral care

segment dominates the market with more than 50% of the tube packaging market share. While the laminate tubes segment

dominates the global market, the plastic and aluminum segment is expected to witness a healthy growth. In the end-user segment,

the health segment is likely to witness robust growth.

According to Indian Institute of Packaging (IIP), the Indian packaging market is expected to reach $32 billion by 2020 and

industry insiders say 50-60 per cent of plastic and polymers produced in the country is consumed by packaging sector as raw

material, thus pointing to the huge size of the market. The Indian packaging industry constitutes about 4 per cent of the global

market. The per capita packaging consumption in India is paltry at 8.7 kg compared with countries like Germany and Taiwan

where it is 42 kg and 19 kg, respectively. However, spurred by rapidly growing retail and e-commerce, the future of the

packaging sector appears to be upbeat. As stated in India Premium Packaging Industry Outlook 2022, owing to rise in

consumption of FMCG products along with rising disposable income encouraging shift in buying behaviour of consumer, the

premium packaging industry in India is forecasted to grow at a CAGR of 25% during the period of 2017-2022.

Source: Global Market Insights Source: Food of India

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Financials & Valuations

Business in India was marred by customer de stocking in Q2 as a result of GST transition (especially pharma segment) for

revenues in India plunged by 3.4% (adjusted for excise duty and GST). However, going forward revenues are expected to

rebound as the Indian economy stabilizes leading to increased demand as well as increased operational efficiency and cost

synergies as a result of consolidation of three Indian units (Silvassa, Murbad, Chakan) into a state of art factory at Dhanoli

near Vapi. EPL has also undertaken expansion in Assam in India where a lot of FMCG companies operate due to tax

advantage. By expanding in Assam, EPL not only expects to retain its existing customers but also to double it in a year of its

operation.

Sources: EPL, CD Equisearch Sources: EPL Source: EPL

Slow off take in Europe (excluding Germany) by key customers as compared to last year has put brakes on its Q2 sales albeit

margins improved in Germany due to increased productivity and efficiency. EPL intends to grow its volume in Germany

through new customer acquisitions which will further improve the bottom line. Setting up a different manufacturing base in

China to cater to non oral care and new customers for oral care has resulted in modest growth which was partially offset by

shrinkage of demand from multinational brands. EBIT from America registered a striking growth of 78.4% in Q2 y-o-y

stimulated by stabilization in the Colombia unit and economies of scale. However, revenue from America only grew by 2.1%

y-o-y indicating the high margins delivered based on lower volumes.

Sources: EPL, CD Equisearch Sources: EPL, CD Equisearch Sources: EPL, CD Equisearch

EPL’s tax free units in India which came under the tax net, investment allowances withdrawal and tax on undistributed profit

according to Ind AS are the factors that led to a striking increase in EPL’S tax liability. Continuous repayment of its debt has

improved its debt equity from 1.3 in FY15 to 0.8 in FY17. We expect the debt-equity ratio to improve further in FY18. Interest

coverage ratio has also been consistently improving (3.5 in FY15 to 5.0 in FY16 and 5.2 in FY17). Depreciation in H1FY18

witnessed a considerable increase of 28.3% y-o-y on account of expansion in Columbia and India as well as EDG

consolidation which requires fair valuing upon acquisition in accordance with Ind AS. The company aims to incur capex

equal to its annual depreciation.

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Urbanization and lifestyle changes have certainly transformed the consumption patterns while growing youth population,

increased life expectancy and increased awareness about products for women’s health and beauty, child care, men’s grooming

will spur demand further. There is strong trend among brands to improve the efficacy of products which often demands

packaging which has different and more effective barrier properties. Technology led disruptive innovations such as Mystik has the

potential to open up fast growing hair colorant category and also certain pharma and food products with aggressive formulations

for using laminated tube packaging. Extensive customer engagement and focused business development efforts will enable the

company to further expand and exploit the market share in non oral care segment globally.


The stock currently trades at 24.9x FY18e EPS of Rs 11.69 and 21.2x FY19e EPS of Rs 13.75. Growth will be invigorated by growing

packaging industry, GST reform in India in the long run, synergies from EDG acquisition such as enhanced cross selling

opportunity in the European markets, sourcing flexibility and better capacity utilization at the Company’s Europe plants,

expansion of Wada unit in India, traction in volumes in major markets in Germany, US and China. Further, innovations such as

‘Mystik’ (packaging premium hair colorant - commercial production line to be installed in Europe) and ‘Green Maple Leaf’ (fully

recyclable eco-friendly laminated tube) being actively promoted in the market place, non oral care category gaining share and

revamping of capabilities to meet demand will enable EPL to revitalize business growth. We assign ‘accumulate’ rating on the

stock with a target price of Rs 344 (previous target: Rs 283) based on 25x FY19e EPS of Rs 13.75 (PEG ratio ~1.4 on FY19 earnings)

over a period of 6-9 months. For more info refer to our April report.

Sources: EPL Sources: EPL

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Risks and Concerns

Raw material prices

Major raw materials of the company includes polymer and aluminum foil and consequently, an increase in the price of these

will hamper the margins due to the strong bargaining power of buyers as a result of low entry barrier and high competition in

the industry. The price of polymer is highly correlated to crude oil price which is expected to increase in the near future as a

result of OPEC production cuts and increasing demand forecasts of oil. EPL has raw material cost escalation pass through

clauses in its customer contracts and continues to identify and establish alternate supply sources and equivalent materials in

order to effectively manage the material costs as well as supply continuity which enables it to manage this risk.

Single product Dependency

Holding oral care market share of 36% in volume terms globally, tooth paste as a category still dominates EPL’s product range

albeit to a much lesser extent than before. Oral care also tends to have a stable demand in an adverse economic environment.

However, EPL is implementing strategies to tap new and more profitable market opportunities in non-oral care category

globally over next few years by replacing plastic/ aluminum tubes and bottles with new generation laminated tubes. This is in

tandem with the 50:50 target of the company i.e. 50% of revenue target from both oral and non oral category along with

growing oral care category. Achieving this target would therefore require even more growth in the non oral care. EPL has

however managed to increase its revenue share from non oral to 40.9% in Q2 from 39.9% y-o-y.

Wage increases

Increase in wages would reasonably impact costs and margins. EPL is pro-actively using automation and asset productivity

improvement as a means to contain the headcount and manage employee costs.

Currency Volatility

The global nature of operations exposes EPL to multiple currencies thereby impacting its financials as a result of fluctuations in

exchange rates. Appropriate pass through clauses have been built into long term customer contracts in order to offset the

impact on material cost due to exchange rate fluctuations. EPL also has the policy of systematically hedging its trade and

capital exposures using forward contracts.

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Cross Sectional Analysis

Company Equity* CMP MCAP* Sales* Profit* OPM (%)

NPM (%)

Int Cov

ROE (%)

Mcap/Sales P/BV P/E

Essel Propack 31 292 4585 2401 165 18.6 7.0 5.4 15.5 1.9 4.1 27.8

Huhtamaki 15 356 2692 2092 56 10.1 2.7 4.2 9.9 1.3 5.3 48.1

Jindal Poly 44 401 1757 7020 98 8.2 2.1 2.7 4.2 0.3 0.8 17.9

Uflex 72 483 3485 6329 359 14.1 5.7 3.1 9.7 0.6 0.9 9.7

*figures in crores; calculations on ttm basis

Book value adjusted for goodwill & revaluation reserves wherever applicable

Huhtamaki PPL posted 7% growth in its income from operations q-o-q indicative of revival of the economy from GST impact,

while the same degrew by 2.1% y-o-y. On 9M basis sales growth fell by 5.4% throttled by the effects of both demonetization and

GST in the current year. The company also managed to control its expenses well thereby almost doubling its EBIT (q-o-q).

However, such gains will be passed on to the customers going forward. HPPL also plans to invest Rs 100 crs ($15.6m) as capex

in the next year for expansion which includes renewing its productive capacity, horizontal expansion to capture the next wave

of growth and service the value added products. The company further plans to repay Rs 32 crs in CY18 of its total borrowing of

over Rs 400 crs.

Sources: Company, Ace Equity Sources: Company, Ace Equity Sources: Company, Ace Equity

Jindal Poly Films Limited is the largest manufacturer of BOPET and BOPP films in India. JPFL has the world's single largest site

for production of BOPP and BOPET films at Nasik, India. Jindal Poly Films is reportedly in advanced negotiations to acquire the

European operations of DuPont Teijin Films (DTF) for Rs 2,000 crs. If the deal is materialized, the company will join the club of

world's largest in the category of polyester (PET) and polypropylene (OPP) films manufacturing which is dominated by firms

such as, Kangde Xin Composite Material, ExxonMobil, LyondellBasell and Industries. The largest component of costs involved

in making flexible packaging film is attributable to raw materials. Given the uptrend in crude oil and demand for polymers for

competing applications is putting pressure on input costs and thereby the bottom line.

JPFL has acquired Apeldoorn Flexible Packaging (AFP), a Netherlands-based company, for EUR 82.3m in an all-cash deal

with effect from September 29, 2017. AFP is a leading player in load security films. This acquisition will expand Jindal's

access to new product segment and strengthen its relationship with brand owners in the food, beverage and FMCG

segments. On the financial front, Apeldoorn has posted revenue of EUR 111m in CY16. The company’s revenue is expected

to be fortified by the acquisition itself. JPFL also got its shareholders nod to grant inter corporate loan up to Rs 10 billion on

November 7, 2017.

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Uflex Limited witnessed a growth of 3.8% in its value of sales y-o-y which led to a growth of net profit by 4.4% in Q2. On

November 28, 2017, chemicals business of Uflex Limited was reported to have become the first NABL accredited entity in the

field of combined manufacturing of packaging inks and laminated adhesives. Uflex has also engineered the first Indian

restorable spouted stand up pouch for cold beverages. This pouch offers a sustainable option with shelf life of 6 months and does

away with the cold chain thereby resulting in much lesser emission of green house gases. Uflex launched the low opacity, good

gloss white, anti-static twist wrap polyester film recently.

Uflex has forayed into the aseptic packaging solution under the brand name – ASEPTO as a part of its expansion strategy.

Featuring a six layered packaging innovation, ASEPTO is made of paperboard, aluminium, and poly-ethylene to keep the

products’ freshness and nutritional value preserved along with the increased shelf life. It also provided a striking functional

makeover to United Kingdom’s Veetee rice packaging thereby providing a holistic to the obstacles faced by the product to

unleash its potential. It is also planning to expand its converting machines business in the international market and to introduce

new and customer friendly packaging and converting machines having better usage and utility.

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Financials

Consolidated Quarterly Results Figures in Rs crs

Q2FY18 Q2FY17 % chg H1FY18 H1FY17 % chg

Income From Operations (net of tax) 639.71 573.59 11.5 1200.43 1101.62 9.0

Other Income 4.82 28.54 -83.1 10.79 33.15 -67.5

Total Income 644.53 602.13 7.0 1211.22 1134.77 6.7

Total Expenditure 507.36 462.93 9.6 966.21 892.67 8.2

EBITDA (other income included) 137.17 139.20 -1.5 245.01 242.10 1.2

Interest 13.82 14.13 -2.2 27.32 27.24 0.3

Depreciation 42.46 33.07 28.4 82.67 64.41 28.3

PBT 80.89 92.00 -12.1 135.02 150.45 -10.3

Tax 28.26 21.33 32.5 47.62 41.48 14.8

PAT 52.63 70.67 -25.5 87.40 108.97 -19.8

Minority Interest 0.47 0.63 -25.4 1.21 1.35 -10.4

Share of Associate 0.33 0.73 -54.8 0.59 0.77 -23.4

PAT after MI and Associate 52.49 70.77 -25.8 86.78 108.39 -19.9

Extraordinary Item 0.00 23.92 -100.0 0.00 23.92 -100.0

Adjusted Net Profit 52.49 46.85 12.0 86.78 84.47 2.7

EPS(Rs) 3.34 2.98 12.0 5.52 5.38 2.7

Segment Results Figures in Rs crs

Q2FY18 Q2FY17 % chg H1FY18 H1FY17 % chg

Segment Revenue

AMESA 236.40 256.52 -7.8 478.25 499.43 -4.2

EAP 158.44 145.43 8.9 291.37 274.18 6.3

AMERICAS 129.01 126.34 2.1 234.71 237.81 -1.3

EUROPE 132.27 87.81 50.6 249.61 169.83 47.0

Unallocated 0.20 0.24 -16.7 0.38 0.46 -17.4

Inter segmental elimination 16.61 20.23 -17.9 31.35 35.70 -12.2

Income From Operations 639.71 596.11# 7.3 1222.97# 1146.01# 6.7

Segment EBIT

AMESA* 36.72 32.85 11.8 67.47 68.95 -2.1

EAP* 29.64 24.71 20.0 51.80 40.66 27.4

AMERICAS 21.14 11.85 78.4 28.52 24.09 18.4

EUROPE 6.37 9.82 -35.1 8.16 11.79 -30.8

Unallocated -1.04 -0.85 22.4 -2.00 -1.65 21.2

Inter segmental elimination 0.13 0.04 225.0 -2.69 -0.79 240.5

Total 92.70 78.34 18.3 156.64 144.63 8.3

Other Income** 4.82 28.54 -83.1 10.79 33.15 -67.5

Other expenses 2.81 0.75 274.7 5.09 0.09

EBIT 94.71 106.13 -10.8 162.34 177.69 -8.6

Finance Cost 13.82 14.13 -2.2 27.32 27.24 0.3

PBT 80.89 92.00 -12.1 135.02 150.45 -10.3 *AMESA - Africa, Middle East & South Asia; *EAP - East Asia Pacific **Includes exceptional items #Gross

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Consolidated Income Statement Figures in Rs crs

FY15 FY16 FY17 FY18e FY19e

Income From Operations 2322.96 2127.50 2302.29 2544.91 2850.30

Growth (%) 9.2 -8.4 8.2 10.5 12.0

Other Income 26.48 26.14 50.95 21.92 22.36

Total Income 2349.44 2153.63 2353.24 2566.83 2872.66

Total Expenditure 1932.20 1723.72 1880.99 2040.85 2280.53

EBITDA (other income included) 417.24 429.91 472.25 525.98 592.13

Interest 79.36 60.91 57.53 58.87 54.00

Depreciation 131.79 123.16 141.48 181.39 203.36

PBT 206.09 245.85 273.24 285.72 334.77

Tax 61.05 77.57 78.69 100.71 117.17

PAT 145.04 168.28 194.55 185.00 217.60

Minority Interest 4.72 3.02 5.28 2.50 3.00

Share of Associate 0.32 4.84 1.05 1.25 1.50

PAT after MI and Associates 140.63 170.10 190.32 183.75 216.10

Extraordinary Item 3.29 1.24 27.67 0.00 0.00

Net Profit 137.34 168.86 162.65 183.75 216.10

EPS (Rs) 8.74 10.75 10.35 11.69 13.75

Segment Results Figures in Rs crs

FY15 FY16 FY17

Segment Revenue

AMESA 1097.35 962.32 980.80

EAP 533.82 545.92 552.85

AMERICAS 478.15 471.90 482.77

EUROPE 358.50 347.42 435.25

Unallocated 0.69 0.77 0.83

Inter segmental elimination 145.55 122.71 64.56

Income From Operations* 2322.96 2205.62 2387.94

Segment EBIT

AMESA 133.30 129.29 128.23

EAP 68.75 85.54 78.08

AMERICAS 48.61 58.31 52.65

EUROPE 18.58 20.96 24.47

Unallocated -4.11 -4.92 -4.15

Inter segmental elimination 0.68 1.56 -3.90

Total 264.45 287.62 283.18

Other Income** 26.48 26.14 50.95

Other expenses 5.48 7.00 3.36

EBIT 285.45 306.76 330.77

Finance Cost 79.36 60.91 57.53

PBT 206.09 245.85 273.24 *Net of tax for FY15; Gross amount for FY16 & FY17 **Includes exceptional items

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Consolidated Balance Sheet Figures in Rs crs

FY15 FY16 FY17 FY18e FY19e

Sources of Funds

Share Capital 31.42 31.42 31.43 31.44 31.44

Reserves 728.89 933.37 1007.57 1142.12 1305.25

Total Shareholders' Funds 760.31 964.79 1039.00 1173.56 1336.69

Minority Interest 8.08 8.14 5.72 8.22 11.22

Long Term Debt 629.80 553.44 604.96 425.00 325.00

Total Liabilities 1398.18 1526.37 1649.68 1606.78 1672.91

Application of Funds

Gross Block 869.15 1047.02 1577.90 1777.23 1977.23

Less: Accumulated Depreciation 0.00 122.85 398.44 579.83 783.19

Net Block 869.15 924.17 1179.46 1197.40 1194.04

Capital Work in Progress 88.19 57.10 19.33 20.00 20.00

Investments 26.20 30.38 15.26 16.51 18.01

Current Assets, Loans & Advances

Inventory 225.11 198.67 245.98 275.50 308.56

Trade Receivables 371.17 331.22 376.62 444.41 511.07

Cash and Bank 114.95 84.42 102.84 43.85 61.14

Short term loans 112.39 125.27 111.98 111.04 111.50

Other Assets 180.77 182.08 126.56 129.37 137.01

Total CA & LA 1004.39 921.66 963.98 1004.17 1129.27

Current Liabilities 587.02 410.32 521.86 608.79 656.63

Provisions-Short term 38.71 32.36 23.11 28.59 34.23

Total Current Liabilities 625.73 442.68 544.97 637.37 690.86

Net Current Assets 378.66 478.98 419.01 366.80 438.41

Net Deferred Tax -19.43 -19.65 -31.72 -43.85 -49.85

Net long term assets 55.42 55.38 48.33 49.93 52.30

Total Assets 1398.18 1526.37 1649.68 1606.78 1672.91

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Key Financial Ratios FY15 FY16 FY17 FY18e FY19e

Growth Ratios (%)

Revenue 9.2 -8.4 8.2 10.5 12.0

EBITDA 9.4 3.8 3.4 18.8 12.6

Net Profit 26.3 22.9 -3.7 13.0 17.6

EPS 26.3 22.9 -3.7 12.9 17.6

Margins (%)

Operating Profit Margin 16.9 19.0 18.3 19.8 20.0

Gross profit Margin 14.3 17.3 16.7 18.4 18.9

Net Profit Margin 6.1 7.9 7.2 7.3 7.6

Return (%)

ROCE 11.6 12.6 12.0 12.5 13.9

ROE 19.1 20.4 17.1 17.6 18.2

Valuations

Market Cap/ Sales 0.8 1.2 1.6 1.8 1.6

EV/EBITDA 6.8 7.3 10.0 9.8 8.7

P/E 14.3 14.9 22.9 24.9 21.2

P/BV 2.7 2.7 3.8 4.1 3.6

Other Ratios

Interest Coverage 3.5 5.0 5.2 5.9 7.2

Debt Equity 1.3 0.8 0.8 0.6 0.5

Current Ratio 1.5 1.9 1.6 1.5 1.5

Dividend Payout Ratio 21.6 25.2 24.0 27.0 24.7

Turnover Ratios

Fixed Asset Turnover 2.6 2.4 2.2 2.2 2.4

Total Asset Turnover 1.7 1.5 1.5 1.6 1.8

Debtors Turnover 6.3 6.1 6.5 6.2 6.0

Inventory Turnover 8.6 8.1 8.5 7.8 7.8

Creditor Turnover 11.3 12.1 13.7 12.9 12.5

WC Ratios

Debtor Days 58.0 60.3 56.1 58.9 61.2

Inventory Days 42.5 44.9 43.1 46.6 46.7

Creditor Days 32.2 30.3 26.7 28.3 29.1

Cash Conversion Cycle 68.4 74.9 72.5 77.2 78.8

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Cumulative Financial Data Rs crs FY12-13 FY14-15 FY16-17 FY18-19e

Income from operations 3415 4450 4430 5395

Operating profit 583 746 826 1074

EBIT 381 532 606 733

PBT 205 371 488 620

PAT after MI & AP 129 246 332 400

Dividends* 34 59 87 102

OPM (%) 17.1 16.8 18.6 19.9

NPM (%) 3.8 5.7 7.5 7.5

Interest coverage 2.2 3.3 5.1 6.5

Debt-equity* 1.7 1.3 0.8 0.5

ROE (%) 12.4 18.7 19.4 17.8

ROCE (%) 9.2 11.3 12.0 13.1

Fixed asset turnover 2.4 2.7 2.2 2.3

Debtors turnover 6.6 6.6 5.9 6.1

Creditors turnover 11.3 13.6 11.8 12.6

Inventory turnover 6.8 8.6 7.7 7.8

Debtor days 55.4 55.1 61.6 60.1

Inventory days 53.8 42.6 47.7 46.8

Creditor days 32.3 26.9 30.9 28.9

Cash Conversion 77.0 70.7 78.5 78.0

Dividend payout ratio (%) 26.4 23.6 24.5 25.7 FY12-13 implies two years ending FY13. *as on terminal year

**includes CDT on subsidiary dividends

Modest rebound in H2FY18 followed by sturdy recovery next fiscal is expected to enable cumulative income from operations

to grow by 21.8% in FY18-19e period. Reduction of outstanding debt (0.5 Vs 0.8 in FY16-17) would stimulate interest coverage

to the highest level in several years. Expansion and revamp of units would not fail to spur fixed asset turnover ratio (2.3 Vs 2.7

in FY14-15). Dividend payout ratio would more or less stabilize around 25%. Profit after tax is expected to grow modestly due

to increase in income taxes and subdued performance in H1FY18. Cash conversion would flatline in FY18-19 period.

The non oral care category entails a considerably bigger growth opportunity for EPL by leveraging customer insight, polymer

and decoration technology, global presence and state of art equipment capability to offer a superior packaging solution in the

form of its new generation laminated tubes in place of the plastic/aluminum tubes and bottles. Essel is focusing on improving

non-oral care category (toiletries, skin care and shampoo) contribution by using laminated tubes as packing material. The non

oral care tube market represents much higher value, three times or more as compared to oral tube market. The company

thereby aims to increase the revenue contribution from non oral care to 50% (41% in Q2FY18). Emerging markets like Asia,

Africa and Latin America would be the key driver for non-oral care categories due to lower product penetration.

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Financial Summary – US dollar denominated

million $ FY15 FY16 FY17 FY18e FY19e

Equity capital 5.0 4.7 4.8 4.9 4.9

Shareholders' funds 116.6 139.2 151.0 173.2 198.1

Total debt 150.8 106.9 123.1 102.2 89.7

Net fixed assets (inc CWIP) 153.0 147.9 182.7 187.7 187.2

Investments 4.2 4.6 2.4 2.6 2.8

Net current assets 55.7 65.9 57.6 49.6 60.1

Total assets 218.6 223.8 245.2 240.8 250.5

Revenues 379.9 325.0 343.2 397.1 444.7

EBITDA 67.5 65.4 66.0 82.1 92.4

PBDT 54.5 56.1 57.4 72.9 84.0

PBT 32.9 37.3 36.3 44.6 52.2

Profit after MI & EO 22.5 25.8 24.2 28.7 33.7

EPS ($) 0.14 0.16 0.15 0.18 0.21

Book Value ($) 0.74 0.89 0.96 1.10 1.26

*Income statement figures translated at average rates; balance sheet at year end rates; projections at current rates (Rs

64.09/$). All dollar denominated figures are adjusted for extraordinary items.

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conflict of interest in the subject company(s) (kindly disclose if otherwise).

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months.

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engaged in market making activity of the company covered by analysts.

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While, CD Equi endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory compliance or

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Registered Office: 37, Shakespeare Sarani, 3rd Floor, Kolkata – 700 017; Phone: +91(33) 4488 0000; Fax: +91(33) 2289 2557 Corporate Office: 10,

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buy: >20% accumulate: >10% to ≤20% hold: ≥-10% to ≤10% reduce: ≥-20% to <-10% sell: <-20%

Exchange Rate Used- Indicative

Rs/$ FY15 FY16 FY17

Average 61.15 65.46 67.09

Year end 62.59 66.33 64.84

All $ values mentioned in the write-up translated at the average rate of the respective quarter/ year as applicable. Projections converted at

current exchange rate. Cumulative dollar figure is the sum of respective yearly dollar value.

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