ineos abs (india) ltd - india news | indian business, finance news
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1
SYNOPSIS
� INEOS Group Limited is a privately
owned multinational chemicals company
headquartered in Lausanne, Switzerland.
� INEOS ABS (India) Ltd is a pioneer in
developing the market for the versatile
engineering thermoplastic material–
Acrylonitrile Butadiene Styrene in India.
� During the quarter ended, the robust
growth of Net Sales is increased by
14.74% Rs. 2062.97 million.
� INEOS ABS (India) Ltd is the 3rd major
global chemical giant INEOS Group,
approx. with a turnover of USD 45
billion.
� Net Sales and PAT of the company are
expected to grow at a CAGR of 20% and
22% over 2009 to 2012E respectively.
� Company’s products ABSOLAN and
ABSOLAC are preferred as market choice
products among major industries.
Years Net sales EBITDA PAT EPS P/E
CY 10 7431.27 1166.64 700.30 39.82 14.69
CY 11E 8620.27 1304.25 783.19 44.53 13.14
CY 12E 9740.91 1463.52 882.92 50.21 11.65
Stock Data:
Sector: Speciality Chemicals
Face Value Rs. 10.00
52 wk. High/Low (Rs.) 723.80/328.55
Volume (2 wk. Avg.) 2299.00
BSE Code 506222
Market Cap (Rs in mn) 10287.81
Share Holding Pattern
1 Year Comparative Graph
INEOS ABS BSE SENSEX
C.M.P: Rs. 585.00 Target Price: Rs. 661.00 Date: Sept. 27th 2011 BUY
INEOS ABS (India) Ltd Result Update: Q2 CY 11
2
Peer Group Comparison
Name of the company CMP(Rs.) Market Cap. (Rs.mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
INEOS ABS (India) Ltd 585.00 10287.81 39.82 14.69 3.08 40.00
BASF India Ltd 611.95 2648.86 30.96 19.77 2.74 80.00
Clariant Chemicals 723.00 1927.57 111.52 6.48 5.25 300.00
Pidilite Inds. Ltd. 165.90 8402.57 6.02 27.56 7.37 175.00
Investment Highlights
Q2 CY11 Results Update
INEOS ABS (India) Ltd disclosed a marginal increase in standalone profit for the
quarter ended June, 30 2011. During the quarter, the profit of the company surged
9.36% to Rs 158.45 million from Rs 144.89 million in the same quarter last year.
Net sales for the quarter rose 14.74% to Rs 2062.97 million, while total income
for the quarter rose 15.69% to Rs 2090.27 million, when compared with the prior
year period. It posted earnings of Rs 9.01 a share during the quarter, registering
9.36% increase over prior year period.
Quarterly Results - Standalone (Rs in mn)
As At June-11 June-10 %change
Net sales 2062.97 1798.01 14.74%
PAT 158.45 144.89 9.36%
Basic EPS 9.01 8.24 9.36%
3
Break up of Expenditure
Company Profile
Incorporated as ABS Plastics Limited in the year 1973 then changed its name to ABS
Industries Limited. The erstwhile ABS Industries Limited now INEOS ABS (India)
Limited (the ‘Company’) w.e.f. June 17, 2008, is a pioneer in developing the market for
the versatile engineering thermoplastic material – Acrylonitrile Butadiene Styrene
(ABS) in India, when it started its operation in 1978 by manufacturing and marketing
ABS polymer under the brand name of ABSOLAC.
The company also set up India’s first modern and dedicated Styrene Acrylonytrile
(SAN) plant in 1993, with technical know-how from M/s JSR, Japan for manufacture
of various grades of ABSOLAN – SAN.
In early 1997, Bayer Industries Private Limited, a 100% holding company of the
German major, Bayer AG acquired a majority share of 51% in ABS Industries Limited.
The company then became a part of the Bayer group and was rechristened as “Bayer
ABS Limited”.
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In early 2004, Bayer Group globally decided carving out of styrenic-based Polymer
products, beside other business, into a new group LANXESS, business was then
globally transferred to a 100% subsidiary of Bayer AG to a Company styled as
LANXESS Deutschland GmbH. Once the business operations at Bayer ABS Ltd were
regrouped within the LANXESS group, LANXESS AG has become an ultimate holding
Company under the spin off process.
INEOS Group, approx. turnover of 45 $ Bn, entered into an agreement with LANXESS
AG, Germany, to acquire world over the styrenic business (ABS) and in the process
INEOS ABS (Jersey) Limited entered into an agreement with the promoters of the
Company and LANXESS INDIA Pvt. Ltd. to acquire major the stake in LANXESS ABS
Ltd. INEOS Group made an offer to the general shareholders through open offer, to
acquire major stake in LANXESS ABS Ltd. to an agreed price stated in the open offer.
Fuelled by the increasing worldwide demand for engineering thermoplastics, INEOS
ABS (India) Limited, a public listed company in NSE & BSE has already commissioned
its expansion of SAN capacity from 36,000 tpa to 65,000 tpa, which has helped
increasing its capacity of ABS from 60,000 tpa to 1,00,000 tpa. This expansion to
100,000 TPA is being funded through internal accruals. The SAN polymer is being
used for captive consumption for making ABS and is also being sold as merchant
product.
Company’s Infrastructure
• Nandesari Plant
• Katol Plant
• Wind Farm
Products
Company’s products ABSOLAN and ABSOLAC continue to be the preferred market
choice among user industries such as Consumer Durables, Automotive, Business
Machines, Telecommunications, Electronics and IT related machines.
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• Absolac
Absolac is plastic resin produced from Acrylonitrile, Butadiene & Styrene. It is a
widely used intermediary product. Its applications range from home appliances to
Automobile and consumer durables to business machines.
• Absolan
Absolan is also a polymerized plastic resin which is produced from Styrene &
Acrylonitrile. It has its main applications in the Lightings, Stationeries and
novelties, Refrigerators and cosmetic packing.
Clients
Some of the prominent clients of the Company include Samsung, LG, Videocon,
BPL, Ford, Hero Honda, Cello, Lexi and Bajaj. With an uptrend in consumer
spending on automobiles, white goods and electronic products the demand for ABS
resin is growing up significantly.
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Financial Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) CY09 CY10 CY11E CY12E
Description 12m 12m 12m 12m
Net Sales 5594.70 7431.27 8620.27 9740.91
Other Income 41.09 47.23 54.31 60.83
Total Income 5635.79 7478.50 8674.59 9801.74
Expenditure -4741.64 -6311.86 -7370.33 -8338.22
Operating Profit 894.15 1166.64 1304.25 1463.52
Interest 0.00 0.00 0.00 0.00
Gross profit 894.15 1166.64 1304.25 1463.52
Depreciation -144.85 -139.78 -143.97 -155.49
Profit Before Tax 749.30 1026.86 1160.28 1308.03
Tax -259.39 -326.56 -377.09 -425.11
Profit After Tax 489.91 700.30 783.19 882.92
Equity capital 175.86 175.86 175.86 175.86
Reserves 2548.44 3166.72 3949.91 4832.83
Face value 10.00 10.00 10.00 10.00
EPS 27.86 39.82 44.53 50.21
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Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) 31-Dec-10 31-Mar-11 30-Jun-11 30-Sep-11E
Description 3m 3m 3m 3m
Net sales 2116.48 2010.81 2062.97 2166.12
Other income 17.11 24.63 27.30 30.85
Total Income 2133.59 2035.44 2090.27 2196.97
Expenditure -1775.11 -1700.36 -1820.45 -1862.86
Operating profit 358.48 335.08 269.82 334.11
Interest 0.00 0.00 0.00 0.00
Gross profit 358.48 335.08 269.82 334.11
Depreciation -34.74 -34.70 -35.37 -36.08
Profit Before Tax 323.74 300.38 234.45 298.03
Tax -104.56 -98.50 -76.00 -98.05
Profit After Tax 219.18 201.88 158.45 199.98
Equity capital 175.86 175.86 175.86 175.86
Face value 10.00 10.00 10.00 10.00
EPS 12.46 11.48 9.01 11.37
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Key Ratios
Particulars CY09 CY10 CY11E CY12E
No. of Shares (in mn) 17.59 17.59 17.59 17.59
EBITDA Margin (%) 15.98% 15.70% 15.13% 15.02%
PBT Margin (%) 13.39% 13.82% 13.46% 13.43%
PAT Margin (%) 8.76% 9.42% 9.09% 9.06%
P/E Ratio (x) 21.00 14.69 13.14 11.65
ROE (%) 17.98% 20.95% 18.98% 17.63%
ROCE (%) 38.14% 39.08% 35.10% 32.32%
EV/EBITDA (x) 11.51 8.82 7.89 7.03
Book Value (Rs.) 154.91 190.07 234.61 284.81
P/BV 3.78 3.08 2.49 2.05
Charts:
Net Sales & PAT
9
P/E Ratio(x)
EV/EBITDA(x)
10
P/BV
Outlook and Conclusion
� At the current market price of Rs.585.00, the stock is trading at 13.14 x CY11E
and 11.65 x CY12E respectively.
� Earning per share (EPS) of the company for the earnings for CY11E and CY12E
is seen at Rs. 44.53 and Rs. 50.21 respectively.
� Net Sales and PAT of the company are expected to grow at a CAGR of 20% and
22% over 2009 to 2012E respectively.
� On the basis of EV/EBITDA, the stock trades at 7.89 x for CY11E and 7.03 x
for CY12E.
� Price to Book Value of the stock is expected to be at 2.49 x and 2.05 x
respectively for CY11E and CY12E.
� We expect that the company will keep its growth story in the coming quarters
also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.661.00 for Medium term investment.
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Industry Overview
The Specialty Chemicals segment in the Indian Chemical Industry is a new emerging
sector which brings promises of huge growth.
Specialty chemicals are those chemicals which are produced at a low volume; they are
high priced and usually targeted at a wide variety of markets. These chemicals are
developed under the user's specifications which usually vary from one user to another.
The methods of development depend on the application and the function of the
chemicals. Prices of various products vary from Rs. 200 to 1500 per kg.
Industry Structure
Major commodity chemical manufacturers due to low margin migrating to speciality
chemicals, as it provide higher profitability and low investment. Most of the erstwhile
textile auxiliary manufacturers have now started synthesizing exotic molecule and
thus emerging as specialty chemical manufacturers.
Industry can be divided into
• Large Indian - Hico Products, Balmer Lawrie
• MNC subsidiaries - Ciba Specialty Chemicals, Color Chem, Foseco, Clariant
India
• Small Indian - Ahura Chemicals
Major Players
• Clariant India Ltd.
• Ciba Speciality Chemicals
• Color Chem
• BASF
• Foseco
• Hindustan Organic Chemicals and
• Balmer Lawrie
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User segments
• Major consumers : textile, leather, paper and detergent industry
• Other users : rubber, paints, agro chemical, oil & gas industries
• Emerging applications: for anti fungal finishes, Teflon finishes flame retardant,
oil and water repellent, wrinkle free coatings, etc.
Market Characteristics
Industry
• Industry peruse fragmented and characterized by a large number of smaller
players in the unorganized sector
• Organised sector dominated by MNC with strong links to parent organization
• HOC and Balmer Lawrie significant players of Indian origin
Market
• Market for speciality chemicals estimated around Rs. 2000 crores/ US $ 465
mn (400,000 tpa)
• Some of the speciality chemicals are Catalysis, Gelatin, Leather, Textile
Chemicals, Plasticizers, Rubber Chemicals, etc.
• Industry has basically evolved from the textile auxiliary chemical industry
Distribution
• Initially, customers developed through direct (company) contacts
• MNCs and large Indian companies then, market standard brands through
dealer channels
• Large requirements are addressed directly by the company
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Key Success Factors
• Branding for a `core group’ of chemicals and `customising’ them for clients
based on their specific operating conditions and requirements
• Forge links with a foreign partner - for inputs on R&D, product development
and application engineering skills
• Focus on specific user markets, exports
Future Outlook
• Emphasis on improvement in process efficiencies and increased productivity
driving speciality chemicals demand
• India being looked as a sourcing point by West
• Following the outcry regarding pollution in the West there has been a shifting of
global capacities for production and consumption to Asian regions
Demand Drivers
• New application areas being addressed resulting in wider usage and thereby
growth
• Growth of oil, paints, textile, rubber sector will fuel demand for speciality
chemicals
• With home & personal care segment, health & hygiene and cosmetic sectors
opening up, demand for speciality chemicals would grow.
The Specialty Chemicals segment is disunited with a huge number of companies.
TNCs have a stellar inherence in this sector. Many of the present textile
manufacturers are emerging as specialty chemical developers.
Market Characteristics
• The specialty chemicals segment is estimated around US $ 465 million
• The industry has emerged from textile auxiliary chemical industry.
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Future of the Specialty chemicals segment:
• Focus on improvement in efficient processes for enhanced productivity
• India to be one of the main source of base materials
• The demand of the segment depends on the demand of the end users.
_____________ ____ _________________________ Disclaimer:
This document prepared by our research analysts 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 do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
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. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
15
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