Essel Propack Limited—Buy—38—INR
Sector — Packaging
Regd.Off. — Vasind P.O., Sahapur Taluka, Thane - 421604
Company overview—
Essel Propack Limited was incorporated in year 1982 is one of the largest manufacturers of laminated tubes in the world. Company is a part of the Essel Group, whose other interests include satellite communication, amusement parks. The company was started in technical collaboration with American National Can Company of US, Karl Magerle Kusnacht of Switzerland, and Kaito Chemicals of Japan. The company supplies tubes for toothpastes, cosmetics, pharmaceutical products, grease, adhesives and almost all segments of the packaging industry. Essel supplies the basic laminate or the web to its operations in Nepal, Egypt and China. Apart from this export revenue company also get royalty income of the sales and dividend from its overseas ventures. The laminated tubes manufacturing major is also looking at capacity expansion in its existing units in China, Egypt and Latin America, with an estimated investment of about $10 million. In the overseas operations the focus is going to be on the cosmetics and the oral care segment, so as to achieve critical mass. Company sees huge potential for laminated tube packaging in the pharmaceutical sector.
Products & services—
Essel Propack has state-of-the-art manufacturing facilities in 15 countries through 25 plants. Packaging products in a laminated tube gives it that competitive edge in the marketplace. Any product that requires attractive, safe and hygienic packaging can be packed in a laminated tube. Laminated tubes find applications in Toothpastes, Cosmetics & Toiletries, Pharmaceuticals, Food & Diary Products, Industrial Products and other products. In terms of growth engine, Company has got several successes in new segments such as cosmetics and pharmaceuticals. Company generates around 90% of its turnover from FMCG sector and 10% from pharmaceutical products.
Coextruded Seamless Tubes: Co-extruded seamless tubes make product stand out on a shelf and enhance its personality as a premium product.
Speciality Laminates and Webs for Laminated Tubes: Essel offers a wide range of laminates for several applications. Continuous innovation has enabled Essel to develop laminates that enable efficient running of tube making lines. The quality and performance of these laminates are top-notch.
Company plants are highly automated with the best technological machinery and systems available anywhere in the world. Company has put in place, two teams at its Technological Innovation Center. While one team focus on new products, the second works on process management. Primarily involved in developing new and improved products for customers, the first team works in close co-ordination with customers to enhance the product by experimenting with the various specifications associated with it. The second team works more with the existing product range. This team monitors machine efficiencies in all the manufacturing units and provides suitable recommendations. Together, the teams combine efforts with the marketing arm of the organization. Company also upgrades its testing facilities constantly to maintain its position at the frontier of technology.
China will be the major contributor in terms of volumes growth in future. Company has considerably enhanced its capacity in China. Except China, Western Europe and eastern European will be future growth drivers. Company has a manufacturing plant in US, East Germany, well positioned to serve western and Eastern Europe.
Recent Developments—
Essel Propack in april announced an acquisition of US based company Catheter & Disposables Technology (CDT), a supplier of specialized disposables medical devices. EPL has acquired 100% equity of CDT in an all cash deal through its US subsidiary, Tacpro. The buyout of CDT is in line with EPL’s strategic expansion plan, and will enable its medical business to establish and expand operations in Minnesota, the second largest medical device manufacturing region in USA.
Essel Propack and Ess Dee Aluminium, have joined a global race to acquire the packaging unit of Rio Tinto Alcan in april. The mining-to-metals major said it would sell the USD 5 billion packaging business as part of a move to focus on core areas. The joint bid is also being planned so that the two companies may split Rio Tinto’s unit subsequently, to merge with their own areas of operations. Morgan Stanley, the financial advisor to Rio Tinto, had suggested dividing the packaging unit to make it easier for interested companies and private equity firms to bid. Buyers could more likely be keen if the packaging division is broken up and offered for sale as smaller entities, the advisor is reported to have indicated. While sales of USD 5 billion or Rs 200 billion, is too big for any single company to acquire on its own. The packaging unit is the only section that has been immediately identified to be sold, while its bauxite, alumina, primary metal and engineered products divisions will all be absorbed into Rio Tinto.
Essel Propack (EPL) september, announced an acquisition of Minneapolis (US), based company Medical Engineering & Design (MED), a supplier of specialized disposable Medical Devices. EPL has acquired 74% equity of MED in an all cash deal through its US subsidiary - Tacpro. The rest will continued to be held by the existing promoter employees. MED has a diversified customer base with the provision of high quality medical device manufacturing services and reliable, on-time delivery of manufactured products. MED is supplier of custom products to the global medical device industry and delivers proven and effective solutions to catheter, extrusion and braid reinforced tubing needs of customers. The company is vertically integrated with its own in site extrusion, wire braiding, reflowing and assembly resulting in significant cost competitiveness and lead time savings to its customer.
Valuation—
Company is on expansion drive, it is looking for more acquisitions in international markets. At current market price, stock is trading at attractive valuation of 14.87 P/E multiple of its FY2010 estimated earnings par share. We recommend investors to “BUY” “Essel Propack Ltd” with medium to long-term investment prospective.
Source: Internet (Valuenotes by Abhishek Jain)
Sector — Packaging
Regd.Off. — Vasind P.O., Sahapur Taluka, Thane - 421604
Company overview—
Essel Propack Limited was incorporated in year 1982 is one of the largest manufacturers of laminated tubes in the world. Company is a part of the Essel Group, whose other interests include satellite communication, amusement parks. The company was started in technical collaboration with American National Can Company of US, Karl Magerle Kusnacht of Switzerland, and Kaito Chemicals of Japan. The company supplies tubes for toothpastes, cosmetics, pharmaceutical products, grease, adhesives and almost all segments of the packaging industry. Essel supplies the basic laminate or the web to its operations in Nepal, Egypt and China. Apart from this export revenue company also get royalty income of the sales and dividend from its overseas ventures. The laminated tubes manufacturing major is also looking at capacity expansion in its existing units in China, Egypt and Latin America, with an estimated investment of about $10 million. In the overseas operations the focus is going to be on the cosmetics and the oral care segment, so as to achieve critical mass. Company sees huge potential for laminated tube packaging in the pharmaceutical sector.
Products & services—
Essel Propack has state-of-the-art manufacturing facilities in 15 countries through 25 plants. Packaging products in a laminated tube gives it that competitive edge in the marketplace. Any product that requires attractive, safe and hygienic packaging can be packed in a laminated tube. Laminated tubes find applications in Toothpastes, Cosmetics & Toiletries, Pharmaceuticals, Food & Diary Products, Industrial Products and other products. In terms of growth engine, Company has got several successes in new segments such as cosmetics and pharmaceuticals. Company generates around 90% of its turnover from FMCG sector and 10% from pharmaceutical products.
Coextruded Seamless Tubes: Co-extruded seamless tubes make product stand out on a shelf and enhance its personality as a premium product.
Speciality Laminates and Webs for Laminated Tubes: Essel offers a wide range of laminates for several applications. Continuous innovation has enabled Essel to develop laminates that enable efficient running of tube making lines. The quality and performance of these laminates are top-notch.
Company plants are highly automated with the best technological machinery and systems available anywhere in the world. Company has put in place, two teams at its Technological Innovation Center. While one team focus on new products, the second works on process management. Primarily involved in developing new and improved products for customers, the first team works in close co-ordination with customers to enhance the product by experimenting with the various specifications associated with it. The second team works more with the existing product range. This team monitors machine efficiencies in all the manufacturing units and provides suitable recommendations. Together, the teams combine efforts with the marketing arm of the organization. Company also upgrades its testing facilities constantly to maintain its position at the frontier of technology.
China will be the major contributor in terms of volumes growth in future. Company has considerably enhanced its capacity in China. Except China, Western Europe and eastern European will be future growth drivers. Company has a manufacturing plant in US, East Germany, well positioned to serve western and Eastern Europe.
Recent Developments—
Essel Propack in april announced an acquisition of US based company Catheter & Disposables Technology (CDT), a supplier of specialized disposables medical devices. EPL has acquired 100% equity of CDT in an all cash deal through its US subsidiary, Tacpro. The buyout of CDT is in line with EPL’s strategic expansion plan, and will enable its medical business to establish and expand operations in Minnesota, the second largest medical device manufacturing region in USA.
Essel Propack and Ess Dee Aluminium, have joined a global race to acquire the packaging unit of Rio Tinto Alcan in april. The mining-to-metals major said it would sell the USD 5 billion packaging business as part of a move to focus on core areas. The joint bid is also being planned so that the two companies may split Rio Tinto’s unit subsequently, to merge with their own areas of operations. Morgan Stanley, the financial advisor to Rio Tinto, had suggested dividing the packaging unit to make it easier for interested companies and private equity firms to bid. Buyers could more likely be keen if the packaging division is broken up and offered for sale as smaller entities, the advisor is reported to have indicated. While sales of USD 5 billion or Rs 200 billion, is too big for any single company to acquire on its own. The packaging unit is the only section that has been immediately identified to be sold, while its bauxite, alumina, primary metal and engineered products divisions will all be absorbed into Rio Tinto.
Essel Propack (EPL) september, announced an acquisition of Minneapolis (US), based company Medical Engineering & Design (MED), a supplier of specialized disposable Medical Devices. EPL has acquired 74% equity of MED in an all cash deal through its US subsidiary - Tacpro. The rest will continued to be held by the existing promoter employees. MED has a diversified customer base with the provision of high quality medical device manufacturing services and reliable, on-time delivery of manufactured products. MED is supplier of custom products to the global medical device industry and delivers proven and effective solutions to catheter, extrusion and braid reinforced tubing needs of customers. The company is vertically integrated with its own in site extrusion, wire braiding, reflowing and assembly resulting in significant cost competitiveness and lead time savings to its customer.
Valuation—
Company is on expansion drive, it is looking for more acquisitions in international markets. At current market price, stock is trading at attractive valuation of 14.87 P/E multiple of its FY2010 estimated earnings par share. We recommend investors to “BUY” “Essel Propack Ltd” with medium to long-term investment prospective.
Source: Internet (Valuenotes by Abhishek Jain)
