X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Essel Propack: Earnings continue to erode - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Essel Propack: Earnings continue to erode
Feb 17, 2012

Essel Propack Limited has announced its third quarter financial results of 2010-2011 (3QFY11). The company has reported a 13.7% YoY growth in sales and 12.9% fall in profits. Here is our analysis of the results.

Performance summary
  • Essel Propack clocked a 13.7% growth in sales led by robust growth in the businesses of all its geographical markets. During 9mFY12, the topline was up by 10%.
  • Operating margin was depressed by 30 basis points on account of higher raw material costs. During 9mFY12, operating margin slid by 130 basis points.
  • Earnings have taken a hit due to adverse currency movements. Net profits for 3QFY12 and 9mFY12 fell by 12.9% and 14.8% respectively.


Consolidated picture
(Rs m) 3QFY11 3QFY12 % change 9mFY11 9mFY12 % change
Net sales 3,649 4,148 13.7% 10,659 11,711 9.9%
Expenditure 3,048 3,478 14.1% 8,811 9,834 11.6%
Operating profit (EBDITA) 601 670 11.5% 1,847 1,877 1.6%
EBDITA margin (%) 16.5% 16.2%   17.3% 16.0%  
Other income 7 7 0.0% 24 17 -30.7%
Interest 144 159 10.2% 440 443 0.8%
Depreciation 267 289 8.5% 802 833 3.8%
Profit before tax 197 229 16.1% 630 618 -1.8%
Exceptional Items - -   - -  
Forex changes 60 (5)   25 (43) -269.7%
Tax 95 87 -8.7% 270 254 -6.1%
Profit after tax/(loss) 162 137 -15.4% 385 321 -16.6%
Share of profits from associates 2 4   13 16 24.2%
Minority interest (8) (6)   (21) (16)  
PAT 156 136 -12.9% 377 321 -14.8%
Net profit margin (%) 4.3% 3.3%   3.5% 2.7%  
No. of shares (m)         157  
Diluted earnings per share (Rs)*         2.7  
Price to earnings ratio (x)*         12.8  
* trailing twelve month earnings

What has driven performance in 3QFY12?
  • Essel Propack saw its consolidated sales grow by 13.7% on 6% rise in offtake in 3QFY12. The price-hikes effected were to the extent of the rupee depreciation. While laminated tubing volumes grew by a sluggish 5%, plastic tubing volumes surged by 19% during the quarter. Sales in largest market, AMESA, increased by 10.5% whereas the Indian operations, comprising a lion's share of 66%, posted robust 16.4% sales growth during the quarter. Sales in each of the EAP and Americas regions increased by upto 11%. Sales in the European market reported the steepest rise of 45% in 3QFY12.

    India operations
    (Rs m) 3QFY11 3QFY12 % change 9mFY11 9mFY12 % change
    Net sales 1,139 1,326 16.4% 3,110 3,719 19.6%
    Expenditure 878 1,065 21.3% 2,399 3,020 25.9%
    Operating profit (EBDITA) 261 261 0.0% 711 698 -1.7%
    EBDITA margin (%) 22.9% 19.7%   22.9% 18.8%  
    Other income 7 6 -10.0% 143 20 -85.9%
    Interest 46 69 49.8% 138 188 36.0%
    Depreciation 62 73 18.9% 180 209 16.5%
    Profit before tax 161 125 -21.9% 536 322 -40.0%
    Exceptional Items - -   - -  
    Forex changes (6) 17   (19) 25  
    Tax 47 40 -14.6% 155 98 -36.9%
    Profit after tax/(loss) 108 102 -4.9% 362 249 -31.2%
    Net profit margin (%) 9.5% 7.7%   11.7% 6.7%  

  • Operating profitability of consolidated operations reduced marginally as higher raw material prices offset cost savings in wages and other expenditure (both as a proportion to sales). Regionwise, only EAP has improved operating margin whereas AMESA eroded operating margin by 320 basis points during the quarter. Both Americas and European regions continued to be in red. However, the European unit halved the magnitude of operating loss from 36% to 13% of sales on the back of improvement in profitability of the Polish unit. Poland, which is the largest market for European operations, is clocking better margins on account of consolidation of the lamination tube facility in the country.

    Consolidated cost break-up
    As a % of net sales 3QFY11 3QFY12 Change in basis points 9mFY11 9mFY12
    Total Cost of goods 48.3% 49.0% 66.88 47.7% 48.8%
    Staff Cost 15.0% 15.0% -8.07 15.3% 15.1%
    Other Expenditure 20.2% 19.9% -27.42 19.6% 20.0%

  • On a consolidated basis, the company's profits fell by 12.9% on the back of forex loss of Rs 5 m registered during the quarter compared to a gain of Rs 60 m in year-ago quarter. The decline in earnings has been contained by an 8.7% drop in tax outgo for the quarter. The tax incidence, measured by tax to PBT ratio, fell from 48% in 3QFY11 to 38% in 3QFY112.

What to expect?
At a price of Rs. 34, the stock is trading at 5.9 times our estimated FY14 earnings.

Essel Propack had been witnessing margin pressures on account of input cost inflation. Going forward, the company's profitability is expected to improve backed by material price-hikes to pass over higher raw material expenses, recovery in volumes in Poland and increased focus on high margin yielding cosmetic and pharmaceutical segments. For FY12-13, the company expects EBIDTA margins of 17-17.5% on 12-13% sales growth. The company has capital expenditure plans of Rs 1.1 bn mainly in India and Europe. Therefore the stock holds potential and we remain bullish about its future prospects.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

ESSEL PROPACK SHARE PRICE


Feb 20, 2018 02:47 PM

TRACK ESSEL PROPACK

  • Track your investment in ESSEL PROPACK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

ESSEL PROPACK - PIRAMAL GLASS COMPARISON

COMPARE ESSEL PROPACK WITH

MARKET STATS