Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 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: Outclassing competition - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 27, 2000

    Essel: Outclassing competition

    Essel Packaging was recently in the news when it announced the merger with Propack, thus creating the world’s largest laminated tube company (capacity – 2 bn tubes per annum). Though there is no company, which comes close to the Essel in terms of size in India, we thought it would be meaningful to compare it Shree Rama Multi-Tech (SRMT), the latest entrant in this segment.

    In terms of product profile, Essel is the more focused of the two, concentrating solely on laminated tubes. But Shree Rama also has a presence in printed products like labels and stickers. It also makes speciality packaging and plastic products. Shree Rama’s laminated tube making capacity is a puny 4,135 tubes per annum compared with 2 bn tubes of Essel Propack combine.

    In terms of presence too, Essel far outshines Shree Rama. Essel is an Indian company with a global presence. It is dominant in China, has presence in Europe, Africa and the Middle East, whereas Shree Rama is as yet, India centric.

    FY00 (Rs m) SRMT Essel
    Laminated tubes capacity (thnos) 4 1,312,000
    Turnover 2,046 2,484
    Net profit 448 366
    Operating profit margin(%) 45.0% 31.5%
    Net profit margin (%) 21.9% 14.8%
    3 year CAGR in turnover 47.2% 17.5%
    3 year CAGR in profits 41.1% 18.7%
    No. of Shares (eoy) 26.5 15.2
    Earnings per share* 16.9 24.1
    Current P/e ratio 4.3 20.2

    A look at numbers of both companies reveals a very interesting picture. While there is no doubt that Essel is a giant in terms of laminated tube making capacity, there is not much difference between the turnover of the two companies. In fact, Shree Rama’s net profit is higher than Essel’s in FY00. It also earns higher margins than Essel. Why is it so? This is because unlike Essel, which focuses purely on laminated tubes, Shree Rama’s revenues come from four business streams viz. labels, tarpaulins, tubes and trading. In real terms, tubes contributed only 35% (Rs 710 m) to Shree Rama’s FY00 turnover.

    At first glance, when we compare the valuations (P/e’s) of the two companies, it does look like that Shree Rama is undervalued. But Essel commands higher valuations for its focused management, its global scale of operations and future growth prospects. Essel’s risk profile is much safer than Shree Rama’s. There is also fear that as a result of the Essel Propack merger, Essel will be able to bring down costs and in effect give competitors like Shree Rama a run for their money.

    From the current perspective and its past records however, it must be said that Shree Rama has done exceptionally well. But will it be able to maintain such scorching growth rates? This is the question that is probably worrying the investors’.



    Equitymaster requests your view! Post a comment on "Essel: Outclassing competition". Click here!


    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working(Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Think Twice Before You Keep Money In A Savings Bank Account(Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 24, 2017 09:19 AM


    • 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


    Compare Company With Charts