1. 1QFY2011 Result Update | Packaging
July 29 2010
Essel Propack BUY
CMP Rs48
Performance Highlights Target Price Rs57
Investment Period 12 Months
Parameters (Rs cr) 1QFY11 2QFY10 % chg Angel Est % Diff
Stock Info
Sales 332 334 - 324 2.5
Sector Packaging
EBITDA 56 60 (5.8) 62 (8.6)
Market Cap (Rs cr) 7,531
EBITDA margin (%) 16.9 17.9 19
Beta 1.05
PAT 11 - - 13 (13.8)
52 Week High / Low 59/25
Source: Company, Angel Research
Avg. Daily Volume 147295
Essel Propack’s (EPP) 1QFY2011 results were marginally below our expectations, Face Value (Rs) 2
primarily due to the lower EBITDA margin and higher tax rate during the quarter. BSE Sensex 17,992
EPP continued to be profitable on the back of its stringent cost-cutting initiatives, Nifty 5,409
increasing contribution from high-margin products and a better production mix at Reuters Code ESSL.BO
its various geographies. We maintain a Buy on the stock. Bloomberg Code ESEL@IN
Steady performance continues: EPP’s 1QFY2011 sales remained flat at Rs332cr.
However, excluding its medical business, total revenues grew 15% yoy. EBITDA
Shareholding Pattern (%)
margin (excl. the medical business) witnessed a decline of 100bp yoy to 16.9%
(17.9%) due to higher raw material cost. Segmental underperformance was Promoters 59
visible in the EAP region and the Americas, where PBIT margins witnessed a MF / Banks / Indian Fls 9
decline primarily on account of rationalisation of production, product-mix and FII / NRIs / OCBs 5
under-utilisation of capacity. Indian Public / Others 28
Outlook and Valuation: EPP’s 1QFY2011 performance was slightly below our
expectations. However, we expect it to ramp up its operations going ahead. The
Abs. (%) 3m 1yr 3yr
company’s European operations pruned losses to a great extent in 1QFY2011.
Sensex 2.8 18.6 18.1
The Poland plant broke-even on the EBITDA front though not on the PAT front,
which we expect would happen in a quarter’s time. We have revised our estimates EPP (2.8) 67.3 (21.6)
downwards to account for the higher-than-estimated capex for FY2012. At current
valuations of 0.8x FY2012E P/BV, the stock is attractively valued. Hence, we
maintain a Buy on the stock, with a revised Target Price of Rs57 (Rs58).
Key Financials (Consolidated)
Y/E March (Rs cr) CY2008 FY2010E* FY2011E FY2012E
Net Sales 1,291 1,682 1,350 1,531
% chg 8.2 30.2 (19.7) 13.4
Net Profit - 82.1 61.3 119.8
% chg - - (25.4) 95.4
EBITDA (%) 13.9 18.2 19.5 20.3
EPS (Rs) - 5.2 3.9 7.6
P/E (x) - 9.2 12.3 6.3
P/BV (x) 1.1 1.0 0.9 0.8
RoE (%) - 11.3 7.9 14.1
RoCE (%) 4.1 10.1 10.0 14.1
Sageraj Bariya
EV/Sales (x) 1.3 0.9 1.0 0.7
40403800 extn 346
EV/EBITDA (x) 9.5 5.0 5.0 3.6
sageraj.bariya@angeltrade.com
Source: Company, Angel Research; Note: * 15 months
Please refer to important disclosures at the end of this report 1

2. 1QFY2011 Result Update | Essel Propack
Exhibit 1: Quarterly performance
Consolidated business Packaging Business only
Y/E March (Rs cr) 1QFY11 2QFY10 % chg FY2010* CY2008 % chg 1QFY11 2QFY10 % chg
Total Revenue 332 334 - 1682 1291 30 332 289 15
Total RM 157 141 11 729 581 25 157 130 21
as % of sales 48.6 42.3 43.3 45.0
Gross Profit 175 193 (9) 953 710 34 175 159 10
Gross margin (%) 52.6 57.7 56.7 55.0 53 55
Staff cost 54 65 (16) 310 253 22 54 47 15
as % of sales 16.7 19.4 18.4 19.6 16 16
Other Expenses 64 68 (5) 337 70 378 64 60 7
as % of sales 19.9 20.4 20.0 5.5 19 21
Total Exp 276 274 1 1375 1111 24 276 238 16
as % of sales 83.1 82.1 81.8 86.1 83 82
EBITDA 56 60 (6) 306 180 70 56 51 10
EBITDA % 16.9 17.9 18.2 13.9 17 18
Depreciation 27 28 (5) 137 112 23 27 27 (2)
EBIT 30 32 (6) 169 68 148 30 24 24
EBIT % 8.9 9.5 10.0 5.3 9 8
Other Income 1 2 11 4 1 1
Interest 16 15 8 85 70 21 16 14 10
PBT 15 19 (23) 95 2 - 15 10 42
Extra-ord Items 0 1 30 (51) 0 0
PBT 15 18 125 (48) 15 10
Total tax 6 11 (47) 37 35 7 6 9 (37)
tax rate 40 58.4 38.8 1680.2 40 90
PAT 9 7 88 (83) 9 1
NPM (%) 2.7 2.0 5.2 (6.4) 3 0
Minority & Others (0) 2 (6) (5) 2 (1)
Adj PAT 11 (0) 82 (88) 11 0
Adj NPM (%) 0.0 (0.1) 4.9 (6.8) 3 0
Equity 31 31 31 31 31 31
EPS 0.6 0.4 31 5.6 (5.3) 0.6 0.1
Adj EPS 0.7 (0.0) 5.2 (5.6) 0.7 0.0
Source: Company, Angel Research. *15 month
Growth across geographies
EPP reported net sales of Rs332cr in 1QFY2011 as against Rs334cr in 2QFY2010.
However, excluding the medical business, sales grew by 15%. EPP‘s core
packaging business witnessed strong growth across regions. The AMESA region
primarily comprising India recorded robust growth of 22.6%, while Europe grew
24.6%. EAP comprising China registered healthy growth of 14% during the
quarter. However, the Americas remained flat at Rs81cr, due to lower utilisation
levels as major customers witnessed decline in key products. However,
management expects the same to recover by end of the September quarter.
July 29 2010 2

3. 1QFY2011 Result Update | Essel Propack
Exhibit 2: Segmental performance
Consolidated business Packaging Business only
Y/E March (Rs cr) 1QFY11 2QFY10 % chg FY2010 CY2008 % chg 1QFY11 2QFY10 % chg
Revenues
AMESA 157 128 22.6 686 500 37.1 157 128 22.6
EAP 61 57 6.4 306 215 42.6 61 53 14.4
Americas 81 121 (33.5) 532 420 26.7 81 81 0.1
Europe 34 27 24.6 158 156 1.2 34 27 24.6
Other 0 0 1 0 0 0
Total 332 334 (0.4) 1682 1291 30.3 332 289 15.0
PBIT
AMESA 22 19 15.9 90 84 6.5 22 19 15.9
EAP 15 19 (23.4) 100 74 35.6 15 16 (6.3)
Americas (1) 5 (113.7) 11 13 (19.6) (1) 1 (164.3)
Europe (4) (10) (61.4) (45) (92) (51.1) (4) (10) (61.4)
Other 15 37 (57.7) 78 58 34.6 15 37 (57.7)
Total 47 70 (32.2) 233 137 70.6 47 62 (23.6)
PBIT margins (%)
AMESA 13.9 14.7 13.1 16.8 13.9 14.7
EAP 24.5 34.0 32.8 34.5 24.5 29.9
Americas (0.9) 4.4 2.0 3.1 (0.9) 1.4
Europe (11.7) (37.9) (28.7) (59.4) (11.7) (37.9)
Other - - - - - -
Total 14.3 20.9 13.9 10.6 14.3 21.5
Source: Company, Angel Research; Note: EAP - East Asia Pacific - China, Indonesia, Singapore & Philippines, AMESA- Africa, Middle East and South Asia
(includes Egypt and India), Americas-USA, Mexico and Colombia, EU - UK, Germany, Poland and Russia
Cost-cutting measures restrict margin erosion; Europe reduces losses
EPP (core packaging business) posted EBITDA margin of 17% (18%) in 1QFY2011,
a yoy decline of 100bp, mainly on account of higher prices of key raw material
(like polymer and polyester) during the quarter. Gross margin fell by 200bp to
53% during the quarter.
July 29 2010 3

4. 1QFY2011 Result Update | Essel Propack
Exhibit 3: Margin trend
56.0 17.7 18.0
17.5
55.0
17.0 16.9
17.0
54.0
(%)
(%)
16.5
53.0 16.0
16.0
52.0 15.5
54.0 55.0 53.0 52.6
51.0 15.0
1QFY10 2QFY10 5QFY10 1QFY11
Gross margin (LHS) EBITDA margin (RHS)
Source: Company, Angel Research
Although OPM declined by 100bp, it continued to be in the 16-18% band
compared to the bottom of 4-7% hit in 4QCY2008 and 3QCY2008. Cost-cutting
initiatives undertaken by the company at its various manufacturing units restricted
the decline in margins. Europe was the biggest contributor, as it reduced losses on
a quarterly basis. During 1QFY2011, Europe pruned losses to Rs4cr from Rs5.5cr
in 5QFY2010 and Rs10.3cr in 2QFY2010.
Exhibit 4: Europe region – Prunes losses
0
(10)
Rs cr
(20)
(30)
(40)
3QCY08
4QCY08
1QFY10
2QFY10
3QFY10
4QFY10
5QFY10
1QFY11
Source: Company, Angel Research
Focus to improve profitability
The company is currently consolidating its operations wherein it is increasing focus
on the high-margin business of plasti-tubes. Hence, although the company may
report muted sales growth going ahead, the same will be compensated by better
profitability and earnings.
July 29 2010 4

5. 1QFY2011 Result Update | Essel Propack
Investment Arguments
Global leader, substantial market share to help garner more business: EPP is a
global leader in the tubes packaging business, with an estimated current market
share of 32%. Around 38% of the market is controlled by the small regional
players. As economic recovery gets underway, further consolidation can not be
ruled out.
New business offers good opportunity: EPP is present in speciality packaging
offering a solution to the food processing industry, which is recession proof in
nature. Speciality packaging is a high-need requirement of consumers. The
domestic food processing industry is still at a nascent stage, but it is fast gaining
momentum. The market size of this segment is huge and offers the company a
chance to diversify its existing revenue mix that is heavily dominated by lamitubes.
Stabilisation in operations at subsidiary level: In CY2008, EPP posted losses on a
consolidated basis, due to deterioration in the performance of its key subsidiaries.
This was on account of the drying-up of orders, shifting of operations by one of the
company's key clients and teething problems at the new plant. We believe EPP has
been able to tackle most of the problems at its various plants and its operations
are now stable and profitable.
Outlook and Valuation
We have marginally revised our estimates downwards to account for the higher-
than-estimated capex to be incurred in FY2012.
Exhibit 5: Change in estimates
Old New % chg
FY11 FY12 FY11 FY12 FY11 FY12
Sales 1,350 1,811 1,350 1,531 - (15.5)
EBITDA 263 367 263 310 - (15.5)
EBITDA % 19.5 20.3 11.4 13.2
Adj PAT 63 155 61 120 (2.7) (22.7)
Source: Company, Angel Research
EPP’s European operations reduced losses to Rs4cr in 1QFY2011, as against
Rs35cr in 3QCY2008, an improvement of 88%. Currently, operations are almost
EBITDA neutral, and we expect them to turn profitable by 2QFY2011. The
company has been aggressively adding new customers from the cosmetic and
pharma sectors, which is likely to result in a changed revenue mix. The current
revenue mix is dominated by lamitubes, while the cosmetic and pharma industries
consume plastic tubes, which have higher margins.
At current levels, the stock is trading at attractive valuations of 0.7x FY2012E
EV/Sales and 0.8x FY2012E P/BV. Hence, we maintain a Buy on the stock, with a
revised Target Price of Rs57 (Rs58).
July 29 2010 5

6. 1QFY2011 Result Update | Essel Propack
Exhibit 6: Key assumption
FY11 FY12 Comments
Sales growth (%)
AMESA (9.8) 14.0 New capacity to aid growth
EAP (20.7) 17.0 Ramp-up in new capacity to aid growth
Americas (39.3) 6.0 Plasti-tube segment to drive growth
EU 5.0 20.0 Plasti-tube segment to drive growth
Total (19.7) 13.4
EBITDA margins (%) 19.5 20.3 Continuing benefit of restructuring
Tax rate 33.8 25.2
Source: Company, Angel Research
Exhibit 7: One-year forward P/BV band
100
80
60
Rs
40
20
0
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Price 0.5x 0.8x 1.0x 1.3x 1.5x
Source: C-line, Angel Research
July 29 2010 6

7. 1QFY2011 Result Update | Essel Propack
Profit & Loss Statement
Y/E March (Rs cr) CY06 CY07 CY08 FY10* FY11E FY12E
Total operating income 1,009 1,194 1,291 1,682 1,350 1,531
% chg 23.6 18.3 8.2 30.2 (19.7) 13.4
Total Expenditure 789 1,007 1,111 1,375 1,087 1,221
Net Raw Materials 405 532 581 729 581 643
Other Mfg costs 109 146 161 - 162 184
Personnel 196 227 253 310 243 276
Other 79 102 116 337 101 119
EBITDA 221 187 180 306 263 310
% chg 13.9 (15.3) (3.7) 70.0 (14.0) 17.7
(% of Net Sales) 21.9 15.7 13.9 18.2 19.5 20.3
Depreciation& Amortisation 87 67 112 137 110 108
EBIT 134 120 68 169 154 202
% chg 14.6 (10.4) (43.4) 147.9 (9.0) 31.5
(% of Net Sales) 13.3 10.1 5.3 10.0 11.4 13.2
Interest & other Charges 23 53 70 85 64 46
Other Income 15 15 4 11 12 13
(% of PBT) 11.8 18.2 186.4 11.9 11.3 7.7
Recurring PBT 125 82 2 95 101 168
% chg 10.5 (34.6) (97.5) 4,542.1 6.3 66.0
Extraordinary Expense/(Inc.) 5 2 (51) 30 - -
PBT (reported) 130.0 84.3 (48.5) 125.4 101.5 168.5
Tax 28 20 35 37 34 43
(% of PBT) 22.4 25.0 1,680.2 38.8 33.8 25.2
PAT (reported) 102 64 (83) 88 67 126
Add: Share of earnings of
(0) 1 1 1 2 2
associate
Less: Minority interest (MI) 3 4 6 7 7 8
Prior period items - - - - - -
PAT after MI (reported) 99 60 (89) 82 60 118
ADJ. PAT 99 61 (88) 82 61 120
% chg 9.3 (38.3) - - (25.4) 95.4
(% of Net Sales) 9.8 5.1 - 4.9 4.5 7.8
Basic EPS (Rs) 6.3 3.9 - 5.2 3.9 7.6
Fully Diluted EPS (Rs) 6.3 3.9 - 5.2 3.9 7.6
% chg 9.3 - - - (25.4) 95.4
*15month
July 29 2010 7

8. 1QFY2011 Result Update | Essel Propack
Balance sheet
Y/E March (Rs cr) CY06 CY07 CY08 FY10* FY11E FY12E
SOURCES OF FUNDS
Equity Share Capital 31 31 31 31 31 31
Preference Capital - - - - - -
Reserves& Surplus 737 785 668 718 769 866
Shareholders Funds 769 816 699 749 801 897
Minority Interest 10 12 17 23 31 39
Total Loans 522 708 1,031 825 635 432
Deferred Tax Liability 20 6 6 7 12 21
Total Liabilities 1,320 1,541 1,753 1,605 1,479 1,389
APPLICATION OF FUNDS
Gross Block 1,206 1,349 1,453 1,423 1,503 1,583
Less: Acc. Depreciation 620 661 770 908 1,018 1,126
Net Block 586 688 683 516 486 458
Capital Work-in-Progress 29 79 42 42 42 42
Goodwill 406 406 439 439 439 439
Investments 42 45 45 45 45 45
Current Assets 492 575 759 799 707 654
Cash 45 55 82 60 71 73
Loans & Advances 130 161 252 223 197 173
Other 318 359 425 516 439 408
Current liabilities 241 255 220 241 245 255
Net Current Assets 251 320 538 557 462 399
Mis. Exp. not written off 6 2 5 5 5 5
Total Assets 1,320 1,541 1,753 1,605 1,479 1,389
*15month
July 29 2010 8

9. 1QFY2011 Result Update | Essel Propack
Cash flow
Y/E March (Rs cr) CY06 CY07 CY08 FY10 FY11E FY12E
Profit before tax 130 91 (50) 125 101 168
Depreciation 87 67 112 137 110 108
Change in Working Capital (19) (46) (99) 23 167 107
Less: Other income - - - - - -
Direct taxes paid (39) (28) (24) (42) (34) (43)
Cash Flow from Operations 158 85 (61) 245 344 341
(Inc.)/ Dec. in Fixed Assets (79) (191) (84) 30 (80) (80)
(Inc.)/ Dec. in Investments (70) 17 (68) - - -
Inc./ (Dec.) in loans and advances - - - - - -
Other income - - - - - -
Cash Flow from Investing (148) (174) (152) 30 (80) (80)
Issue of Equity 1 - - - - -
Inc./(Dec.) in loans 97 203 321 (206) (190) (203)
Dividend Paid (Incl. Tax) (80) (38) (28) (5) - (9)
Others (35) (66) (54) (85) (64) (46)
Cash Flow from Financing (17) 100 239 (296) (253) (259)
Inc./(Dec.) in Cash (7) 10 27 (22) 11 2
Opening Cash balances 52 45 55 82 60 71
Closing Cash balances 45 55 82 60 71 73
*15month
July 29 2010 9

10. 1QFY2011 Result Update | Essel Propack
Key Ratio
Y/E March CY06 CY07 CY08 FY10 FY11E FY12E
Valuation Ratio (x)
P/E (on FDEPS) 7.6 12.4 - 9.2 12.3 6.3
P/CEPS 4.1 5.9 31.8 3.4 4.4 3.3
P/BV 1.0 0.9 1.1 1.0 0.9 0.8
Dividend yield (%) 4.2 2.5 0.6 - 1.0 2.1
EV/Sales 1.2 1.2 1.3 0.9 1.0 0.7
EV/EBITDA 5.6 7.5 9.5 5.0 5.0 3.6
EV / Total Assets 0.9 0.9 1.0 0.9 0.9 0.8
Per Share Data (Rs)
EPS (Basic) 6.3 3.9 - 5.2 3.9 7.6
EPS (fully diluted) 6.3 3.9 - 5.2 3.9 7.6
Cash EPS 11.8 8.1 1.5 14.0 10.9 14.5
DPS 2.0 1.2 0.3 - 0.5 1.0
Book Value 49.1 52.1 44.7 47.9 51.1 57.3
Dupont Analysis
EBIT margin 13.3 10.1 5.3 10.0 11.4 13.2
Tax retention ratio 77.6 75.0 - 61.2 66.2 74.8
Asset turnover (x) 1.3 1.3 1.2 1.5 1.4 1.7
ROIC (Post-tax) 13.0 9.8 - 9.2 10.2 17.1
Cost of Debt (Post Tax) 3.9 6.5 - 5.6 5.8 6.5
Leverage (x) 0.6 0.7 1.1 1.2 0.9 0.5
Operating ROE 18.1 12.2 - 13.4 14.0 22.9
Returns (%)
ROCE (Pre-tax) 10.9 8.4 4.1 10.1 10.0 14.1
Angel ROIC (Pre-tax) 16.7 13.1 6.2 15.0 15.4 22.9
ROE 13.4 7.7 - 11.3 7.9 14.1
Turnover ratios (x)
Asset Turnover (Gross Block) 0.9 0.9 0.9 1.2 0.9 1.0
Inventory / Sales (days) 52 57 66 62 62 60
Receivables (days) 46 47 50 60 48 46
Payables (days) 52 57 66 62 62 60
Working capital cycle (ex-cash) (days) 65 72 102 104 120 85
Solvency ratios (x)
Net debt to equity 0.6 0.8 1.4 1.0 0.7 0.4
Net debt to EBITDA 2.2 3.5 5.3 2.5 2.1 1.2
Interest Coverage (EBIT / Interest) 5.7 2.3 1.0 2.0 2.4 4.3
July 29 2010 10

11. 1QFY2011 Result Update | Essel Propack
Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
Disclaimer
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Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
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Disclosure of Interest Statement Essel Propack
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)
July 29 2010 11