SOLID Q1FY16 RESULTS

BUY

N E O C OR P I N T ER N AT I ON AL
FOR SIZABLE GAIN

Rating

Buy

CMP (`)

43

Target Price (`)

79

Upside (%)

84

Retail Desk

27 August 2015
Company Description:
Incorporated in 1985 as Neo Sack, NCIL was promoted by KS Trivedi, the present
chairman. NCIL manufactures HDPE/PP woven sacks, both laminated and
unlaminated, flexible intermediate bulk containers (FIBC) and fabrillated yarn. It
entered into a technical collaboration with Sungkwang Chemical Industrial
Company, Korea and came out with a `3.8-crore public issue in March'93 to
finance the project for FIBC and fabrillated yarn.

CORP.

Key Data
BSE Code
NSE Code
Reuters code
Bloomberg Code
Sensex
Face Value (`)
Mcap (` Cr.)
52 week H/L (`)
2 Wk Avg Qty
Share holding,
June15
Promoters
Foreign
Corporates
Public
Performance
(%)
3M
Stock-NCIL
72.0
BSE 200
-3.8
BSE 500
-3.6

526705
NEOCORP
NEOS.BO
NEO IN
26231
10
163
58/18
381000

Holding %
24.1
1.9
31.7
42.3

In 1994, it attained the Export House status. Nearly three decades of reliable
catering to the requirement of FIBC's, container liner, leno bag, geo textile,
ground cover, shade nets, hale nets, wind breakers and constructive cover from
fully integrated, clean room 30,000 square meter manufacturing facility. NCIL
has entered into other technical textile segments like Geotech and Agrotech.
Subsidiaries:
NCILs subsidiaries are Sacos Indigo Pvt Ltd; Europlast Ltd; Net flex Infracon Ltd;
Poly base (HK) Ltd; Polylogic International Pvt Ltd and Prism Flexible Solutions
Pvt Ltd.
Joint Venture:
For its long term strategic objectives, NCIL continued to give impetus towards
taking new business initiatives by formation of a new Joint Venture (JV) named
''Neo Ds Advanced Nonwovens Ltd''. The JV is controlled by Neo Corp and a
Belgium Based Company De Saedeleir Textile Platform (''DS'') with a plan to
venture into PET needle felt project. ''DS'' is one of the major European PET fibre
and needlefelt producers. Neo Corp is having 51% stake in the equity of the new
JV Neo Ds Advanced Nonwovens Ltd''.

LTD

Price Chart: (One-Year)

6M
16.2
-8.0
-7.7

12M
126.3
4.2
4.3

Q1FY16 & FY15 Results:

During Q1FY16, consolidated net profit has gone up by 50% to `14.4 crore on 67%
higher sales of `354 crore. Q1FY16 EPS is `3.8. OPM and NPM stood at 12.4% and
4.5% Vs 11.6% and 4.5% in Q1FY15. Q1FY16 EPS is `3.8.

(GMDV)

During FY15, net profit 50% to `45 crore on 147% higher sales of `57 crore. FY15
EPS is `11.8. OPM and NPM stood at 10.2% and 3.3% Vs 10.4% and 3.0% in Q1FY15.
Key Financial: (Consolidated)

Year-March

http:// www.neocorp.co.in
Vijay Dave
vijaydave@sunidhi.com
Ph: 91-22-6760 7700

Sales/OP Inc
PBIDT
Interest
PBDT
Depreciation
PBT
Tax
PAT
Equity
Reserves
Book Value (`)
EPS (`)
OP Margin (%)
NP Margin (%)
P/E

Q1FY16A

Q1FY15A

318.0
39.3
16.6
22.7
3.7
19.0
4.6
14.4

211.7
24.6
10.3
14.3
2.3
12.0
2.4
9.6

3.8
12.4
4.5

2.5
11.6
4.5

FY14A

984.1
102.0
42.3
59.7
9.7
50.0
20.0
30.0
37.8
245.3
74.9
7.9
10.4
3.0

(` crore)
FY15A

FY16E

FY17E

1357.2
138.6
63.4
75.2
14.0
61.2
16.2
45.0
37.8
288.8
86.4
11.8
10.2
3.3
3.6

1560.0
191.9
68.0
123.9
18.5
105.4
37.6
67.8
37.8
356.6
104.3
17.9
12.3
4.3
2.4

1720.0
206.4
70.0
136.4
20.0
116.4
37.4
79.0
37.8
435.6
125.2
20.9
12.0
4.6
2.1

Neo Corp International

Financial

Equity capital is `37.8 crore. With reserves of `289 crore, the book value of
the share works out to `86. The debts of `422 crore give the DER o 1.3:1.
The value of the gross block is `300 crore. Long term loans given, cash and
other current assets value is `163 crore (`43/share).

Industrial & Consumer Packaging

Manufactured with state of the art manufacturing facilities, our wide range
of PACKTECH products provide cost effective solutions for storage carriage
and protection requirements of industrial, agricultural and their goods.
Packaging is an ideal and long established application for textiles.
The Packtech application area includes all textiles used for the temporary
containment, carriage, storage and protection of industrial, agricultural and
other goods. It ranges from relatively heavyweight woven fabrics used for
bags, sacks, FIBCs, wrappings for textile bales and carpets etc. to
lightweight woven used as Leno bags and other food and industrial product
wrappings.

Agro Net

Manufactured from state of the art technology, Suraksha nets have wide
range of applications for in Agrotech sector. Agro net applications include all
activities concerned with the growing and harvesting of crops and animals.
The principal function of most of /Agro nets relates to the protection of food
produce, animals or land. End-uses range from crop production (cereals,
cotton, tobacco, etc), through forestry and horticulture (fruits, vegetables,
trees and flowers), to animal and poultry rearing and fishing.

GeoTextiles

NCIL has Geotextiles fabrics having wide range of end-uses in

pavements/roads/railroad beds/airfields, retaining wall earth embankment,
concrete
revetment,
drain
construction
waterways,
coastal
engineering/defense, landfill, industrial and contaminated land reclamation.
With state of the art weaving technology and strict quality control, NCIL
ensures that the fabrics comply with the high requirements of customers.
Applications include reinforcing areas of weak subsoil and distribute the
applied load across a wider area, providing a means to maintain the
separation of subgrade from clean base aggregate, filtering water passing
through the ground without losing any excess of fine subsoil and to improve
the performance of drainage systems, and in many instances reduce the
need for using graded aggregate.

Prospects

Global Scenario:
Technical Textile is the sunrise segment of the global Textile industry. With
increasing competition and diminishing margins in the production of
conventional textiles, textile manufacturers in industrialized countries have
switched over to production of value-added technical textiles. As the use of
technical textiles is dictated by need, its pricing normally offers good
margins.
The technical textile industry is estimated to account for over 50% of the
total textile activity in certain industrialized countries. While the US
continues to be the main manufacturers and consumers of functional
textiles, China has emerged as a large manufacturer of the same. India and
Russia are the other important markets for technical textiles, where
consumption is increasing at a fast pace.
Indian Scenario:
India is emerging as a significant player in technical textiles. The fast- paced
economic growth leading to infrastructure creation as well as higher
disposable income has made India a key market for the technical textile
products. Moreover, the country has developed a foothold in the production
of technical textiles. Considering its highly skilled and scientific/technical
manpower and abundant availability of raw materials, India can emerge as a
key player in the technical textiles industry.

Sunidhi Research |

Neo Corp International

Indian textile industry involves around35million workers directly and
accounts for 21% of the total employment generated in the economy, the
second largest provider of employment after agriculture. Thus, Technical
textiles holds significant potential in India and the government has already
taken steps to promote this industry. Indian technical textile market is
nascent and is quite honestly depending on government's push and
mandatory regulations to penetrate into different sectors. The market for
technical textiles is expected to cross 1.5 lakh crore by 2016-17. The strong
interest in the segment is driven by better profit margins and less
competition.
Outlook

As the barriers of the trade have come down, strong market like India has
become cynosure of the industries worldwide. To encash these
opportunities, NCIL endeavors to reinvent itself with planned capital
investment and management culture. NCIL is renewing its customer
relationship by providing value added solution. Efforts are made to embrace
information technology in the quest of efficient and faster processes
throughout the demand and supply chain. NCIL is also balancing the growth
aspiration with social concerns for sustainable growth and environment
friendliness.

Valuation & Recommendation

The success of technical textiles is primarily due to the creativity, innovation

and versatility in fibres, yarns and woven/ knitted/nonwoven fabrics with
applications spanning an enormous range of uses. The ability of technical
textiles to combine with each other and with others to create a new
functional products offer unlimited opportunity to growth. The production of
different items of technical textile industry has been slowly but steadily
increasing in the country which is further contributing in the growth of the
industry as a whole.
At the CMP of `43, the share is trading at a P/E of 2.4x on FY16E & 2.0x on
FY17E. We recommend BUY with a target price of `79 at which, the share
will trade at a P/E of 3.8x on FY17E.

Key Risk & Mitigation

Sunidhi Research |

The nature of companys business warrants that various risks including

pricing pressure and competition from other countries have to be confronted
and overcome to successfully exist in the said business and to grow at a
respectable pace.

Neo Corp International

Sunidhi Securities & Finance Ltd.

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