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SYNOPSIS

We initiated coverage of Kemrock

Industries & Exports Ltd. and set a

target price of Rs. 574.00 for

medium term investment.

Kemrock Industries & Exports Ltd.

(KIEL) is a fully integrated global

leader in the manufacture of Fibre

Reinforced Composite Materials,

established in 1981.

During the quarter ended, the

robust growth of Net Sales is

increased by 40.44% to Rs. 2377.17

million.

KIEL has launched a range of

carbon fiber products for industrial

applications under the brand name

"JAITEC".

Net Sales and PAT of the company

are expected to grow at a CAGR of

27% and 30% over 2010 to 2013E

respectively.

Years Net sales EBITDA Net Profit EPS P/E

FY 11 9013.10 2526.40 754.59 43.26 11.85

FY 12E 10815.72 3046.42 959.30 55.00 9.32

FY 13E 12546.24 3530.50 1160.82 66.55 7.70

Stock Data:

Sector: Plastic

Face Value Rs. 10.00

52 wk. High/Low (Rs.) 581.60/482.05

Volume (2 wk. Avg.) 29468.00

BSE Code 526015

Market Cap (Rs in mn) 8939.03

Share Holding Pattern

1 Year Comparative Graph

BSE SENSEX Kemrock Inds.

C.M.P: Rs. 512.50 Target Price: Rs. 574.00 Date: Jan 6th 2012 BUY

Kemrock Industries & Exports Ltd Result Update: Q1 FY 12

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Peer Group Comparison

Name of the company CMP(Rs.) Market Cap. (Rs. mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Kemrock Inds. & Exports 512.50 8939.03 43.26 11.85 1.36 20.00

Jain Irrigation Sys. Ltd. 85.70 3468.34 6.78 12.63 2.10 50.00

Supreme Industries Ltd. 176.05 2236.31 13.43 13.11 4.57 215.00

Sintex Industries Ltd. 62.65 1713.02 11.30 5.55 0.79 65.00

Investment Highlights

Q1 FY12 Results Update

Kemrock Industries & Exports Ltd. has reported net profit of Rs 154.94 million for

the quarter ended on September 30, 2011 as against Rs 137.62 million in the same

quarter last year, an increase of 12.59%. It has reported net sales of Rs 2377.17

million for the quarter ended on September 30, 2011 as against Rs 1692.70 million

in the same quarter last year, a rise of 40.44%. Total income grew by 41.73% to

Rs.2404.02 million from Rs.1696.23 million in the same quarter last year. During

the quarter, it reported earnings of Rs 8.88 a share.

Quarterly Results - Standalone (Rs in mn)

As At Sep-11 Sep-10 %change

Net sales 2377.17 1692.70 40.44%

PAT 154.94 137.62 12.59%

Basic EPS 8.88 8.21 8.14%

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• Break up of Expenditure

• Segment Revenue

Particulars Q1 FY12 (Rs. in mn)

Composite Products 2149.36

Polymers 373.18

Total 2522.54

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• Update on a Joint Venture

Kemrock Industries and Exports Ltd has informed a 50:50 Joint Venture between

"Kemrock Industries and Exports Limited" and "SAERTEX Beteiligungsgesellschaft

mbH", Germany, set up under the name of "SAERTEX-KEMROCK India Pvt. Ltd"

(entity) has been discontinued w.e.f., December 28, 2011, with the mutual

agreement of both the partners, in view of the change in business plan of the

foreign JV partner. The wholly owned subsidiary has been renamed as "Kemrock

Aerospace India Pvt. Ltd". The Company shall continue to forge ahead with its plan

to manufacture materials and components for aeronautical industry.

• Kemrock launches industrial grade Carbon Fiber under brand 'JAITEC'

Kemrock Industries and Exports Ltd. (KIEL), one of the leading manufacturers of

fibre reinforced polymer (FRP) composites, launched a range of carbon fibre

products for industrial applications under the brand name "JAITEC". Kemrock and

HAL have also joined hands together by signing a MoU for manufacture of carbon

fibre prepregs.

Company Profile

Established in 1981, Kemrock Industries and Exports Limited (KIEL) is a fully

integrated global leader in the manufacture of Fibre Reinforced Composite Materials.

KIEL manufactures and exports FRP/GRP (Composite) Products for major industrial

sectors such as aerospace, defense, renewable energy, wind energy, railways, chemical

processing, oil and gas, water and waste water management, infrastructure,

construction, electrical and electronics, marine, telecommunications. The State-of

the-Art facility, located close to Vadodara in the western part of India, provides high-

quality engineered advanced composite solutions and reliable services, complying with

customer specifications as well as national and international standards. The company

operates using principles of Total Integrated Management (TIM), ensuring complete

customer satisfaction. An end-to-end solution provider, it encompasses conceptual

design, prototype development, testing, manufacturing, logistic support, installation

and comprehensive after sales service.

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Kemrock has established a reputation as a major supplier to key industries by

manufacturing first quality material, consistently. In order to do that, a full and wide

ranging Quality Assurance Team oversees the manufacture of products at Kemrock,

ensuring complete traceability. The Integrated management system is certified under

ISO 9001:2008, ISO 14001: 2004 and OSHAS 18001:2007. Kemrock is also proud to

be India’s First and only IRIS Certified Company (IRIS - International Railway Industry

Standard).

Kemrock has the unique distinction of commissioning India's first Carbon Fibre

Manufacturing facility to cater to Defence, Aerospace & Infrastructure Sectors.

Product Range

Kemrock’s Composite Product Range:

• Carbon Fiber

• Railway Interiors & Exteriors

• Rotors Blades, Nacelle Covers &

Nose Cones

• GRP Pipe Systems & Solutions

• Cooling Tower Solutions

• Industrial Cable Management

System

• Moulded & Pultruded Gratings

• Lighting/Utility Poles & Flag Masts

• Access System-EasyReach

• Handrails & Ladders

• Thermosetting Resins: Epoxy,

Phenolic & Unsaturated Polyester

Resins

• Technical Fabrics

• Pultruded Structural Profiles

Kemrock serves major industrial sectors such as:

• Aerospace

• Defense

• Renewable Energy

• Wind energy

• Railways

• Chemical processing

• Oil and Gas

• Water and Waste water treatment

• Infrastructure

• Construction

• Electrical & electronics

• Marine

• Telecommunications

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Strategic Alliances

RPM International Inc. (USA) Georgia-Pacific (USA) Fibergrate (USA)

DSM Composite Resins (Switzerland) CSIR & NAL (India) BEML Ltd (India)

General Electric (India) Hindustan Aeronautics Ltd. (India)

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Financial Results

12 Months Ended Profit & Loss Account (Standalone)

Value (Rs.in.mn) FY10 FY11 FY12E FY13E

Description 12m 12m 12m 12m

Net Sales 6078.26 9013.10 10815.72 12546.24

Other Income 22.65 45.06 55.87 61.46

Total Income 6100.91 9058.16 10871.59 12607.70

Expenditure -4570.35 -6531.76 -7825.17 -9077.20

Operating Profit 1530.56 2526.40 3046.42 3530.50

Interest -540.16 -1094.31 -1291.29 -1459.15

Gross profit 990.40 1432.09 1755.14 2071.34

Depreciation -288.09 -421.16 -467.49 -514.24

Profit Before Tax 702.31 1010.93 1287.65 1557.11

Tax -175.41 -256.34 -328.35 -396.28

Profit After Tax 526.90 754.59 959.30 1160.82

Equity capital 167.54 174.42 174.42 174.42

Reserves 5479.30 6403.75 7363.05 8523.87

Face value 10.00 10.00 10.00 10.00

EPS 31.45 43.26 55.00 66.55

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Quarterly Ended Profit & Loss Account (Standalone)

Value (Rs.in.mn) 31-Mar-11 30-Jun-11 30-Sep-11 31-Dec-11E

Description 3m 3m 3m 3m

Net sales 2293.43 2937.22 2377.17 2614.89

Other income -7.30 5.43 26.85 31.68

Total Income 2286.13 2942.65 2404.02 2646.57

Expenditure -1613.50 -2155.35 -1738.52 -1895.79

Operating profit 672.63 787.30 665.50 750.78

Interest -313.12 -331.39 -328.94 -345.39

Gross profit 359.51 455.91 336.56 405.39

Depreciation -92.89 -118.24 -116.92 -128.61

Profit Before Tax 266.62 337.67 219.64 276.78

Tax -62.35 -77.16 -64.70 -72.52

Profit After Tax 204.27 260.51 154.94 204.26

Equity capital 167.54 174.42 174.42 174.42

Face value 10.00 10.00 10.00 10.00

EPS 12.19 14.94 8.88 11.71

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Key Ratios

Particulars FY10 FY11 FY12E FY13E

No. of Shares(in mn) 16.75 17.44 17.44 17.44

EBITDA Margin (%) 25.18% 28.03% 28.17% 28.14%

PBT Margin (%) 11.55% 11.22% 11.91% 12.41%

PAT Margin (%) 8.67% 8.37% 8.87% 9.25%

P/E Ratio (x) 16.30 11.85 9.32 7.70

ROE (%) 9.33% 11.47% 12.73% 13.35%

ROCE (%) 12.27% 16.06% 17.65% 18.65%

Debt Equity Ratio 1.63 1.79 1.64 1.49

EV/EBITDA (x) 5.61 3.54 2.93 2.53

Book Value (Rs.) 337.04 377.15 432.14 498.70

P/BV 1.52 1.36 1.19 1.03

Charts:

Net Sales & PAT

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P/E Ratio(x)

Debt Equity Ratio

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EV/EBITDA(x)

P/BV

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Outlook and Conclusion

� At the current market price of Rs.512.50, the stock is trading at 9.32 x FY12E

and 7.70 x FY13E respectively.

� Earning per share (EPS) of the company for the earnings for FY12E and FY13E

is seen at Rs.55.00 and Rs.66.55 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 27% and

30% over 2010 to 2013E respectively.

� On the basis of EV/EBITDA, the stock trades at 2.93 x for FY12E and 2.53 x for

FY13E.

� Price to Book Value of the stock is expected to be at 1.19 x and 1.03 x

respectively for FY12E and FY13E.

� 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.574.00 for Medium term investment.

Industry Overview

The Indian plastics industry made a promising beginning in 1957 with the production

of polystyrene. Thereafter, significant progress has been made and the industry has

grown and diversified rapidly. Currently, the Indian plastics industry is spread across

the country, employing more than 3.5 million people and over 2,000 exporters. It

operates more than 30,000 processing units, of which 85 per cent to 90 per cent are

small and medium enterprises (SMEs).

Steady Growth in Exports

India is one of the most promising exporters of plastics among developing countries.

The Indian plastics industry produces and exports a wide range of raw materials,

plastic moulded extruded goods, polyester films, laminates, moulded/soft luggage

items, writing instruments, plastic woven sacks and bags, PVC leather cloth and

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sheeting, packaging, consumer goods, sanitary fittings, electrical accessories,

laboratory/medical surgical ware and travel ware, among other products.

As manufacturers increasingly focus on customising products in accordance with end-

user needs, the Indian plastics industry has also started developing specific items to

suit customer requirements, including supplies to original equipment manufacturers

(OEMS). The design, style, as well as the pattern, is decided according to the

requirement of the customer in the export market.

Plastics Export Promotion Council

The Plastics Export Promotion Council (popularly known as PLEXCONCIL) sponsored

by the Ministry of Commerce & Industry, Department of Commerce, Government of

India, for the promotion of exports by the Indian plastic industry.

Road Ahead

India's plastic processing industry is expected to cross sales of 1 trillion rupees in the

current fiscal year, up over 15 percent, as key sectors like automobile and irrigation

are looking to replace steel components with plastic ones. Due to global economic

concerns, the growth has been about 12 percent up till now. It is catching up again by

March 2012 as per Plastindia Foundation. It expects India's plastic demand to rise to

12.5 million tonnes in the current year from 9.5 million tonnes last year.

_____________ ____ _________________________ 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.

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