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Essel: Looking for consolidation benefits

May 16, 2001

Essel Propack Limited (formerly Essel Packaging) has reported a net profit growth of 16% to Rs 95 m in 4QFY01. The company's turnover during the period saw a 23% growth YoY. Essel finished FY01 with a 10% turnover growth and an 18% jump in net profit.

(Rs m) 4QFY00 4QFY01 Change FY00 FY01 Change
Net Sales 469 578 23.2% 2,070 2,281 10.2%
Other Income 18 57 215.0% 40 85 112.5%
Expenditure 287 416 44.9% 1,299 1,486 14.4%
Operating Profit (EBDIT) 182 162 -11.2% 771 794 3.0%
Operating Profit Margin (%) 38.8% 28.0%   37.2% 34.8%  
Interest 9 3 -64.4% 25 6 -74.8%
Depreciation 74 69 -6.2% 278 279 0.2%
Profit before Tax 118 146 23.5% 507 594 17.2%
Exceptional expenses - -     -  
Tax 36 51 41.7% 141 161 14.2%
Profit after Tax/(Loss) 82 95 15.5% 366 433 18.4%
Net profit margin (%) 17.5% 16.4%   17.7% 19.0%  
No. of Shares (eoy) (m) 14.5 24.3   14.5 24.3  
Diluted no. of shares (m) 24.3 24.3   24.3 24.3  
Earnings per share* 13.5 15.6   15.0 17.8  
*(annualised)            
Current P/e ratio         9.7  

Essel makes lamitubes used in packaging consumer products like toothpaste, cosmetics and pharmaceuticals. It is the world's largest producer of collapsible lamitubes with a current capacity of more than 2 bn tubes post its merger with Propack in FY01. Essel's early entry into the lamitube market and the scale of its operations gives it tremendous cost advantages over any new entrant. It is also backwardly integrated into web-making for lamitubes.

The company has not merged the accounts of Propack with itself in FY01. Therefore, the real benefits of the consolidation will come into effect from FY02. At the analyst meet last year the management had stated that the combined turnover of Essel Propack will touch Rs 15 bn by FY05, thatís a CAGR growth of 60% in the next four years. Similarly, the net profit of the combined entity is estimated (by the Essel management) to touch Rs 3.3 bn by FY05. One cannot really comment on these targets unless one sees Essel Propack's merged numbers.

The company had allotted bonus shares in the ratio of 3:5 in January 2001.Consequently the paid up capital has increased to Rs 243 m. Essel's board of directors has recommended maintaining the dividend at 54% on the post bonus increased share capital.

At the current price of Rs 173 the stock trades at a P/E multiple of 9.7 times its FY01 earnings.

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