Signet Industries Ltd BSE Scrip Code: 512131 Comm. Trading & Distribution September 21, 2012 Equity Statistics Current Market Price Rs. 52 Week High / Low Rs. Market Capitalisation Rs. crores Free Float Rs. crores Dividend Yield % One Year Regression Beta Times BSE Volumes Trend - Average = 5 Thousand 20 15 10 5 0 in '000s 176.2 209.30/76 514.2 132.2 0.3 0.2 Business Summary Signet Industries Ltd. (Signet) is into manufacturing of polymers and trading of chemicals. The company is also engaged in distribution and trading of polyvinyl chloride (PVC) and polyethylene terephthalate (PET) resins; polyolefins, such as high-density polyethylene (HDPE), low-density polyethylene (LDPE), linear low density polyethylene (LLDPE), and polypropylene (PP). In addition, it manufactures micro irrigation systems; HDPE sprinkler pipes, HDPE pipes, and cable ducts; PVC pipes and fittings; spray etc. Furthermore, it operates wind turbine power units. Signet has it s headquarter in Indore. In FY12, Signet reported net sales of Rs.511.93 crore and net profit of Rs.3.93 crore. The company caters only to the domestic market. Signet is currently trading 13.7 times FY12 adjusted book value. Relative Returns 200 150 100 50 Sensex Signet Returns (%) 1M 3M 6M Since listing Absolute 5% 40% 77% 70% Relative to Sensex 2% 30% 69% 58% Shareholding Pattern 100% 50% 0% Sep `11 Dec `11 Mar `12 Jun `12 Board of Directors Person Role Qualification Mukesh Sangla MD NA Saurabh Sangla Director NA Dipak Kalani Director FCA Deepak Mehta Director FCA Murli Dhar Vashist Director FCA Source: AR and CARE Research Note: MD: Managing Director DII FII Others Promoter 1 Initiative of the BSE Investors Protection Fund
Background Formed in 1984, Signet commenced business in 1992 as a distributor of polypropylene (PP) for DCW Ltd (DCW) in Madhya Pradesh. Subsequently, it started the distributorship for other companies, including Haldia Petrochemicals Ltd, Indian Oil Corporation Ltd, API Industrial Corporation Ltd, and South Asian Petro Chemicals Ltd. Currently, Signet operates in three lines of business: distributorship, merchant trading of imported chemicals and manufacture of plastic-moulded products. It has also installed windmills with total capacity of 1.4 megawatts (MW). Business overview Signet derives revenue from four segments: distribution, irrigation sector, other manufacturing sector and wind energy with around 75% of its income being derived from the distribution segment. Signet caters only to the domestic market. Strengths and growth drivers Signet s operations derive strength from its established presence in the petrochemical and polymer trading industry, longstanding relationships with suppliers and enhanced dealer network. Risk and concerns High volatility in petrochemical and polymer prices and foreign exchange (forex) rates can have a negative effect on profitability for Signet. Future strategy and expansion plans The company has set up 7 lines of drip irrigation system with a capacity to manufacture 6,00,000 meters drip irrigation pipes per day. The company has also set up many injection moulding machines for in-house manufacturing of fittings and accessories. The company is in the process of manufacturing various out-sourced items like bends, valves & PVC agro fittings. This will help in reducing cost. Considering the healthy demand of drip irrigation systems in various states and the healthy order book of the company, Signet has planned to set up an additional drip line at its existing plant at Pithampur (Indore). Industry outlook The Indian plastic industry is expected to grow at a significant pace in the next 3 to 5 years due to capacity expansion of the existing petrochemical complexes. Plastics have helped to reduce the burden on natural resources, by replacing materials like wood, paper, metal, glass and carbon. India s consumption of plastics is expected to grow from the current 0.75 crore tons to 1.5 crore tons by 2015 and is set to be the third-largest consumer of plastics in the world. 2 Initiative of the BSE Investors Protection Fund
Peer comparison Year ended March 31, 2012 Income statement (Rs. crore) Signet Ester Kanpur Glory Total income 523.7 730.1 184.3 128.5 Net sales 511.9 699.6 183.6 124.9 EBITDA 32.5 35.3 20.8 8.8 Ordinary PAT 3.9 (13.9) 10.4 (19.8) Adjusted PAT 3.9 (13.8) 10.4 (19.7) Per share data (Rs.) Adjusted BVPS 13.7 23.7 25.5 41.2 Diluted EPS* 1.3-12.5 - Growth (Y-o-Y) (%) Growth in Total income 12.8 4.8 50.7 (28.3) Growth in Net sales 18.5 4.2 56.2 (25.5) Growth in EBITDA 46.5 NM 106.0 NM Growth in Adjusted PAT NM NM 244.5 NM Growth in EPS NM NM 133.0 NM Profitability ratio (%) EBITDA margin 6.4 5.0 11.3 7.1 Adjusted PAT margin 0.7 NM 5.6 NM Valuation ratios (Times) Price/EPS (P/E) 131.5 NM 7.8 NM Price/Book value (P/BV) 12.8 0.4 3.8 1.2 Enterprise value (EV)/EBITDA 21.6 6.9 6.8 18.8 Note: Ester: Ester Industries Ltd; Kanpur: Kanpur Plastipack Ltd; Glory: Glory Polyfilms Ltd. NM: Non Meaningful Quarterly financials Quarter ended June 30, 2012 Income statement (Rs. crore) Q1FY13 Q4FY12 Q3FY12 Q2FY12 Q1FY12 Total income 139.5 196.2 134.7 77.3 104.1 Net sales 139.5 198.0 134.0 76.3 104.1 EBITDA 78.3 161.3 91.2 76.8 63.5 Ordinary PAT 3.4 5.0 (7.2) 1.6 3.2 Adjusted PAT 3.4 5.0 (7.2) 1.6 3.2 Growth (Q-o-Q) (%) Growth in net sales -29.07 47.8 75.5 NM Profitability ratio (%) EBITDA margin 56.2 81.4 68.1 100.6 61.0 Adjusted PAT margin 2.4 2.6 NM 2.1 3.0 3 Initiative of the BSE Investors Protection Fund
Financial analysis In FY12, Signet reported net sales of Rs.511.9 crore up 18.5% y-o-y. Total income witnessed a growth of 12.79% during the same period. Raw materials form the largest portion of cost for Signet. In FY12, raw materials cost as a percentage of net sales was at around 87%. The company reported EBITDA margins and adjusted PAT margins of 6.4% and 0.7%, respectively in FY12. Signet had high levels of leverage as on March 31, 2012. The total debt as on March 31, 2012 was at Rs.237.4 crore compared to an adjusted net-worth of Rs.40 crore. The company has paid a dividend of Re.0.5 per share for FY12, resulting in a dividend yield of 0.3% at the current market price of Rs.176.15 per share. Annual financial statistics FY08 FY09 FY10 FY11 FY12 Income statement (Rs. crore) Total income 236.8 305.4 366.5 464.5 523.7 Net sales 238.4 304.5 360.8 432.0 511.9 EBITDA 9.8 11.2 19.9 22.2 32.5 Depreciation and amortisation 1.3 1.4 1.8 2.5 4.5 EBIT 8.5 9.9 18.1 19.7 28.0 Interest 6.3 7.4 10.1 11.9 20.4 PBT 3.8 3.2 14.6 9.2 8.0 Ordinary PAT 2.8 2.0 11.5 5.8 3.9 Adjusted PAT 1.9 2.0 7.3 5.8 3.9 Balance sheet (Rs. crore) Adjusted networth 17.7 19.7 31.2 36.4 40.0 Total debt 67.6 72.3 75.8 121.4 237.4 Cash and bank 5.0 14.0 11.9 18.2 49.8 Investments 6.3 6.3 6.2 7.7 7.7 Net fixed assets (incl. CWIP) 15.6 17.6 23.3 59.2 79.4 Net current assets (excl. cash, cash equivalents) 62.2 58.0 69.9 78.4 148.9 Per share data (Rs.) Adjusted BVPS 108.8 121.4 64.2 12.5 13.7 Diluted EPS 17.0 12.6 23.7 2.0 1.3 DPS - - - 1.3 - Growth (Y-o-Y) (%) Growth in total income 29.0 20.0 26.7 12.8 Growth in net sales 27.7 18.5 19.7 18.5 Growth in EBITDA 14.6 77.0 11.7 46.5 Growth in adjusted PAT 6.8 258.8 (20.2) (32.9) Growth in EPS (25.9) 88.6 (92.5) (100.0) Key financial ratio EBITDA margin (%) 4.1 3.7 5.5 5.1 6.4 Adjusted PAT margin (%) 0.8 0.7 2.0 1.3 0.7 RoCE (%) 9.4 14.5 11.9 10.6 RoE (%) 10.9 45.3 17.3 10.3 Gross debt - equity (times) 3.8 3.7 2.4 3.3 5.9 Net debt - equity (times) 3.5 3.0 2.0 2.8 4.7 Interest coverage (times) 1.3 1.3 1.8 1.7 1.4 Current ratio (times) 2.6 2.6 2.8 1.7 2.1 Inventory days 15.5 14.1 30.0 46.2 Receivable days 95.4 82.2 95.4 116.1 Financial Year (FY) refers to period from April, 1 to March, 31 NM: Not Meaningful; NA: Not Available 4 Initiative of the BSE Investors Protection Fund
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