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: Tax benefit boosts earnings - 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: Tax benefit boosts earnings
Jun 1, 2012

Essel Propack Limited has announced its third quarter financial results of 2010-2011 (4QFY11). The company has reported a 18.2% YoY growth in sales and 89% surge in profits. Here is our analysis of the results.

Performance summary
  • Backed by double-digit growth in revenues of all its geographical markets, Essel Propack registered an 18% rise in revenues in 4QFY12. During FY12, the topline was up by 12.5%.
  • Operating margin was depressed by 70 basis points on account of higher raw material and staff costs. For the full year FY12, higher input costs shaved off 150 basis points from the operating margin.
  • Earnings increased 1.9 folds aided by tax benefit arising from brought forward business losses and depreciation of the merged RAS Propack Lamipack and RAS Extrusions. However, lower other income and extraordinary expenses resulted in a marginal rise in earnings in FY12.


Consolidated picture
(Rs m) 4QFY11 4QFY12 % change FY11 FY12 % change
Revenues 3,497 4,126 18.0% 14,083 15,837 12.5%
Expenditure 2,920 3,476 19.0% 11,597 13,264 14.4%
Operating profit (EBDITA) 577 650 12.7% 2,486 2,573 3.5%
EBDITA margin (%) 16.5% 15.8%   17.7% 16.2%  
Other income 64 38 -40.6% 244 167 -31.6%
Interest 210 240 14.3% 851 842 -1.1%
Depreciation 260 268 3.1% 1,070 1,100 2.8%
Profit before tax 171 180 5.3% 809 798 -1.4%
Exceptional Items (13) (13)   (14) (13)  
Forex changes (5) 35   20 (8) -140.0%
Tax 62 (57)   338 197 -41.7%
Profit after tax/(loss) 91 259 184.6% 477 580 21.6%
Share of profits from associates 4 10   25 25 0.0%
Minority interest (11) (15)   (29) (31)  
Loss from discontinuing operations (after tax) -   (95)   -   (95)  
PAT 84 159 89.3% 473 479 1.3%
Net profit margin (%) 2.4% 3.9%   3.4% 3.0%  
No. of shares (m)         157  
Diluted earnings per share (Rs)*         3.7  
Price to earnings ratio (x)*         9.6  
* trailing twelve month earnings

What has driven performance in 4QFY11?
  • Essel Propack registered an 18% increase in topline led by volume growths of 10% and 27% respectively in Tubes and Flexible packaging. Sales in largest market, AMESA, increased by 12% out of which Indian operations grew by 16.4%. Sales in each of the EAP and Americas regions increased by upto 19%. Sales in the European market reported the steepest rise of 49% in 4QFY12.

    India operations
    (Rs m) 4QFY11 4QFY12 % change FY11 FY12
    Net sales 1,074 1,250 16.4% 4,183 4,968
    Expenditure 881 1,034 17.4% 3,264 4,034
    Operating profit (EBDITA) 193 216 11.9% 919 934
    EBDITA margin (%) 18.0% 17.3%   18.8% 18.8%
    Other income 134 179 33.6% 570 407
    Interest 145 163 12.4% 594 580
    Depreciation 64 77 20.3% 243 286
    Profit before tax 118 155 31.4% 652 475
    Exceptional Items - -   - -
    Forex changes (8) (2)   (20) 24
    Tax 25 (87) -448.0% 192 11
    Profit after tax/(loss) 85 240 182.4% 440 488
    Net profit margin (%) 7.9% 19.2%   8.9% 11.7%

  • Operating profitability of consolidated operations contracted by 70 basis points (bps) as cost savings in other expenditure was offset by higher raw material prices and wages (all as a proportion to sales). All the regions barring AMESA, have improved operating performance. The EAP region clocked a 172 bps increase in operating margin whereas for Americas, the EBIDTA margin expanded by 262 bps during the quarter. The European unit pared its operating loss from 22% to 7% 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. AMESA reported flat EBIDTA margins during the quarter due to fall in profitability of its Indian operations impacted by higher raw material costs.

    Consolidated cost break-up
    As a % of net sales 4QFY11 4QFY12 Change in basis points
    Total Cost of goods 48.3% 49.2% 95.45
    Staff Cost 15.0% 15.5% 46.99
    Other Expenditure 20.2% 19.5% -67.83

  • A one-time tax benefit of Rs 57 m as compared an outgo of Rs 62 m in the year-ago quarter led to an 89% jump in company earnings. During the quarter, two subsidiaries RAS Propack Lamipack and RAS Extrusions were merged with the company as per the rehabilitation scheme of Board for Industrial and Financial Reconstruction (BIFR). The brought forward losses and depreciation of the merged entities led to the huge tax inflow during the quarter.

What to expect?
At a price of Rs. 37, the stock is trading at 7.4 times our estimated FY14 earnings.

Essel Propack's profitability has been under cloud in FY12 on account of steep rise in cost of goods sold. Going forward, the company plans to mitigate higher raw material costs through change in formulations and packaging innovations and passing a 3-4% price-hike to consumers. Essel Propack is negotiating two large contracts in Europe and India which will partially contribute to revenues in FY13. The company expects a revenue growth of 12% in FY13 backed by robust growth in all geographies barring China. The company has capital expenditure plans of Rs 1 bn each in the next two years mainly in India and Europe. Presently the company has a gross debt of Rs 9.4 bn which it expects to cut down by upto 1 bn by FY13. With prospects remaining bright, 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 22, 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 - HUHTAMAKI PPL COMPARISON

COMPARE ESSEL PROPACK WITH

MARKET STATS