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BHANSALI ENGINEERING POLYMERS LTD

Company Report

Date 10th April 2018

BSE Code 500052

NSE Code BEPL

Market Cap (Rs Cr) 3529.52

52 week High/Low 224.40/35.40

Industry Chemicals

Face Value Rs 1/Share

Shares O/S (In No) 16.59 Cr

EPS * 5.19

Book Value* 13.82

P/E 40.99

P/B 15.40

*Note: On TTM Basis

Shareholding Pattern as on Dec’ 2017

Research Analyst : Astha Jain

Bhansali Engineering Polymers (BEPL) is a leading name in the petrochemical sector in India. BEPL is a vertically integrated petrochemical company that is into manufacturing of ABS (Acrylonitrile Butadiene Styrene) -- a raw material used extensively across industries like automobiles, home appliances, telecommunications, luggage and other sectors.

Reputed Clientele: As co’s products find application in automobiles, home

appliances, telephones, electrical and electronics appliances, business

machines, luggage, stationery, novelties and various other products ,its

clientele includes strong names like HMSI, Maruti, Whirlpool, Samsung, LG,

Toyota, Mahindra, Bajaj, Godrej ,Hero Motocorp, TVS Motor & many more..

Zero debt company: Company has paid entire dues outstanding leaving no

dues remaining in lieu of which company gets release of all the prime and

collateral securities charged in favour of Allahabad bank to secure their

aforesaid credit facilities of Rs. 216.50 Crore including exclusive Equitable

Mortgage of Land and Building, Hypothecation of Plant & Machinery and all

other Fixed assets of company related to its Abu Road Plant and Satnoor

plant, Release of pledge of 5,00,00,000 (Five Crore) Equity Shares

belonging to Promoter and Promoter Group of company and release of

Personal Guarantee extended by its Managing Director for securing the

aforesaid credit facilities thus maintaining the zero debt status of company

Successful implementation of co’s capex plan: ABS capacity expansion

plan of the company from 80 KTPA to 100 KTPA at its Abu Road Unit has

been successfully implemented within the envisaged cost and time frame

i.e. Rs. 20 Crore and 31st March, 2018 respectively. Hence being cost

effective expansion strategy ,it will benefit the company going forward.

Valuation

The company is currently trading at 29x of FY19E eps of Rs 7.26. On the back of increase in global ABS prices, co stands to benefit from its capacity expansion plans . Along with that co’s effort to deleverage its balance sheet & funding its expansion plans through internal accruals shows strength in fundamentals of company .Going forward, co expects to save its logistics cost & increasing quality competitiveness against international giants in ABS manufacturing field . Hence , we recommend “Buy” on the stock with price target of Rs 255(appreciation of almost 20%) for long term investment.

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BUY CMP 212.75 TARGET 255 MEDIUM TO LONG TERM

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Company Overview

Bhansali Engineering Polymers Limited (BEPL) was incorporated in the year 1984 and it was the first company in India to start manufacturing Quality ABS resins using foreign technology. The first plant of company situated at Satnoor, Madhya Pradesh was setup in technical collaboration with Sumitomo Chemical Engineering Co. Limited / Sumitomo Nagatuck Limited, Japan and started its production in 1990. Company is one of the two leading Petrochemical Company in India involved in the manufacturing of ABS & SAN. BEPL is a vertically integrated petrochemical company that manufactures ABS which acts as a raw material for leading companies dealing in Automobiles, Home Appliances, Telecommunications, Luggage, Bus Body and various other multifaceted applications. The Company, with a view to expand its footprint in ABS Market, acquired two units of competitors viz. Polychem, Baroda & Rajasthan Polymers Resins Ltd (RPRL), Abu Road in the year 1999 & 2003 respectively and consolidated its entire ABS Production activities in Abu Road, Rajasthan and HRG at Satnoor, Madhya Pradesh.

Acrylonitrile Butadiene Styrene (ABS) is an opaque thermoplastic and amorphous polymer. It is

useful in manufacturing products such as drain-waste-vent (DWV) pipe systems, musical

instruments (recorders, plastic clarinets, and piano movements), golf club heads (because of its

good shock absorbance), automotive trim components, automotive bumper bars, medical devices for

blood access, enclosures for electrical and electronic assemblies, protective headgear, whitewater

canoes, buffer edging for furniture and joinery panels, luggage and protective carrying cases, small

kitchen appliances, and toys, including Lego and Kre-O bricks. Household and consumer goods are

the major applications of ABS. Keyboard keycaps are commonly made out of ABS.

Styrene acrylonitrile resin is a copolymer plastic consisting of styrene and acrylonitrile. It is also

known as SAN. It is widely used in food containers, water bottles, kitchenware, computer products,

packaging material, battery cases and plastic optical fibers.

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Sales ( In Rs Cr )

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Strong CAPEX Plan

Co has decided to set up a port based green-field plant with a minimum capacity of 200 KTPA in

the state of Gujarat. The new plant will be based on state of the art technology from Japanese

company Nippon A&L, .The implementation programme has been scheduled to commence

manufacturing of ABS from the proposed port based green-field plant by 31st March, 2021 as

against previously decided of 31st March 2022. With the new 200 KTPA port based plant

establishment; the company will be able to exploit its capacity of the plant optimally. Due to this,

there will be substantial saving in logistics cost & co will derive benefit out of economics of scale.

These will result in cost & quality competitiveness against international giants in ABS

manufacturing field.

In Jan’18, company has given approval for revised capital Expenditure at Rs 70 Cr pertaining to

the capacity expansion project of company viz ABS compounding expansion from 80 KTPA to

137 KTPA at Abu Road to 137 KTPA by 31st Dec 2018. Co decided to implement it in two phases,

the first phase with 100 KTPA ABS capacity incurring capex of Rs 20 Cr & the second phase with

aggregate 137 KTPA through compounding expansion to be completed by 31st Dec 2018

incurring additional capex of Rs 30 Crores thus aggregates to Rs 50 Cr. CAPEX Plan also includes

setting up of R&D Centre at ABU road which is ongoing project & is likely to be completed by 31st

Dec 2018 with a capex of Rs 20 Cr. All R&D equipment from Aburoad R&D centre will be shifted

to new R&D Centre at port based plant location as & when it is established.

In recent development, ABS capacity expansion plan of the company from 80 KTPA to 100 KTPA

at its Abu Road Unit has been successfully implemented within the envisaged cost and time

frame i.e. Rs. 20 Crore and 31st March, 2018 respectively. The cost of aforesaid expansion has

been financed through internal accruals of the company.

Debt Free Status

The Company was sanctioned working capital credit facilities amounting to Rs. 216.50 Crore

comprised of Fund based credit facilities (FBWC), Non Fund based credit facilities (NBFWC) and

Credit Conversion Factor (CCF) on exclusive basis from Allahabad bank. The entire

dues/outstanding out of the aforesaid credit facilities have been repaid by company. Consequent

upon above, Allahabad Bank has issued No dues letter, Shares pledge release letter to company,

resulting into release of all the prime and collateral securities charged in favour of Allahabad

bank to secure their aforesaid credit facilities of Rs. 216.50 Crore including exclusive Equitable

Mortgage of Land and Building, Hypothecation of Plant & Machinery and all other Fixed assets of

company related to its Abu Road Plant and Satnoor plant, Release of pledge of 5,00,00,000 (Five

Crore) Equity Shares belonging to Promoter and Promoter Group of company and release of

Personal Guarantee extended by its Managing Director for securing the aforesaid credit facilities.

With this co has become zero debt entity with no outstanding dues.

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Consolidated P&L A/c

Rs Cr

Particulars FY15 FY16 FY17 FY18E FY19E Total Revenue 601.06 530.86 626.15 1064.46 1277.35 Growth ( %) -- (11.68) 17.95 70.00 20.00 Expenditure 576.20 493.88 563.67 920.75 1098.52 EBIDTA 24.86 36.98 62.48 143.71 178.83 Growth (%) -- 48.75 68.96 130.00 24.44 EBIDTA Margin (%)

4.14 6.97 9.98 13.50 14.00

Other Income 1.89 2.54 8.44 14.35 17.22 Depreciation 5.02 5.55 5.42 8.89 10.67 EBIT 21.73 33.97 65.50 149.17 185.38 EBIT Margin (%) 3.62 6.40 10.46 14.01 14.51 Interest 13.58 11.08 9.80 0.00 0.00 Exceptional Item 0.00 0.00 0.00 0.00 0.00 PBT 8.15 22.89 55.70 149.17 185.38 Tax 3.28 6.70 21.11 52.21 64.88 PAT 4.87 16.19 34.59 96.96 120.50 Min Int & Ass Sh 0.00 0.00 0.00 0.00 0.00 Consolidated PAT 4.87 16.19 34.59 96.96 120.50 Growth (%) -- 232.44 113.65 180.28 24.29 NPM (%) 0.81 3.05 5.52 9.11 9.43

Ratios

Particulars FY15 FY16 FY17 FY18E FY19E EPS 0.29 0.98 2.08 5.84 7.26

ROE(%) 2.63 12.79 22.01 38.66 32.75

ROCE(%) 9.60 21.49 41.67 59.47 50.38

Book Value 11.16 7.63 9.47 15.12 22.18

Debt/Equity 0.22 0.25 0.00 0.00 0.00

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BHANSALI ENGINEERING POLYMERS LTD

Consolidated Balance Sheet

Rs Cr

Particulars FY15 FY16 FY17 FY18E FY19E Sh Capital 16.59 16.59 16.59 16.59 16.59 Res & Surplus 168.48 109.97 140.58 234.21 351.39 Sh App/Warrants 0.00 0.00 0.00 0.00 0.00 Total Debt(Long Term+Short Term Borrowings)

41.34 31.53 0.00 0.00 0.00

Other Long Term Liab & Provison

2.78 3.43 4.01 5.22 7.14

Net Deferred Tax Liability

-1.30 0.04 4.29 5.58 7.63

Sources Of Fund 227.89 161.56 165.47 261.60 382.75 Net Fixed Assets 122.17 81.86 93.00 113.00 169.75 Non –Current Investments

0.00 0.00 0.00 57.86 89.87

Misc Expenses 0.00 0.00 0.00 0.00 0.00 Other Non –Current Assets

2.71 1.32 1.76 2.02 2.61

Inventories 75.03 83.04 139.25 159.96 207.74 Sundry Debtors 146.56 131.90 136.71 157.04 203.95 Cash & Bank Bal 14.94 15.20 17.25 19.82 25.73 Other Current Assets 0.76 1.36 0.73 0.84 1.09 Loans & Advances 32.46 34.45 31.63 36.33 47.19 Current Investment 0.00 0.00 0.00 0.00 0.00 Total Current Assets 269.77 265.95 325.57 373.99 485.71 Current Liabilities & Provisions

166.76 187.57 254.87 285.29 365.23

Net Current Assets ( Ex Cash)

88.07 63.18 53.45 68.88 94.75

Uses Of Funds 227.89 161.56 165.46 261.58 382.71

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BHANSALI ENGINEERING & POLYMERS LTD

Standalone Quarterly Financial Highlights

Rs Cr

Particulars Q3FY18 Q3FY17 Q2FY18 YoY% QoQ%

Revenues 257.93 122.95 292.87 109.79 -11.93

Expenditures 214.63 113.84 255.06 88.54 -15.85

Operating Profit 43.31 9.11 37.82 375.38 14.52

Net Profit 29.06 3.06 25.10 849.58 15.78

PBIDTM% (ex OI) 16.79 7.41 12.91 126.60 30.05

NPM % 11.27 2.49 8.57 352.63 31.51

EPS* 1.75 0.18 1.51 872.22 15.89

Past Price movement of the stock

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