Ecoplast Limited. Company Overview. Company Fundamentals

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1 Plastic Products October 31, 2012 CMP Rs BSE Code BSE ID ECOPLAST High/Low 1Y (Rs.) 41.4/24.9 Average Volume (3M) 973 Market Cap (Rs. Cr.) 9 Shareholding % Sept-12 Jun-12 Promoters DIIs # - - FIIs # - - Public & Others Stock Chart ( Relative to Sensex) /Oct/11 30/Apr/12 30/Oct/12 Ecoplast Ltd Sensex Stock Perfm.(%) 1M 6M 1Yr Ecoplast Ltd Sensex Financials FY10 FY11 FY12 Revenue Y-o-Y 52.4% 36.3% -8.3% EBITDA Y-o-Y 137.6% 57.5% -22.0% Net Profit Y-o-Y * 133.9% -49.2% EPS (Dil.) EBITDA Margin 8.6% 10.0% 8.5% Net Profit Margin 2.7% 4.6% 2.6% P/E(x) 7.2x 3.1x 6.1x Financial year ends at March 31 on consolidated basis for FY12; FY10 & FY11 figures are on standalone basis All figures in Rs. crore except for per share data # FIIs- Foreign Institutional Investors # DIIs- Domestic Institutional Investors *large growth figure due to low base Ecoplast Limited. Company Overview Incorporated in 1981 as a private limited company, Ecoplast Limited (EL) was later converted into a public limited company in June 1994, which started its commercial production in The company is engaged in the manufacturing and selling of polyethylene films (LPDE/ HDPE), produced by the blown film co-extrusion process for flexible packaging. At present, the company operates with an annual production capacity of 9,289 MT of multi-layer films and has its manufacturing facility located at Valsad, Gujarat. The company's multilayer films finds applications in wide range of products such as agro-product fertilizers, cable wrap, cosmetics & toiletries, food & beverages, pharmaceuticals and specialty applications. Ecoplast films are used by companies like Nestle India Ltd., HLL, Lipton India Ltd., Indian Aluminium Co Ltd., P&G India Ltd., Sterlite Industries India Ltd. etc. The company invested in the joint venture company, Synergy Films Pvt. Ltd., which was making losses. During the year under review, EL has acquired 75% equity shares in Synergy and thus the latter became the subsidiary of EL in November Company Fundamentals Slump in revenue for FY12 Total revenue for FY12 stood at Rs 60.6 crore against Rs 66.1 crore during the previous financial year, translating into a decline of 8.3% Y-o-Y. The dent in revenue is mainly attributed to fall in the business of lamination films in export market, owing to backward integration undergone by one of the large customers on account of huge films requirement. This, coupled with volatility in the raw material costs, had resulted in decrease in the EBITDA margins by 250 bps during the year under review. Inflationary trend in the commodity market, fluctuation in the exchange rate and high borrowing costs has adversely impacted the net margin of the company. Future Plans With strong in-house R&D facility, the company is involved in future development activities such as a) films required for extending shelf-life for packaging fruits, vegetables, marine products and poultry in the domestic and export markets, b) development of specialty films, which are import substitutes c) films which are difficult to replicate due to the technology content. In order to satisfy customers with the improved film performance, the company continues to make investments in equipments and ancillaries. Key Strengths - Tremendous growth opportunity due to a hugely underpenetrated packaging market and multiple growth drivers in the end user industry - Diversified product profile Initiative of the BSE Investors Protection Fund -1-

2 Company Business The company is engaged in the manufacturing of multi-layer co-extruded plastic films for flexible packaging. Multi-layer films are a combination of two or more thermoplastics (polyethylenes) co-extruded to form one homogenous film with distinct individual layers. Multi-layer films provide a range of properties, which cannot be obtained from monolayer films. This film forms the integral part (or seal layer) of a laminate (which is in contact with the packed product) made with polyester film, bi-axially oriented polypropylene film or aluminium foil. The company s product finds applications in a wide range of product groups such as beverages, edible oil, dairy products, snack foods, processed foods, cosmetics, toiletries, pharmaceuticals, bakery products, and food commodities like salt, wheat flour, rice, sugar etc. Industrial applications include adhesive films for bonding materials, release films, films for manufacture of jelly-filled telephone cables and in auto industry for bonding of fabrics and foams which are subsequently used for hood liners, door liners, door trims, carpets manufacturing and seating upholstery etc. Ecoplast Ltd also manufactures surface protection films suitable for substrates like stainless steel, coated metals, aluminum composite panels, clean room, PVC/plastic, decorative laminates and carpets. Surface protection films are designed to prevent abrasion, scratching during manufacturing and damage during delivery cycles. These protective films are used to withstand the stress of manufacturing processes like cutting, bending, deep drawing as well as the effect of mechanical handling during manufacturing and transportation. Corporate Milestones Ecoplast is the first company in India to provide multi-layer blown films for lamination to replace mono-layer films. Nestle's MAGGI brands standardized Ecoplast films integral with the laminate. Proctor & Gamble approves a high moisture barrier film for high speed vertical FFS packaging of Vicks Vapour Rub. Cadbury India approves a high abrasion resistance film integral with the paper laminate for Bournvita on a cekatainer Swedish packaging system. Ecoplast becomes the first approved supplier of lami-tube films to Essel Propack Ltd. Film for an 8 ml shampoo sachet packed on a five track Hassia packaging line was developed for Hindustan Unilever Ecoplast is recognized as one of the largest supplier of film for packaged refined salt for state-of-the packaging lines from Bosch and Rovema, Germany. Ecoplast becomes the largest supplier of films integral with the laminate to the high quality segment of the market, covering large Indian corporations and multinational corporations in food, beverage, confectionary, bakery, detergent, personal products and pharmaceuticals. Ecoplast exports films for lamination to UAE and Oman. Ecoplast receives an export award from PLEXCOUNCIL - Ministry of commerce and industry for two consecutive years for recording export volumes of multi layer films onwards Ecoplast develops a film for lamination to PVDC coated PVC sheet for blister packaging for the pharmaceutical industry. Ecoplast develops a unique process for manufacturing Polyamide (Nylon) film by the 'blown film process' and files a patent. Ecoplast develops a multilayer film for depositing aluminium by the vacuum metalizing process for agriculture mulch. Ecoplast develops a thermally active film for bonding various substrates for the automobile industry, manufactures aluminium composite panels, shoe uppers and high altitude thermal garments. Ecoplast develops adhesive coated peel Surface Protection Film- 'Ecoguard'. Ecoplast installs a protective film manufacturing plant capable of coating rubber-based, solvent-based and water-based adhesives along with a printing and lamination plant. Initiative of the BSE Investors Protection Fund -2-

3 Industry Overview Plastic plays a significant role in the key sectors of the economy including agriculture, water management, automobiles, transportation, construction, telecommunication, electronics, packaging and consumer durables, besides defence and aerospace, computers and power transmissions. With the growth in these segments, the Indian plastic industry is expected to grow at a healthy double digit rate with tremendous rise in domestic consumption. The plastic industry is classified into two primary segments namely the 1) Upstream which is into manufacturing of polymers and 2) Downstream conversion of polymers into plastic products (plastic processing industry). Also, plastics dominate the flexible packaging market because of their properties as they can be modified by co-polymerisation and the use of additives to match exact packaging requirement of the commodity being packed. Packaging is the world's third-largest industry after food and energy or petrochemicals. With the rising consumer demand and new technologies, the Indian packaging industry is expected to grow at an annual compounded growth rate (CAGR) of 18-20% by 2015 from the current level of 15% witnessed during FY12 (as per Assocham). The Indian packaging industry is witnessing a shift from the traditional rigid packaging to flexible packaging due to numerous advantages which flexible packaging offers. Plastics, paper and metal are the key materials used in the flexible packaging products, which are made from foil or paper sheet or laminated paper and plastic layers. Flexible packaging consists of either monolayer or multilayer films of plastics. The multilayered laminated sheets of plastics mainly include polyethylene, polypropylene, polyethylene terephthalate (PET) and polyvinyl chloride (PVC), along with metal foils, paper and cloth separately or together depending upon the end application. Flexible packaging has the advantage of protecting the product from adulteration, pilferage, moisture etc. and hence prevents wastage and damage. They also have the advantage of convenience of handling and disposal along with saved costs in transportation and storage - taking up less shelf space. Flexible packaging is unique in terms of aroma retention, sealing the product from heat, good barrier properties against moisture and grease along with good tensile strength. With the expanding middle class and rising income levels, the pattern of consumption are bound to change substantially and the demand for quality and conveniencebased products will increase. The increased interaction with the developed world will considerably influence the aesthetic and quality norms of the Indian consumers and lead to better consumption standards. The diagram depicts total flexible packaging market, market split by end-user application (India) *Source: Plasticindia.org Competitor Analysis Source: Plasticbiz360.com We have compared Ecoplast Limited with its close peers in the plastic products industry. Company Year End CMP* M Cap Revenue EBIT Margin EPS P/E Ecoplast Ltd Mar % x Alfa Ica (India) Ltd Mar % x Hindustan Adhesives Ltd Mar % x Source: Company Financials, BSE, ICRA Online Research Market cap and Revenue in Rs. Crore, *CMP as on 31 Oct 2012 Initiative of the BSE Investors Protection Fund -3-

4 Summary Financials Particulars (Rs crore) FY10 FY11 FY12 Net Sales Other Op. Revenue Total Revenue Growth (%) 52.4% 36.3% -8.3% Cost of Goods Sold Gross Profit Employee Costs Other Expenditure EBITDA Growth (%) 137.6% 57.5% -22.0% Depreciation EBIT Profit Finance cost Other Income Exceptional Items PBT Growth (%) # 97.9% -63.0% Income Tax Profit after Tax Extra Ordinary Items Net Profit Growth (%) # 133.9% -49.2% Rep. Basic EPS Rep. Diluted EPS Equity Capital Face value Ratio Analysis FY10 FY11 FY12 Margins EBITDA Margin (%) 8.6% 10.0% 8.5% Net Profit Margin (%) 2.7% 4.6% 2.6% Valuation P/E (x) P/BV (x) Profitability ROCE (%) * % 18.2% RONW (%) 10.1% 20.4% 9.6% Solvency Ratio Debt/ Equity Ratio (x) Interest Cover (x) *Bifurcation between Long Term and Short Term debt is not available for FY10 #large growth figure due to low base Note: Financial year ends at March 31 on consolidated basis for FY12; FY10 & FY11 figures are on standalone basis Initiative of the BSE Investors Protection Fund -4-

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