Essel Propack's 5QFY2010 results were below expectations due to lower EBITDA margins, higher tax rates, and slow customer off-take. However, the company remained profitable due to cost-cutting and higher contributions from high-margin products and geographies. While sales declined 7% year-over-year, sales excluding medical products grew 10%. The European division significantly reduced losses. The analyst maintains a 'Buy' rating with a revised target price of Rs58.

1. 5QFY2010 Result Update I Packaging
April 29, 2010
Essel Propack BUY
CMP Rs49
Performance Highlights Target Price Rs58
Essel Propack’s (EPP) 5QFY2010 results were below our expectations, Investment Period 12 Months
primarily due to the lower EBITDA margin, higher tax rate and slow
off take from customers during the quarter. EPP continued to be Profitable on Stock Info
the back of its stringent cost-cutting initiatives, increasing contribution from
Sector Packaging
high-Margin products and a better production mix in its various geographies.
We have revised our estimates based on improved FY2010 performance. The Market Cap (Rs cr) 766
company has also guided better revenue visibility going ahead. We maintain
Beta 0.5
a Buy on the stock.
Steady performance continues: EPP’s 5QFY2010 sales de-grew by 7% yoy, to 52 WK High / Low 59/15
Rs301cr; however, excluding its medical business, total revenue grew by 10%. Avg. Daily Volume 171047
In Segmental terms (excl. medical business), the European region was the best
performer, with a growth of 34%, while the East-Asia Pacific region (EAP), Face Value (Rs) 2
comprising of China, Indonesia, Singapore and Philippines, was the BSE Sensex 17,559
second-best performer, with a growth of 32%. AMESA region (Africa, Middle
East and South Asia) showed a modest growth of 10%, while the Americas Nifty 5,278
region de-grew by 14%. The EBITDA margin (excl. medical business) came in Reuters Code ESSL.BO
at 16%, 100bp lower than that in the same quarter last year. However,
segmental underperformance was visible in the EAP region and the Americas, Bloomberg Code ESEL@IN
where the PBIT margins witnessed a decline. This was primarily on account of
Shareholding Pattern (%)
rationalisation of production and the product-mix, and a one-time inventory
loss of US $0.5mn in the Americas. Promoters 58.9
Europe biggest contributor to improvement in EBITDA margin: The company’s MF/Banks/Indian FLs 19.1
EU operations have been a major drag on its overall Profitability, as the new
plant in Poland has been running into losses. Hence, the company had been FII/NRIs/OCBs 5.0
working towards turning around the unit. In 5QFY2010, the company Indian Public 17.0
managed to cut the Losses of this unit to Rs5cr, from Rs11cr in the same
quarter last year and an all-time high of Rs35cr in 3QCY2008. Abs. (%) 3m 1yr 3yr
Outlook and Valuation: Sensex 7.3 54.0 26.6
EPP’s 5QFY2010 performance was slightly below our expectations. However,
we expect it to ramp-up its operations, going ahead. The company’s EPP 6.0 206.5 (32.3)
European operations pruned losses to a great extent in 5QFY2010.
Consequently, the Poland plant has broken-even on the EBITDA front but not
on PAT front, which we expect to happen in a quarter’s time. We are revising
our estimates and maintain a Buy on the stock, with a Target Price of Rs58.
Key Financials
Y/E March (Rs cr) CY2008 FY2010E* FY2011E FY2012E
Net Sales 1,291 1,659 1,350 1,811
% chg 8.2 28.5 (18.6) 34.1
Adj Profit (88.3) 59.9 62.8 155.3
% chg - - 4.8 147.4
EBITDA Margin (%) 13.9 17.1 19.5 20.3
EPS (Rs) - 3.8 4.0 9.9
P/E (x) - 12.8 12.2 4.9
P/BV (x) 1.1 1.1 1.0 0.8
RoE (%) - 8.4 8.4 18.5
RoACE (%) 4.1 8.8 10.2 17.3
Sageraj Bariya
EV/Sales (x) 1.3 0.9 1.1 0.7
Tel: 022 – 4040 3800 Ext: 346
EV/EBITDA (x) 9.5 5.5 5.4 3.4 E-mail: sageraj.bariya@angeltrade.com
Source: Company, Angel Research; *Note- results for 15month period
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Essel Propack I 5QFY2010 Result Update
Exhibit 1: 5QFY2010 Financial Performance Exhibit 2:Packaging Business only
% %
Y/E March (Rs cr) 5QFY2010 1QFY2010 chg FY2010* CY2008 chg 5QFY2010 1QFY2010 % chg
Total Revenue 301 323 (7) 1659 1291 29 303 277 10
Total RM 141 140 1 729 581 25 141 127 11
as % of sales 46.7 43.2 43.9 45.0 47 46
Gross Profit 160 184 (13) 931 710 31 162 150 8
Gross margin (%) 53.3 56.8 56.1 55.0 53 54
Staff cost 49 65 (24) 310 253 22 50 47 6
as % of sales 16.3 20.0 18.7 19.6 17 17
Other Expenses 63 65 (3) 337 70 378 64 56 13
as % of sales 20.8 20.1 20.3 5.5 21 20
Total Exp 253 269 (6) 1375 1111 24 255 231 11
as % of sales 83.9 83.2 82.9 86.1 84 83
EBITDA 49 54 (10) 284 180 58 48 46 4
EBITDA % 16.1 16.8 17.1 13.9 16 17
Depreciation 26 29 (13) 137 112 23 26 28 (10)
EBIT 23 25 (8) 147 68 115 23 18 27
EBIT % 7.6 7.7 8.8 5.3 7 6
Other Income 2 2 9 11 4 197 2 2 (19)
Interest 13 18 (27) 85 70 21 13 18 (26)
PBT 12 9 34 73 2 3462 11 2 438
Extra-ord Items (2) 5 30 (51) 3 (5)
PBT 14 4 297 103 (48) (313) 14 (3) (518)
Total tax 5 7 (32) 37 35 7 5 6 (8)
tax rate 40.9 81.2 50.6 1680.2
PAT 9 (4) (354) 66 (83) (180) 9 (9) (200)
NPM (%) 3.1 (1.1) 4.0 (6.4) 3 (3)
Minority & Others 1 1 (54) (6) (5) 17 1 1 8
Adj PAT 9 (5) - 60 (88) - 8 (9) -
Adj NPM (%) 2.9 (1.6) 3.6 (6.8)
Equity 31 31 31 31 31 31
EPS 0.6 (0.2) - 4.2 (5.3) - 1 (1) -
Adj EPS 0.6 (0.3) - 3.8 (5.6) - 1 (1) -
Source : Company , Angel Research, *Note- results for 15month period
Focus to improve profitability: EPP’s Net Sales declined by 7% yoy to Rs301cr
(Rs323cr) in 5QFY2010. However, excluding the medical business, sales grew
by 10%. The company is currently consolidating its operations by reducing its
low margin business and increasing the high margin one. Hence, although
there might be a muted sales growth, it will be compensated by better
profitability and earnings.
Mixed growth across geographical: Americas de-grew by 14%, due to low
off take from customers observed during the quarter. Europe and EAP
maintained their momentum and increased their revenue by 34% and 32%
yoy, respective. AMESA’s revenue grew by 10%, due to a slowdown in off take
by customers; this was due to an inventory build-up at the customer level.
April 29, 2010 2

3. Essel Propack I 5QFY2010 Result Update
Exhibit 3: 5QFY2010 segmental revenue break up Exhibit 4:Packaging Business only
Y/E March (Rs cr) 5QFY2010 1QFY2010 % chg FY2010* CY2008 % chg 5QFY2010 1QFY2010 % chg
Revenues
AMESA 139 127 9.6 680 500 35.9 139 127 9.6
EAP 62 52 18.1 304 215 41.5 62 47 32.0
Americas 68 120 (43.5) 533 420 26.8 68 79 (14.1)
Europe 33 25 33.6 143 156 (8.0) 33 25 33.6
Other - - - - - - - - -
Total 301 323 (6.8) 1659 1291 28.5 301 277 8.8
PBIT
AMESA 18 16 8.4 114 84 35.7 18 16 8.4
EAP 18 20 (8.9) 101 74 36.0 18 16 9.3
Americas (6) 6 - 12 13 (8.8) (6) 2 -
Europe (5) (11) (51.9) (45) (92) (50.8) (5) (11) -
Other 3 8 (62.9) 56 58 (3.7) 3 8 (62.9)
Total 27 38 (30.2) 237 137 73.5 27 31 (14.0)
PBIT margins
AMESA 12.6 12.8 - 16.8 16.8 - 12.6 12.8 (14.5)
EAP 29.1 37.8 - 33.1 34.5 - 29.1 35.2 (605.8)
Americas - 4.7 - 2.3 3.1 - - 2.1 -
Europe - - - - - - - - -
Other - - - - - - - - -
Total 8.9 11.9 - 14.3 10.6 - 8.9 11.2 (235.8)
Source : Company , Angel Research, *Note- results for 15month period, EAP-East Asia Pacific - China, Indonesia, Singapore & Philippines, AMESA- Africa,
Middle east & South Asia (includes Egypt & India), Americas-USA, Mexico & Colombia, EU-UK, Germany, Poland, Russia
Europe biggest contributor to improvement in EBITDA margin: EPP (core
business) posted an EBITDA margin of 16% in 5QFY2010 (as against 17% in
the same quarter last year). Although the OPM declined by 100bp, for the full
year, the margin stood at 17% as against 14% witnessed in CY2008. This
improvement in the EBITDA margin was in line with the cost-cutting initiatives
that the company has undertaken at its various manufacturing units. Europe
was the biggest contributor to the improvement, as it has been able to reduce
losses on a quarterly basis.
Exhibit 5: Reducing losses in Europe division
0
(5)
(5)
(10) (8)
(10) (10)
(11)
(15)
Rs cr
(20)
(25)
(30) (27)
(35)
(35)
(40)
3QCY2008 4QCY2008 1QFY2010 2QFY2010 3QFY2010 4QFY2010 5QFY2010
Source : Company , Angel research
April 29, 2010 3

4. Essel Propack I 5QFY2010 Result Update
Highlights of FY2010
• Total sales for FY2010 stood at Rs1,659cr. The impact of various cost-cutting
initiatives is visible from the improvement in Gross margins, from 55% in
CY2008 to 56% in FY2010.
Exhibit 6: Gross Margin inching towards historic level
60
60
59
58
57
56
%
56 55
55
55
54
53
52
CY2006 CY2007 CY2008 FY2010*
Source - Company , Angel Research. Note *- 15month period
• The OPM for the year stood at 17% against 14% in CY2008. EPP has targeted to
achieve the OPM of CY2006 (22%). However, we prefer a more conservative
approach, and have estimated an OPM of 20% in FY2012E for the company.
• Total adj. PAT (including profit from the sale of the medical division) stood at
Rs63cr (against a loss of Rs88cr in CY2008).
Exhibit 7: EBITDA Trend
25
22
20
20
20
17
16
14
15
%
10
5
0
CY2006 CY2007 CY2008 FY2010 FY2011E FY2012E
Source: Company, Angel Research. Note *- 15month period
April 29, 2010 4

5. Essel Propack I 5QFY2010 Result Update
Outlook and Valuation
The European operations of EPP incurred a loss of Rs5cr in 5QFY2010, as against
Rs35cr in 3QCY2008, a decrease of 86%. Currently, operations are almost EBITDA
neutral, and we expect them to turn profitable by 1QFY2011E. 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 Lamitube, while the cosmetic and pharma industry consumes plastic
tubes, which have a higher margin. The average capacity utilisation for the company
stands in the region of 67-68%, indicating a superior growth rate available to the
company without too much capex. On the whole, due to the overall restructuring of
its operations, EPP’s Gross Margin is moving toward its historic level of 60%, while its
EBITDA margin has touched 16% in 5QFY2010 and is likely to touch a level of 20%
in FY2012E.
We have revised our estimates, based on the 5QFY2010 performance of the
company and better revenue visibility guidance by management. On the valuation
front, at the CMP of Rs49, the stock is trading at 0.7x FY2012E EV/Sales and 0.8x
CY2012E P/BV. We maintain our Buy rating on the stock, with a Target Price of
Rs58.
Exhibit 8: Revised Estimates
Rs crore Old New % change
FY2011 FY2012 FY2011 FY2012 FY2011 FY2012
Sales 1350 1471 1350 1811 0.0 23.2
EBITDA 263 298 263 367 0.0 23.2
EBITDA % 19.5 20.3 19.5 20.3 0.0 0.0
PAT 80 126 63 155 (21.2) 23.0
EPS 5.1 8.1 4.0 9.9 (21.3) 23.0
Source: Company, Angel Research.
Exhibit 9: One year forward P/B Chart
100
90
80
70
60
50
Rs
40
30
20
10
0
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Jan-05
May-05
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Price 0.5x 0.8x 1.0x 1.3x 1.5x
Source - Company , Angel Research.
April 29, 2010 5

6. Essel Propack I 5QFY2010 Result Update
Profit & Loss Statement (Consolidated) (Rs cr)
Y/E March CY2006 CY2007 CY2008 FY2010* FY2011E FY2012E
Gross sales 1,055 1,239 1,323 - - -
Less: Excise duty 46 46 32 - - -
Net Sales 1,009 1,194 1,291 1,659 1,350 1,811
Other operating income
Total operating income 1,009 1,194 1,291 1,659 1,350 1,811
% chg 23.6 18.3 8.2 28.5 (18.6) 34.1
Total Expenditure 789 1,007 1,111 1,375 1,087 1,444
Net Raw Materials 405 532 581 729 554 743
Other Mfg costs 109 146 161 - 176 226
Personnel 196 227 253 310 257 344
Other 79 102 116 337 101 131
EBITDA 221 187 180 284 263 367
% chg 13.9 (15.3) (3.7) 57.7 (7.3) 39.3
(% of Net Sales) 21.9 15.7 13.9 17.1 19.5 20.3
Depreciation& Amortisation 87 67 112 137 105 110
EBIT 134 120 68 147 158 257
% chg 14.6 (10.4) (43.4) 115.3 7.7 62.7
(% of Net Sales) 13.3 10.1 5.3 8.8 11.7 14.2
Interest & other Charges 23 53 70 85 69 54
Other Income 15 15 4 11 12 12
(% of PBT) 11.8 18.2 186.4 15.5 11.4 5.6
Recurring PBT 130 84 (48) 103 101 215
% chg 10.5 (34.6) - - 37.5 113.7
Extraordinary Expense/(Inc.) 5 2 (51) 30 - -
PBT (reported) 130 84 (48) 103 101 215
Tax 28 20 35 37 32 54
(% of PBT) 22.4 25.0 - 50.6 31.8 25.0
PAT (reported) 102 64 (83) 66 69 161
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) 59 61 153
ADJ. PAT 99 61 (88) 60 63 155
% chg 9.3 (38.3) - - 4.8 147.4
(% of Net Sales) 9.8 5.1 - 3.6 4.6 8.6
Basic EPS (Rs) 6.3 3.9 - 3.8 4.0 9.9
Fully Diluted EPS (Rs) 6.3 3.9 - 3.8 4.0 9.9
% chg 9.3 (38.3) - - 4.8 147.4
*Note- results for 15month period
April 29, 2010 6

7. Essel Propack I 5QFY2010 Result Update
Balance Sheet (Consolidated) (Rs cr)
Y/E March CY2006 CY2007 CY2008 FY2010E* FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 31 31 31 31 31 31
Preference Capital - - - - - -
Reserves& Surplus 737 785 668 689 741 873
Shareholders Funds 769 816 699 720 773 905
Minority Interest 10 12 17 23 31 39
Total Loans 522 708 1,031 825 701 491
Deferred Tax Liability 20 6 6 7 13 19
Total Liabilities 1,320 1,541 1,753 1,575 1,518 1,453
APPLICATION OF FUNDS
Gross Block 1,206 1,349 1,453 1,423 1,503 1,549
Less: Acc. Depreciation 620 661 770 908 1,013 1,123
Net Block 586 688 683 516 490 426
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 492 575 759 776 733 773
Cash 45 55 82 43 39 28
Loans & Advances 130 161 252 221 226 237
Other 318 359 425 512 469 508
Current liabilities 241 255 220 248 238 276
Net Current Assets 251 320 538 528 496 496
Mis. Exp. not written off 6 2 5 5 5 5
Total Assets 1,320 1,541 1,753 1,575 1,518 1,453
*Note- results for 15month period
Cash Flow (Consolidated) (Rs cr)
Y/E March CY2006 CY2007 CY2008 FY2010E* FY2011E FY2012E
Profit before tax 130 91 (50) 103 101 215
Depreciation 87 67 112 137 105 110
Change in Working Capital (19) (46) (99) 23 96 29
Less: Other income
Direct taxes paid (39) (28) (24) (42) (32) (54)
Cash Flow from Operations 158 85 (61) 222 270 301
(Inc.)/ Dec. in Fixed Assets (79) (191) (84) 30 (80) (45)
(Inc.)/ Dec. in Investments (70) 17 (68) - - -
Inc./ (Dec.) in loans and
advances
Other income
Cash Flow from Investing (148) (174) (152) 30 (80) (45)
Issue of Equity 1 0 0 - - -
Inc./(Dec.) in loans 97 203 321 (206) (124) (210)
Dividend Paid (Incl. Tax) (80) (38) (28) (5) (7) (9)
Others (35) (66) (54) (85) (69) (54)
Cash Flow from Financing (17) 100 239 (296) (200) (273)
Inc./(Dec.) in Cash (7) 10 27 (45) (10) (18)
Opening Cash balances 52 45 55 82 37 27
Closing Cash balances 45 55 82 37 27 9
*Note- results for 15month period
April 29, 2010 7

8. Essel Propack I 5QFY2010 Result Update
Key Ratios
Y/E March CY2006 CY2007 CY2008 FY2010E* FY2011E FY2012E
Valuation Ratio (x)
P/E (on FDEPS) 7.8 12.6 - 12.8 12.2 4.9
P/CEPS 4.1 6.0 32.4 3.9 4.6 2.9
P/BV 1.0 0.9 1.1 1.1 1.0 0.8
Dividend yield (%) 4.1 2.5 0.6 0.8 1.0 2.0
EV/Sales 1.2 1.2 1.3 0.9 1.1 0.7
EV/EBITDA 5.6 7.6 9.5 5.5 5.4 3.4
EV / Total Assets 0.9 0.9 1.0 1.0 0.9 0.8
Per Share Data (Rs)
EPS (Basic) 6.3 3.9 - 3.8 4.0 9.9
EPS (fully diluted) 6.3 3.9 - 3.8 4.0 9.9
Cash EPS 11.8 8.1 1.5 12.6 10.7 16.9
DPS 10.0 1.2 0.3 0.4 0.5 1.0
Book Value 49.1 52.1 44.7 46.0 49.4 57.8
Dupont Analysis
EBIT margin 13.3 10.1 5.3 8.8 11.7 14.2
Tax retention ratio 77.6 75.0 - 49.4 68.2 75.0
Asset turnover (x) 1.3 1.3 1.2 1.5 1.3 1.9
ROIC (Post-tax) 13.0 9.8 - 6.5 10.5 19.9
Cost of Debt (Post Tax) 3.9 6.5 - 4.5 6.1 6.8
Leverage (x) 0.6 0.7 1.1 1.2 1.0 0.7
Operating ROE 18.1 12.2 - 8.8 14.8 28.6
Returns (%)
ROCE (Pre-tax) 10.9 8.4 4.1 8.8 10.2 17.3
Angel ROIC (Pre-tax) 16.7 13.1 6.2 13.1 15.4 26.5
ROE 13.4 7.7 - 8.4 8.4 18.5
Turnover ratios (x)
Asset Turnover (Gross Block) 0.9 0.9 0.9 1.2 0.9 1.2
Inventory / Sales (days) 52.4 57.4 66.0 62.0 60.0 59.0
Receivables (days) 46.4 47.1 50.5 60.0 50.0 50.0
Payables (days) 52.4 57.4 66.0 62.0 60.0 59.0
WC cycle (ex-cash) (days) 64.7 72.1 102.1 103.6 127.2 93.2
Solvency ratios (x)
Net debt to equity 0.6 0.8 1.4 1.1 0.9 0.5
Net debt to EBITDA 2.2 3.5 5.3 2.8 2.5 1.3
Interest Coverage (EBIT / Int.) 5.7 2.3 1.0 1.7 2.3 4.8
*Note- results for 15month period
April 29, 2010 8

9. Essel Propack I 5QFY2010 Result Update
Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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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 and its Group companies.
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Tel : (022) 3952 4568 / 4040 3800
Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE:
INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946
Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM /
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April 29, 2010 9