DhunseriPetrochem_Sunidhi_100514

7/24/2019 DhunseriPetrochem_Sunidhi_100514

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Robust 9MFY14 Results

DHUNSERI PETROCHEM & TEA RO CK -S O L I D GR O W T H PROSPECTS Retail Desk

BUY

10 May 2014

Rating Buy

CMP (`) 119

Target Price (`) 160

Upside (%) 34

Key Data

BSE Code 523736

NSE Code DPTL

Reuters code DHUN.BO

Bloomberg Code DPTL IN

Sensex 22994

Face Value (`) 10

Mcap(` Cr.) 417

52 week H/L(`) 127/732 Wk Avg Qty 2957Share holding,March 14 Holding %

Promoters 67.3

Corporates 4.9

DIs 15.0

Public 12.8Performance(%) 3M 6M 12M

Stock-DPIL 16.7 12.5 12.8

BSE 200 13.7 12.4 12.6

BSE 500 13.9 13.1 13.2

Price Chart:

http://www.dhunseritea.com

Vijay Dave

[email protected]

Ph: 91-22-6760 7700

Company Description:Incorporated in 1961 as Dhunseri Tea, DPTL headquartered in Kolkata, India,part of the `4,000 crore Dhunseri Group and has become the largest pet r

manufacturer in India following the capacity expansion in Haldia. The Compis headed by Mr. C.K. Dhanuka (Executive Chairman), ably assisted by MrDhanuka (Vice-chairman & MD) and a professional management team. EgypIndian Polyester Company S.A.E; Dowamara Tea Company Private Ltd.; DhunPetrochem & Tea Pte Ltd.; Makandi Tea and Coffee Estates Ltd. & KawaEstate Company Ltd are subsidiaries of DPTL.

Manufacturing Plants:DPTL has two PET resin plants in Haldia (port town of West Bengal). Anomanufacturing facility is coming up at Ain El Sokhna, a deep-sea port on theSea in Egypt through its subsidiary namely Egyptian Indian Polyester CompS.A.E. The tea estates of Dhunseri Group are located in Assam (India) and Ma(Africa). DPTL has ten tea estates with nine tea factories in Assam andsubsidiaries have two tea estates with two tea factories in Malawi.

DPTLs tea packaging and blending units are located in Dhunseri Tea Es(Assam) and at Jaipur (Rajasthan). The commercial IT Park is located at Banin the South-eastern Kolkata. Once operational, the first phase of this projeexpected to generate rental income and add to the companys top line. Majocompanies have shown interest in the IT SEZ plot as a result of which compahave already started operations in the region. Other infrastructure develolike Forum Projects and Infinity Group have booked spaces within the facilitaccount of the future prospect in this part of the city.

Power Plants:DPTL sourced low cost energy from its 8-MW captive coal power plant, soon tosupplemented by another coal-based captive power plant (10 MW) tocommissioned by the Q3FY14. These plants will suffice for the po

requirements of expanded capacity.,

Key Financial: (Consolidated) (`cYear-March 9MFY14A 9MFY13A FY12A FY13A FY14E F

Sales 2959.7 1538.6 1947.0 2378.3 4000.0 50

PBIDT 185.7 112.5 114.1 175.7 248.0 3

Interest 50.2 26.3 41.2 46.8 70.0

PBDT 135.5 86.2 72.9 128.9 178.0 2

Depreciation 36.7 26.9 39.6 33.3 50.0

PBT 98.8 59.3 33.3 95.6 128.0 1

Tax 26.3 11.7 9.5 20.8 28.2

PAT 72.5 47.6 23.8 74.8 99.8 1

Minority Share (7.4) 13.2 17.0 Net Profit 31.2 61.6 82.8 1

Equity 35.0 35.0 35.0

Reserves 665.3 754.5 816.8 8

Book Value (`) 200.1 225.6 243.4 2

EPS (`) 20.7 13.6 8.9 17.6 23.7

OP Margin (%) 6.3 7.3 5.9 7.4 6.2

PAT Margin (%) 2.4 3.1 1.2 3.2 2.5

P/E 5.0 %

*Interim results are standalone.A dividend of 50% for FY14 and 60% for FY15 is assume
http://www.dhunseritea.com/http://www.dhunseritea.com/mailto:[email protected]:[email protected]:[email protected]://www.dhunseritea.com/


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Dhunseri Petrochem &

Sunidhi Research |

Marketing Network DPTL enjoys a marketing presence covering around 500 PET-consumcustomers in around 50 countries. Its products are available in the ASbrand in North America, the European Union, the Middle East, EasEurope and Africa. To help deal with its international operations betDPTL established a branch office in Dubai Multi Commodities CeAuthority under the name of Dhunseri Petrochem & Tea Ltd.

Q3FY14, 9MFY14 & FY13 Results During Q3FY14, standalone net profit rose 231 per cent to `22.2 crore on

higher sales of`

1054 crore. Q3FY14 EPS is`

6.3. During 9MFY14, net pclimbed 52 per cent to `72.5 crore on 92 per cent increased sales of `2crore. 9MFY14 EPS on standalone basis stands at `20.7.

During FY13, consolidated net profit advanced 97 per cent to `61.6 cror22 per cent higher sales of `2378 crore. Prior years income of `38.5 croexcluded. FY13 EPS worked out to `24.6. A dividend of 45% was paid. year 2012-13 was challenging on account of the global economic slowdowhich translated into the slowest Indian GDP growth in a decade.

During FY13, the offtake in PET industry was correspondingly affected byincrease in raw material costs, weak international realisations, excessupply over demand and volatile currency movements. As such the glPET resin growth moderated to around 4-5% and in India to around 10%.

Expansion Pet Resin:In this competitive environment, DPTL doubled its Haldia PET resin capacThe commissioning of the Egyptian plant commissioned in November 2operated at full capacity utilisation in the Q4FY13 indicating a short learcurve and quicker payback. This plant is expected to operate at full capautilisation and add positively to the bottomline from year one.

During FY13, DPTL commissioned the first leg of its expansion of 2, 10,tpa at (Haldia), which doubled its production capacity to 4, 10,000 TPone stroke. Plant I operated at full capacity utilisation for the whole while Plant II operated at its optimum capacity for the Q4FY13. immediately strengthened DPTLs quarterly revenues providing investors an indication of enhanced revenue visibility for the full FY15.

Dhunseri Groups global PET capacity is expected to increase from 4,10TPA in 2012-13 to 8,30,000 TPA in 2014-15 following the completion of pin Egypt. This plant will effectively service growing PET resin demanAfrica, the Middle East and Europe, leaving the Indian unit to cater primato the robust demand coming out from within Asia (including India) and sdemand from Europe and the US.

Tea Business:DPTL enjoys a strong presence within the Indian tea market throughbrands LAL GHORA and KALA GHORA. To boost its international preseDhunseri Group acquired two tea estates in Malawi in South Eastern Africa

Dhunseri modernises its tea factories by replacing old machines with higher output machines and continuously replacing old tea bushes with yielding and superior clones Dhunseri Group has selected to position itsea progressively global group global in terms of assets and revenues.

Dhunseri Groups plantation acreage increased from 3,428 hectares in 212 to 5,631 hectares in 2012-13 following the acquisition of two Maestates and set off by the sale of Namsang Tea Estate.

Financial Equity capital is `35 crore. With reserves of `754 crore, the book valuthe share works out to `226. The value of the gross block including capwork in progress of `666 crore was `1975 crore. With the debts of `2crore and cash/bank balance of `232 crore, the DER worked out to 2:1 aFY13.


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Sunidhi Research |

Demerger of Tea & IT SEZ divisions DPTL has already approved a Scheme of Arrangement between DDhunseri Services Ltd (DSL) and Dhanurveda Infrastructure Private Ltd (Dand their respective shareholders. The scheme provides for demerger reorganisation as under:

(i) Demerger of Tea Division of DPTL to DSL from April 01, 2014 ('AppoinDate') in consideration of issue and allotment of equity shares in DSL toshareholders of DPTL in the share entitlement ratio of issue and allotmen

1 equity share(s) of `10/- each in DSL credited as fully paid up to the eqshareholders of DPTL for every 5 equity share of Rs 10/- each held by tin DPTL.

(ii) Reorganisation of IT SEZ Division of DPTL by its transfer to DIPconsideration of issue and allotment of 50,00,000 equity shares of `10/- ecredited as fully paidup in DIPL to DPTL.

Divestment of Dowamara Tea Co. Dhunseri has entered into a memorandum of understanding for the sale oloss-making subsidiary Dowamara Tea Company Pvt. Ltd (DTCPL). Dhunacquired 100% stake in Assam-based DTCPL (tea manufacturing capacity lakh kg per annum) in FY12 for a consideration of `7 million.

DTCPL was loss-making at the time of acquisition. Dhunseri was unablturn around its operation. In FY13, DTCPL had a negative net worth of `

million.

Prospects Pet Resin:Coming to prospects, in 2013, the Asia-Pacific PET market accountedabout 30% of the global PET packaging consumption, while North Ameand Western Europe accounted for about 24% and 20% of the consumptrespectively. At 36%, the Asia-Pacific region showed the highest PET demand by 2020, GBI expects China to emerge as the global PET market leafollowed by the fast growing markets of Brazil, Russia and India.

PET has become the worlds preferred packaging material due to its unproperties of eco-friendly attribute & 100% recyclability. The osignificant properties of PET are rigidity and transparency, hygiestrength, lightness, durability, inertness, cost-effectiveness, attractive

and freshness-retention capability among others.As a result, the global PET resin demand is expected to grow at 7.8% oYoY basis (Source: SBA-CCI, May review 2013), driven by a growthpopulation, urbanisation, disposable incomes, FMCG sector and neapplications (beverages and pharmaceuticals). The US$24.6 billion stIndian packaging sector is expected to grow at a CAGR of 12.3% from 2012016.This spells good prospects for PET resin industry.

Tea Sector:Tea is one of the most popular lowest cost beverages in the world. global market for RTD (ready-to-drink) tea and coffee in terms of revenuexpected to reach US $125 billion by 2017 as against US $69 billion in 2(estimated) signaling an anticipated annual growth of 10.9 % from 201

2017. Indias tea industrys turnover is likely to touch `33,000 crore by 2according to ASSOCHAM.

Valuation & Recommendation Following the expansion, DPTL brings to this low cost structure the magscale, which it feels will make it possible for it to emerge more competand carve out larger shares of the global market over the foreseeable fut

DPILs plant in Haldia (West Bengal) is located in proximity to raw matesources, lowering logistic and inventory holding costs and, thereby, ovproduction costs. Further, DPILs capacity will double with commissioning of a 4,20,000 TPA (tonnes per annum) plant in Egypt (to mthe increasing global demand for PET).


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Sunidhi Research |

Sales to Europe and America from Egypt, Dhunseris key markets, expected in half the time resulting in savings in freight costs and efficworking capital management. The unit will also benefit from proximitraw material sources, availability of power at a cheaper rate and tax-status.

At the CMP of`119, the share is trading at a P/E of 5.0x on FY14E and on FY15E. We recommend BUY with a target price of `160 in the med

term at which the share will trade at a P/E of 5.3x on FY15E.

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While utmost care has been taken in preparing this report, we claim no responsibility for its accuracy. Recipients should not regard thereport as a substitute for the exercise of their own judgment. Any opinions expressed in this report are subject to change without any notice

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