BUY CMP 191.60 Target Price 220.00 SESHASAYEE PAPER & BOARDS LTD Result Update (PARENT BASIS): Q3 FY15 APRIL 8 th, 2015 ISIN: INE630A01016 Index Details Stock Data Sector Paper & Paper Products BSE Code 502450 Face Value 10.00 52wk. High / Low (Rs.) 288.00/174.60 Volume (2wk. Avg.) 882 Market Cap (Rs. in mn.) 2416.08 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY14A FY15E FY16E Net Sales 10133.80 9964.66 10506.74 EBITDA 1289.20 1109.79 1158.54 Net Profit 267.90 271.33 293.40 EPS 21.25 21.52 23.27 P/E 9.02 8.90 8.23 Shareholding Pattern (%) Highlights Seshasayee Paper and Boards Limited (SPB), the flagship company belonging to 'ESVIN GROUP', operates an integrated pulp, paper and paper board. Net profit for the quarter grew up by 26.19% to Rs. 26.50 million from Rs. 21.00 million, when compared with the prior year period. During the quarter, revenue was at Rs. 2595.70 million against Rs. 2535.10 million in the corresponding quarter of previous year. In Q3 FY15, EBIDTA is Rs. 206.90 million as against Rs. 247.50 million in the corresponding period of the previous year. In Q3 FY15, Earnings per Share for the company were Rs. 2.10 compared to Rs. 1.67 in Q3 FY14, registered a growth of 20.74%. 1 Year Comparative Graph In Q3 FY15, PBT is Rs. 39.50 million as against Rs. 31.40 million in the corresponding period of the previous year, an increase of 25.80%. For the Dec quarter of FY15, Total income was Rs. 2597.70 million as compared to Rs. 2546.40 million for Dec quarter of FY14. SESHASAYEE PAPER & BOARDS LTD S&P BSE SENSEX Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 13% over 2013 to 2016E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Seshasayee Paper & Boards Ltd 191.60 2416.08 21.25 9.02 0.63 40.00 Emami Paper Mills Ltd 40.35 2441.10 1.97 20.48 0.77 30.00 TCPL Packaging Ltd 476.70 4147.30 31.90 14.94 4.72 25.00 Rainbow Papers Ltd 72.25 7674.20 1.22 59.22 1.24 20.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q3 FY15, Seshasayee Paper and Boards Limited (SPB), the flagship company belonging to 'ESVIN GROUP', operates an integrated pulp, paper and paper board has reported its financial results for the quarter ended 31 st Dec, 2014. Rs. In Mn Dec-14 Dec-13 % Change Net Sales 2595.70 2535.10 2.39 PAT 26.50 21.00 26.19 EPS 2.10 1.67 26.19 EBITDA 206.90 247.50 (16.40) Seshasayee Paper & Boards Ltd has achieved a turnover of Rs. 2595.70 million for the 3 rd quarter of the financial year 2014-15 as against Rs. 2535.10 million in the corresponding quarter of the previous year. The company has reported an EBITDA of Rs. 206.90 million, a decrease of 16.40% over corresponding quarter of previous year. In Q3 FY15, net profit increased by 26.19% to Rs. 26.50 million from Rs. 21.00 million in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 2.10 for the 3 rd quarter as against an EPS of Rs. 1.67 in the corresponding quarter of the previous year. Break up of Expenditure Rs. In Million Q3 FY15 Q3 FY14 CHNG % Cost of Material 1535.40 1374.60 12% Depreciation 74.40 124.60-40% Emply Benefit Exp 149.90 147.40 2% Other Expenditure 671.90 668.70 0% Stock-in-Trade 54.00 66.20-18%
COMPANY PROFILE Seshasayee Paper and Boards Limited (SPB), the flagship company belonging to 'ESVIN GROUP', operates an integrated pulp, paper and paper board Mill at Pallipalayam, Erode, District Namakkal, Tamil Nadu, in India. SPB, incorporated in June 1960, was promoted by Seshasayee Brothers (Pvt) Limited in association with a foreign collaborator M/s Parsons and Whittemore, South East Asia Inc., USA. SPB commenced commercial production in December 1962, on commissioning a 20000 tpa integrated facility, comprising a Pulp Mill and two Paper Machines (PM-1 and PM-2), capable of producing, writing, printing, Kraft and poster varieties of paper. Products SPB produces a wide range of products such as printing and writing papers, packing and wrapping papers and speciality papers. SPB has branded products namely, "SPrint", "Colour Sprint", "Index", SprintPlus", "Success" etc. Exports performance SPB's export is nearly 20% of its production and is a significant exporter in the Indian Paper Industry. Due to its excellent export performance, SPB has been awarded 'Golden Export House' status.
FINANCIAL HIGHLIGHTS (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31 st, 2013-2016E SESHASAYEE PAPER & BOARDS LTD FY13A FY14A FY15E FY16E EQUITY AND LIABILITIES: Shareholders Funds: Share Capital 112.50 126.10 126.10 126.10 Reserves and Surplus 3506.30 3715.20 4027.28 4309.19 Shares Pending Allotment 13.60 0.00 0.00 0.00 A. Net worth 3632.40 3841.30 4153.38 4435.29 Non-Current Liabilities: Long-term borrowings 1940.90 1931.10 1768.89 1662.75 Deferred Tax Liabilities [Net] 781.50 926.00 1037.12 1140.83 Other Long Term Liabilities 134.20 146.40 158.70 168.22 Long Term Provisions 147.70 145.30 149.66 153.25 B. Total Non-Current Liabilities 3004.30 3148.80 3114.37 3125.06 Current Liabilities: Short-term borrowings 1773.80 1636.50 1384.48 1301.41 Trade Payables 1944.80 1766.50 2056.21 2282.39 Other Current Liabilities 730.90 458.60 542.98 597.28 Short Term Provisions 80.30 83.80 35.20 36.60 C. Total Current Liabilities 4529.80 3945.40 4018.86 4217.68 Total Liabilities (A+B+C) 11166.50 10935.50 11286.61 11778.03 ASSETS: Non-Current Assets: Fixed Assets i. Tangible Assets 7105.91 6646.24 6593.07 6724.93 ii. Intangible Assets 17.89 15.19 15.95 16.59 iii. Capital work-in-progress 24.48 90.93 107.30 123.39 a) Sub Total - Fixed Assets 7148.28 6752.36 6716.32 6864.91 b) Other non-current assets 3.70 3.73 3.89 4.01 c) Non Current Investments 227.62 319.90 329.50 355.86 d) Long Term Loans and Advances 220.10 231.91 236.55 240.33 D. Total Non-Current Assets 7599.70 7307.90 7286.26 7465.11 Current Assets: Current Investments 0.00 0.00 156.49 169.01 Inventories 871.30 1122.90 1711.30 1858.09 Trade Receivables 991.00 1204.50 963.60 1079.23 Cash and Bank Balances 739.80 295.90 136.11 141.56 Short Term Loans and Advances 884.30 935.90 973.34 1002.54 Other Current Assets 80.40 68.40 59.51 62.48 E. Total Current Assets 3566.80 3627.60 4000.35 4312.91 Total Assets (D+E) 11166.50 10935.50 11286.61 11778.03
Annual Profit & Loss Statement for the period of 2013 to 2016E Value(Rs.in.mn) FY13A FY14A FY15E FY16E Description 12m 12m 12m 12m Net Sales 8335.50 10133.80 9964.66 10506.74 Other Income 51.10 27.50 14.27 15.41 Total Income 8386.60 10161.30 9978.93 10522.15 Expenditure -7285.90-8872.10-8869.14-9363.61 Operating Profit 1100.70 1289.20 1109.79 1158.54 Interest -444.60-387.10-381.02-401.97 Gross profit 656.10 902.10 728.77 756.57 Depreciation -491.40-489.70-290.15-313.36 Exceptional Items 0.00 0.00-32.20 0.00 Profit Before Tax 164.70 412.40 406.42 443.21 Tax 40.40-144.50-135.09-149.80 Net Profit 205.10 267.90 271.33 293.40 Equity capital 112.50 126.10 126.10 126.10 Reserves 3506.30 3715.20 4027.28 4309.19 Face value 10.00 10.00 10.00 10.00 EPS 18.23 21.25 21.52 23.27 Quarterly Profit & Loss Statement for the period of 30 th June, 2014 to 31 st Mar, 2015E Value(Rs.in.mn) 30-Jun-14 30-Sep-14 31-Dec-14 31-Mar-15E Description 3m 3m 3m 3m Net sales 2142.50 2306.30 2595.70 2920.16 Other income 2.00 7.90 2.00 2.37 Total Income 2144.50 2314.20 2597.70 2922.53 Expenditure -1883.80-2024.80-2390.80-2569.74 Operating profit 260.70 289.40 206.90 352.79 Interest -98.80-93.80-93.00-95.42 Gross profit 161.90 195.60 113.90 257.37 Depreciation -86.80-60.80-74.40-68.15 Exceptional Items 0.00-32.20 0.00 0.00 Profit Before Tax 75.10 102.60 39.50 189.22 Tax -24.80-33.90-13.00-63.39 Net Profit 50.30 68.70 26.50 125.83 Equity capital 126.10 126.10 126.10 126.10 Face value 10.00 10.00 10.00 10.00 EPS 3.99 5.45 2.10 9.98
Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) 18.23 21.25 21.52 23.27 EBITDA Margin (%) 13.20 12.72 11.14 11.03 PBT Margin (%) 1.98 4.07 4.08 4.22 PAT Margin (%) 2.46 2.64 2.72 2.79 P/E Ratio (x) 10.51 9.02 8.90 8.23 ROE (%) 5.67 6.97 6.53 6.62 ROCE (%) 21.71 24.01 19.16 19.89 Debt Equity Ratio 1.03 0.93 0.76 0.67 EV/EBITDA (x) 1.96 1.87 2.18 2.09 Book Value (Rs.) 321.67 304.62 329.37 351.73 P/BV 0.60 0.63 0.58 0.54 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 191.60, the stock P/E ratio is at 8.90 x FY15E and 8.23 x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs. 21.52 and Rs. 23.27 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 13% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 2.18 x for FY15E and 2.09x for FY16E. Price to Book Value of the stock is expected to be at 0.58 x and 0.54 x respectively for FY15E and FY16E. We recommend BUY in this particular scrip with a target price of Rs.220.00 for Medium to Long term investment. INDUSTRY OVERVIEW Paper is of significant importance to the society. Its contribution in the areas of education, dissemination of information and knowledge, hygiene and packaging cannot be matched. Paper is interwoven with human life in hundreds of ways. It is a bio-degradable product and has a benign footprint at the end of its life cycle. Despite the projections that digital age would render paper obsolete, Paper Industry has been growing year after year. Paper Industry has a very prominent role in the World Economy. Annual revenue from this Sector exceeds US $ 500 bn. World consumption of paper and boards grew from 169 million tonnes in 1981, to 253 million tonnes in 1993 and to 352 million tonnes in 2005. Current consumption is of the order of 400 million tonnes.
Demand is projected to exceed 500 million tonnes by 2020. While the mature markets may record a flat growth rate, the emerging markets are expected to grow at a CAGR of 4 5%. India is forecast to have the highest growth rate of 6 7% per annum. China and Russia are expected to register impressive growth rates, in excess of 5% per annum. The four key paper and board categories are News print, Coated / Un coated Wood - free Papers, Tissue and Papers and Boards for the packaging applications. The growth rate will vary by grade. Tissue, Container Boards and Carton Boards are expected to witness higher growth rates. The year 2011 and 2012 saw a mild recovery in the fortunes of the paper industry. However, paper and paper board output fell along with overall industrial production in both Europe and the USA. A wave of consolidations and takeovers reduced demand for pulp commodities across Europe and North America. However, volumes to Asia, particularly China were strong in 2011 and in early 2012. During this period, prices peaked and then subsequently fell following overcapacity for most pulp, paper and paperboard commodities. The theme of sustainability dominates any discussion on the future of pulp and paper industry. Companies strive hard to sustain their Green Initiatives to reduce the carbon foot-print across their businesses. Domestic India's production in the year 2012-13 moved up to 11.7 million tonnes, while the consumption stood at 13.0 million tonnes. This enabled India to maintain its position as the 11th largest producer of paper in the world. However, the Indian Paper Industry accounted for a meagre 3% of global paper demand. The per-capita consumption amounted to about 10 kgs which is significantly lower than the world average of around 58 kgs. India's per capita consumption is also lower than China's (42 kg), Indonesia's (22 kg), Malaysia's (25 kg), and of course USA's (312 kg) consumption levels. This indicates the ample scope available for expansion of the Indian Paper Industry. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates 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. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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