Emmbi Industries (EMMPOL)

Transcription

1 Management Meet Note Rating Matrix Rating : Unrated Target : NA Target Period : NA Potential Upside : NA Key Financials Crore Net Sales EBITDA Net Profit EPS ( ) Valuation Summary P/E EV / EBITDA P/BV RoNW (%) RoCE (%) Stock Data Particular Amount Market Capitalization 142 crore Total Debt (FY15) 81 crore Cash and Investments (FY15) 3.3 crore EV 219 crore 52 week H/L 96 / 13 Equity capital 17.7 crore Face value.0 MF Holding (%) 0.0 FII Holding (%) 0.0 Price Performance 1M 3M 6M 12M Emmbi Industries Kanpur Plastipack Neocorp International (11.9) (15.9) 12.2 (19.7) Flexituff International (15.8) (16.3) (20.8) (.0) Price Movement,000 8,000 6,000 4,000 2,000 Jan13 May13 Research Analysts Oct13 Feb14 Price (R.H.S) Chirag J Shah shah.chirag@icicisecurities.com Jun14 Nov14 Shashank Kanodia shashank.kanodia@icicisecurities.com Mar15 Jul15 Nifty (L.H.S) Dec Moving up the value chain... December 23, 2015 We recently met Makrand Appalwar, Chairman & Managing Director of Emmbi Industries (Emmbi), to get an insight into the domestic flexible intermediate bulk container (FIBC) market, the company s role in the entire value chain and innovation drivers at Emmbi. Emmbi is a leading FIBC player domestically with manufacturing capability in FIBCs capable of handling load in the range of kg, which are in generalised and specialised category. In the specialised category (advance composites), Emmbi manufactures FIBCs, which are anti corrosive, anti carcinogenic, tamper proof, etc. The company also manufactures polypropylene based water tanks, canal liners and agri products viz. crop covers, shade nets, etc. The current capacity of Emmbi is metric tonnes. The company operated at 68% utilisation levels in FY15. In FY1215, sales grew at 21.3% CAGR to 183 crore in FY15. PAT grew at 22.3% CAGR in FY1215 to 6 crore in FY15 primarily on the back of 120 bps expansion in EBITDA margin to.8% in FY15. Going forward, on the back of increasing share of valueadded products viz. advance composites and water tanks amid increasing government focus on water conservation, Emmbi is on a strong footing with robust prospects, going forward. New products: Innovating to the core Emmbi is a pioneer in the art of innovation. It has over a period of time launched innovative products suiting the market dynamics. Emmbi was the first to introduce flexible water tanks (patent registered), which was a huge success in the domestic market, particularly Maharashtra. In FY15; sales comprised speciality packaging (FIBCs; 47.8% of sales, 9.5% EBITDA margins), advance composites (FIBCs + functionality; 35.5% of sales, 11% EBITDA margins), water conservation products (tanks, liners, 14.5% of sales, 15% EBITDA margins) and agri products (nets, irrigation systems, 2.3% of sales, 16% EBITDA margins). High working capital, geared balance sheet!!! In FY15, gross sales were at 192 crore, comprising domestic sales ( 90 crore, 47% share) and exports ( 2 crore, 53% share). Thus, by virtue of having a large proportion of export sales, Emmbi has an elongated working capital with net working capital days as of FY15 at 171 days. The company also has a leveraged balance sheet with debt as of FY15 at 81 crore with consequent debt: equity at 1.3x. However, with increasing share of high margin valueadded products (advance composites and water conservation products) and the management s focus on controlling the working capital cycle, the leverage should decline, going forward. This would also lead to an improvement in EBITDA margins with consequent earnings growth over FY1518E. Exhibit 1: Financial Performance Crore FY12 FY13 FY14 FY15 H1FY16 Net Sales EBITDA Net Profit EPS ( ) P/E NA EV / EBITDA NA P/BV NA RoNW (%) NA RoCE (%) NA Emmbi Industries (EMMPOL) 85 ICICI Securities Ltd Retail Equity Research

2 Key financials Revenues have grown at 21.3% CAGR in FY1215 to crore in FY15 ( 2.2 crore in FY12). Revenues can be subdivided into domestic (gross sales in FY15 at 90 crore) and exports (gross sales in FY15 at 2 crore). The manufactured goods sales in FY15 came in at 173 crore while traded goods sales in FY15 were at 18 crore. Exhibit 2: Revenue trend; grows at CAGR of 21.3% in FY Exhibit 3: Revenue bifurcation (manufactured, traded & services) Export sales have increased at a CAGR of 26.5% in FY1215 to 2 crore in FY15. Domestic sales have grown a tad lower at a CAGR of 18.1% in FY1215 to 90 crore in FY Exports Domestic Exhibit 4: Revenue bifurcation (product type) Sales can be bifurcated depending on the product type; speciality packaging ( 87 crore, 47% share in FY15 sales), advance composites ( 65 crore, 36% share in FY15 sales), water conservation products ( 27 crore. 15% share in FY15 sales) and agri products ( 4 crore, 25 share in FY15 sales) Water Conservation Products, 26.5, 15% Agri Products, 4.1, 2% Speciality Packaging, 87.2, 47% Advance Composites, 64.8, 36% ICICI Securities Ltd Retail Equity Research Page 2

3 Exhibit 5: EBITDA & EBITDA margins (EBITDA grows at CAGR of 26.3% in FY1215) Operational efficiencies and increasing share of valueadded products is driving the improvement in EBITDA margins. EBITDA margins have improved 120 bps in FY1215 with FY15 EBITDA margins at.8% vs. 9.6% in FY % 8 EBITDA (LHS) EBITDA Margin (RHS) Though subdued, the return ratios are seeing an uptick. The RoCE has improved from 8.2% in FY12 to 11.5% in FY15. RoE, on the other hand, has improved from 6.5% in FY12 to 9.5% in FY15. Exhibit 6: RoCE & RoE trend Exhibit 7: PAT grows at CAGR of 22.3% in FY1215 % RoNW (%) RoCE (%) Net Profit EPS ( ) /share PAT has grown at a CAGR of 22.3% in FY1215 to 6.0 crore in FY15. EPS in FY15 was at 3.4/share. Exhibit 8: Net working capital days Net working capital days are a bit stretched at ~170 days due to the higher proportion of exports in the total sales mix. Exports: domestic sales mix in FY15 was at 53:47 days NWC Days ICICI Securities Ltd Retail Equity Research Page 3

4 Exhibit 9: Product profile Speciality Packaging Advance Composites Water Conservation Products Agri Products ICICI Securities Ltd Retail Equity Research Page 4

5 Financial summary Profit and loss statement Crore (Yearend March) FY12 FY13 FY14 FY15 Net Sales Other Operating Income Total Operating Income Growth (%) Raw Material Expenses Employee Expenses Other Operating Expense Total Operating Expenditure EBITDA Growth (%) Depreciation Interest Other Income PBT Exceptional Item Total Tax PAT Growth (%) EPS ( ) Cash flow statement Crore (Yearend March) FY12 FY13 FY14 FY15 Profit after Tax Add: Depreciation (Inc)/dec in Current Assets Inc/(dec) in CL and Provisions Others CF from operating activities (Inc)/dec in Investments (Inc)/dec in Fixed Assets Others CF from investing activities Issue/(Buy back) of Equity Inc/(dec) in loan funds Dividend paid & dividend tax Inc/(dec) in Share Cap Others CF from financing activities Net Cash flow Opening Cash Closing Cash Balance sheet Crore (Yearend March) FY12 FY13 FY14 FY15 Liabilities Equity Capital Reserve and Surplus Total Shareholders funds Total Debt Deferred Tax Liability Total Liabilities Assets Gross Block Less: Acc Depreciation Net Block Capital WIP Total Fixed Assets Liquid Investments Other Investments Inventory Debtors Loans and Advances Other Current Assets Cash Total Current Assets Creditors Provisions Current Liabilities & Prov Net Current Assets Application of Funds Key ratios (Yearend March) FY12 FY13 FY14 FY15 Per share data ( ) EPS Cash EPS BV DPS Cash Per Share (Incl Invst) Operating Ratios (%) EBITDA Margin PBT / Total Op. income PAT Margin Inventory days Debtor days Creditor days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA Debt / Equity Current Ratio Quick Ratio ICICI Securities Ltd Retail Equity Research Page 5

6 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >%/15% for large caps/midcaps, respectively; Hold: Up to +/%; Sell: % or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1 st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 6

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