HALDYN GLASS GUJARAT LTD

Result Update: Q4 FY 12

C.M.P: Target Price: Date:

Rs. 15.95 Rs. 18.00 June 14th, 2012

BUY
SYNOPSIS

Stock Data: Sector: Face Value Rs. 52 wk. High/Low (Rs.) Volume (2 wk. Avg.) BSE Code Market Cap (Rs.In mn)
Containers& Packaging

1.00 17.50/10.02 99448.00 515147 857.31

We initiated coverage of HALDYN GLASS GUJARAT Ltd and set a target price of Rs.18.00 for Medium term investment. HALDYN GLASS GUJARAT LTD manufactures a very wide variety of glass bottles and containers of different sizes and volume. During the quarter ended, the Net profit of the company increased to Rs.80.95 millions and registering a growth of 191.50%.

Share Holding Pattern

1 Year Comparative Graph

The company has recommended a Dividend of Rs. 0.75 per equity Share of Re. 1 each (75%) for the year ended March 31, 2012. Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 29% over 2011 to 2014E respectively.

BSE SENSEX

HADYN GLASS GUJARAT

Years FY 12 FY 13E FY 14E

Net sales (Rs.Mn) 1769.19 2034.57 2278.72

EBITDA (Rs.Mn) 456.77 529.21 599.54

Net Profit (Rs.Mn) 242.55 291.88 336.58

EPS (Rs.) 4.51 5.43 6.26

P/E 3.53 2.94 2.55

Peer Group Comparison

Name of the company Haldyn Glass Gujarat Piramal Glass La Opala RG Uflex CMP(Rs.) 15.95 105.10 106.20 102.30 Market Cap. (Rs.Mn.) 857.31 8504.30 1125.50 7423.30 EPS(Rs.) 4.51 9.67 11.89 19.87 P/E(x) 3.53 10.87 8.93 5.17 P/Bv(x) 1.10 1.65 1.94 0.57 Dividend (%) 25.00 35.00 15.00 75.00

Investment Highlights

Q4 FY12 Results Update Haldyn Glass Gujarat Ltd disclosed a phenomenon rise in standalone net profit for the quarter ended March 2012. During the quarter, the profit of the company surged 191.50% to Rs 80.95 million from Rs 27.77 million in the same quarter previous year. Net sales for the quarter rose 24.66% to Rs 510.36 million from Rs 409.41 million, when compared with the prior year period. It reported earnings of Rs 1.51 a share during the quarter, registering 191.50% increase over previous year period.

Quarterly Results - standalone (Rs in mn)

As At Net sales PAT Basic EPS

Mar-12 510.36 80.95 1.51

Mar-11 409.41 27.77 0.52

%change 24.66% 191.50% 191.50%

Break up of Expenditure

Recommends Dividend Haldyn Glass Ltd has recommended a Dividend of Rs. 0.75 per equity Share of Re. 1 each (75%) for the year ended March 31, 2012.

Company Profile
Haldyn Glass Gujarat Limited (H.G.G.L) incorporated in 1991, promoted by Haldyn Glass Limited in the state of Gujarat, India. Haldyn Glass Limited is a closely held company engaged in manufacture of Soda Lime Flint & Amber Glass containers since 1964. The company creates new design and shapes of bottles to give cutting-edge advantage to the products of our esteemed clients of food, pharmaceutical, beverages and liquor industries. Company try to produce most sophisticated and ahead of times designs to suit the quality standard of its clients. HGGL a listed company at Mumbai Stock Exchange, currently has total melting capacity 320 tons per day. The two Glass Melting Furnaces capable of producing (220 + 100) tons per day on 10 I.S. machines give them leverage over the competition in

manufacturing a wider range of containers from 10 ml to 1000 ml. The I.S. machines installed at the modern plant are capable of producing 1.5 million high quality containers every day to their discerning customers which are supplied at a very short lead time. Containers manufactured by the company go through various stages of stringent quality tests. The Company is re-accredited for Quality Management System ISO 9001: 2008 certification and for Environment Management System ISO 14001: 2004 certification.

Products Vials Pharmaceutical industry use these Clear glass Vials of various shapes and sizes to package injectibles, eye-drops, ear-drops and other life saving drugs. Liquor Liquor manufacturing industry use these bottles with capacities ranging from 60ml to 1000 ml in various shapes and sizes for packaging Whisky, Gin, Brandy, Vodka and other liquor products. Industry uses these bottles with capacities ranging from 60ml to 1000ml in various shapes. Cosmetics Cosmetics industry uses these clear bottles for packaging products like nailpolish, perfumes, hair oil and toiletries that look vibrant in different colours. Industry uses these bottles with capacities ranging from 60ml to 1000ml in various shapes. Food and Beverages Food and Beverages industry uses these bottles to package consumable products. The clear transparency of the Bottles gives shelf appeal to the products. Industry uses these bottles with capacities ranging from 60ml to 1000ml in various shapes.

Clients Local clients United Spirits Limited Pernod Ricard Tilaknagar Industries Amul Bajaj Consumer Care Champagne Indage Fosbel Sarabhai Zydus Denischem Khemani Distilleries Shiva Distilleries Empee Distileries

Export (International) Mohd Ali - Yemen Dabur - Dubai Bentos Pharma - Nigeria Saga Concept - Beirut Al-Maya Dubai Weikfield International Dubai

Financials Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Equity capital Reserves Face value EPS

FY11 12m 1563.04 0.12 1563.16 -1221.20 341.96 -46.53 295.43 -98.62 196.81 -38.30 158.51 53.75 528.02 1.00 2.95

FY12 12m 1769.19 0.20 1769.39 -1312.62 456.77 -36.34 420.43 -82.27 338.16 -95.61 242.55 53.75 723.72 1.00 4.51

FY13E 12m 2034.57 0.22 2034.79 -1505.58 529.21 -32.71 496.50 -88.85 407.65 -115.77 291.88 53.75 1015.60 1.00 5.43

FY14E 12m 2278.72 0.24 2278.96 -1679.41 599.54 -34.34 565.20 -97.74 467.47 -130.89 336.58 53.75 1352.17 1.00 6.26

Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) Description Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Equity capital Face value EPS

30-Sep-11 3m 415.28 0.00 415.28 -317.27 98.01 -9.60 88.41 -20.94 67.47 -16.58 50.89 53.75 1.00 0.95

31-Dec-11 3m 463.22 0.00 463.22 -342.87 120.35 -8.32 112.03 -20.63 91.40 -29.53 61.87 53.75 1.00 1.15

31-Mar-12 3m 510.36 0.11 510.47 -370.14 140.33 -6.86 133.47 -20.24 113.23 -32.28 80.95 53.75 1.00 1.51

30-Jun-12E 3m 525.67 0.00 525.67 -392.15 133.52 -7.20 126.32 -21.25 105.07 -29.63 75.44 53.75 1.00 1.40

Key Ratios
Particulars No. of Shares(in mn) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV FY11 53.75 21.88% 12.59% 10.14% 5.41 27.25% 48.14% 0.57 2.51 10.82 1.47 FY12 53.75 25.82% 19.11% 13.71% 3.53 31.20% 47.81% 0.45 1.88 14.46 1.10 FY13E 53.75 26.01% 20.04% 14.35% 2.94 27.29% 43.01% 0.34 1.62 19.89 0.80 FY14E 53.75 26.31% 20.51% 14.77% 2.55 23.94% 38.91% 0.27 1.43 26.16 0.61

Charts: Net Profit & PAT

P/E Ratio (X)

Debt Equity Ratio

EV/EBITDA(X)

P/BV Ratio

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Outlook and Conclusion

At the current market price of Rs.15.25, the stock is trading at 2.94 x FY13E and 2.55 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.5.43 and Rs.6.26 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 29% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 1.62 x for FY13E and 1.43 x for FY14E. Price to Book Value of the stock is expected to be at 0.80 x and 0.61 x respectively for FY13E and FY14E. 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.18.00 for Medium to Long term investment.

Industry Overview
Indian glass packaging industry is poised to grow at 12 - 15% compounded annual growth rate [CAGR]. It is buoyant due to the growth shown by its user industries especially the liquor sector, which is projected to sustain 12% CAGR on account of changing lifestyles and rise in disposable incomes. 65% of the Indian demand for glass bottles arises from Southern & Western Indian regions. The Indian Pharmaceutical domestic market is currently growing at CAGR of 12 - 15%. The retail food sector in India is expected to double by 2025 on account of a growing health consciousness resulting in the increased use of glass packaging. In India, 10-12% of all food and beverages are packed in glass containers as against 40-50% in developed economics. Beverages and processed food industries are expected to have 14-15% CAGR. The demand for Glass Containers is expected to increase driven by growing consumer awareness about health and hygiene and eco friendly products.

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The global glass packaging industry is about $30 bn in size and out of this $28 bn is the moulded glass industry. It can be further divided into Cosmetics and Perfumery (8.2%), Pharma (7.1%) and Specialty F&B (4.6%). Balance 80% is Food and Beverages. PGL is present in the niche high value added flacconage segment and thus it has an addressable market of 20% of the total market size. The Indian glass industry is pegged at $2.7 billion. Glass consumption growth is expected in construction (9 per cent), automotive (19 per cent), consumer goods (10-12 per cent) and pharmaceuticals (12-15 per cent) sectors. As per industry sources, the Indian packaging industry was valued at around $14 bn in the year 2009 and it registered a growth rate of more than 15% annually in the last few years. Within the packaging industry, glass containers occupy an important position with a share of ~9%. Despite the development of other packaging alternatives, glass, being chemically inert and transparent, is most suitable for liquor, pharmaceutical, life-saving drugs and food articles. The market for glass containers in India has been growing at more than 10% during the last few years. Despite this growth, Indias per capita consumption of glass

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containers is low at 1.5 kg as against 4.9 kg in Brazil, 5.8 kg in China and 27.6 kg in the US, highlighting the untapped potential of the Indian glass container market. The demand for glass containers is driven by growth in end user segments such as liquor, beer, pharmaceuticals, and food processing and carbonated drinks. The liquor and beer industries are the major users of glass containers, accounting for around 60% of Indias glass container production. This is followed by pharmaceuticals with 20% share, food with 10% share, carbonated drinks with 5% share and remaining 5% for cosmetics & others. The glass packaging industry is facing various substitutes like flexible packaging laminates, paper and board, plastic containers, and aluminum cans. Bottled drinks are increasingly being sold in aluminum cans and Polyethylene Terephthalete (PET) bottles primarily due to the fragility and weight of glass. Also, it is cost-effective for manufacturers as PET bottles of smaller sizes are cheaper compared to glass. However, given certain inherent advantages and characteristics of glass it still remains the most suitable packing medium for C&P, liquor, pharmaceuticals, life-saving drugs and food articles. Glass is the only packaging material for foods and beverages that is chemically inert. It provides a barrier to oxygen and moisture, protecting a products taste and shielding it for a longer duration than other packaging materials.

Investments
Major players in the glass industry have lined up investments worth Rs 7,000 crore for capacity expansion and new technologies over the next 2-3 years. The industry, growing in double digits, will see a two-fold rise in investment as against the last 3-4 years on the back of increase in consumption, Mukul Somany, president, All India Glass Manufacturers Federation, said. According to him, Hindusthan National Glass & Industries Ltd (HNG) has earmarked Rs 1,500 crore for adding 1,000 tonne per day to its existing capacity of 3,000 tpd,

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over the next 12-18 months. For this, it would set up a new plant at Naidupeta in Andhra Pradesh and expand capacity of its Nasik plant. City-based AGI Glaspac will also invest Rs 600 crore to double its capacity at its Bhongir plant here to 900 tpd by January 2012, company president Arun Kumar Dukkipati said. The per capita glass consumption in India is 1.2 kg, compared with 8-9 kg in developed countries and 30-35 kg in the US. The flat glass market, at present, stands at 4,500 tpd and is growing at 16 per cent year-on-year while the container glass is at 7,000 tpd and contributes 55-60 per cent to the overall glass market. Other glass (lighting, bangles, and beads) market is at 1,500 tpd. Around 1.3 pounds waste is generated per person per day in India, whereas it is 4.6 pounds in the US. The glass recycling was very high in developed countries at 70-80 per cent. In Denmark, 98 per cent of bottles are refillable and 98 per cent of those are returned to consumers. However, in India, only 40-45 per cent of the finished products come for recycling and the rest goes for land filing.

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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 its 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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Firstcall India Equity Research: Email info@firstcallindia.com C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods k.jagadhishwari Devi Diversified H.Lavanya Oil & Gas Ashish.Kushwaha Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPOs, QIPs, F.P.Os,Takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-Capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071 Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089 E-mail: info@firstcallindiaequity.com www.firstcallindiaequity.com

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