crisil research ier report dhunseri 2013
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CRISILIERIndependentEquityResearch
Enhancing investment decisions
Dhunseri Petrochemand Tea Ltd
Reinitiating Coverage
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Explanation of CRISIL Fundamental and Valuation (CFV) matrix
The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis
of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a
five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a five-
point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).
CRISILFundamental Grade Assessment
CRISILValuation Grade Assessment
5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)
4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)
3/5 Good fundamentals 3/5 Align (+-10% from CMP)
2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)
1/5 Poor fundamentals 1/5 Strong downside (
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Dhunseri Petrochem and Tea LtdCapacity-based expansion to drive growth
Fundamental Grade 3/5 (Good fundamentals)
Valuation Grade 5/5 (CMP has strong upside)
Industry Chemicals
1
December 17, 2013
Fair Value 187
CMP 110
For detailed initiating coverage report please visit: www.ier.co.in
CRISIL Independent Equity Research reports are also available on Bloomberg (CRI ) and Thomson Reuters.
Dhunseri Petrochem and Tea Ltd (Dhunseri), a dominant PET (polyethylene terephthalate)
player in India, is well prepared to cater to the growing demand for PET following doubling ofits capacity. Its upcoming greenfield plant in Egypt would offer locational advantage due to
proximity to end markets and raw material sources; it derives similar benefits from its Haldia
plant. Dhunseri stands to gain from the increase in demand for PET due to varied
applications of PET and strong growth in the end-user industries. However, the current over-
supply scenario and pressure on PET spreads are likely to continue over the next few years.
We reassign the fundamental grade of 3/5.
Locational advantage in Haldia gives edge; Egypt plant to strengthen its size and scaleDhunseris plant in Haldia (West Bengal) is located in proximity to raw material sources,
lowering logistic and inventory holding costs and, thereby, overall production costs. Further,
Dhunseris capacity will double with the commissioning of a 420,000 TPA (tonnes per annum)
plant in Egypt (to meet the increasing global demand for PET). Sales to Europe and America
from Egypt, Dhunseris key markets, are expected in half the time resulting in savings in
freight costs and efficient working capital management. The unit will also benefit from
proximity to raw material sources, availability of power at a cheaper rate and tax-free status.
Stands to gain from healthy growth in demand for PETDhunseri, being a dominant domestic player, is expected to benefit from strong demand from
end-user industries such as FMCG, beverages and pharma. Also, preference for PET as a
packaging material has increased due to its unique qualities eco-friendly, cost-effective and
recyclable. Domestic PET demand clocked ~30% CAGR during FY07-12. Global PET
demand is expected to grow at a CAGR of 5-6% over the next five years. PET spreads have
been weak due to over-supply; spreads are currently in the range of US$120-160 per tonne
compared to the five-year average of US$180-200 per tonne. We expect an improvement in
the long run with supply rationalisation of PET and PTA globally and pick-up in demand.
Key risks: Cyclical spreads, forex risk and political instability in EgyptThe spreads of PET resins are cyclical as is with all commodity businesses. The companys
imports and foreign loan transactions are un-hedged; any adverse movement in exchange
rates could adversely impact its profitability since its exposure is not entirely hedged byexports. Further, continuous social unrest and political instability in Egypt have delayed
project completion; continuous instability may pose a threat to the smooth functioning of
Dhunseris operations.
Revenues estimated to grow to 67.5 bn, EBITDA margin to improve in FY15We expect revenues to grow at a two-year CAGR of 66% to 67.5 bn in FY15, of which
29 bn is estimated to be contributed by the Egypt plant. EBITDA margin is estimated to
improve in FY15 driven by improvement in the PET spreads. Gearing is expected to be 2.0x
in FY15.
Valuations: Current market price has strong upsideWe have used the discounted cash flow method to value Dhunseri and arrived at a fair value
of 187 per share; at the CMP of 110, the valuation grade is 5/5.
KEY FORECAST
(mn) FY11 FY12 FY13 FY14E FY15E
Operating income 16,593 19,820 24,411 40,818 67,552
EBITDA 2,679 1,467 1,547 3,054 4,906
Adj net income 1,829 310 629 1,239 1,758
Adj EPS () 52.2 8.8 18.0 35.4 50.2
EPS growth (%) 63.8 (80.0) 323.0 23.3 41.9
Dividend yield (%) 3.5 5.2 5.2 7.1 9.0
RoCE (%) 22.5 8.2 5.1 7.8 11.6
RoE (%) 28.2 4.24 7.9 13.9 17.3
PE (x) 2.9 11.3 5.6 2.8 2.0
P/BV (x) 0.7 0.5 0.4 0.4 0.3
EV/EBITDA (x) 2.4 5.3 14.1 8.0 5.0
NM: Not meaningful; CMP: Current market price
Source: Company, CRISIL Research estimates
CFV MATRIX
KEY STOCK STATISTICSNIFTY/SENSEX 6155/20660
NSE/BSE ticker DPTL
Face value (per share) 10
Shares outstanding (mn) 35
Market cap (mn)/(US$ mn) 3,864/63
Enterprise value (mn)/(US$ mn) 21,840/354
52-week range ()/(H/L) 127/72
Beta 0.7
Free float (%) 32.7%
Avg daily volumes (30-days) 10414
Avg daily value (30-days) (mn) 1.0
SHAREHOLDING PATTERN
PERFORMANCE VIS--VIS MARKET
Returns
1-m 3-m 6-m 12-m
Dhunseri 13% 37% 18.3% -4%
CNX500 2% 7% 5% 1%
ANALYTICAL CONTACTMohit Modi (Director) mohit.modi@crisil.com
Gaurav Samota gaurav.samota@crisil.com
Vishal Rampuria vishal.rampuria@crisil.com
Client servicing desk
+91 22 3342 3561 clientservicing@crisil.com
1 2 3 4 5
1
2
3
4
5
Valuation Grade
FundamentalGrade
PoorFundamentals
ExcellentFundamentals
Strong
Dow
nside
Str
ong
Upside
67.1% 67.2% 67.2% 67.3%
8.7% 8.7% 8.7% 8.7%
24.2% 24.1% 24.1% 24.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec-12 Mar-13 Jun-13 Sep-13
Promoter FII DII Others
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Table 1: Dhunseri - Business environment
Parameter
PET and tea
PET (India plant) PET (Egypt plant) Tea business
Revenue contribution(FY13)92% - 8%
Revenue contribution
(FY15E)54% 42% 4%
Product offering Bottle grade PET resin Bottle grade PET resin The company mainly grows/processes
CTC (crush, tear and curl) tea, packet tea
and a small percentage of orthodox tea
Geographic presence Domestic market and 50 countries
across the globe
Mainly exports to Europe and America
Exports accounted for 45% of sales
revenues in FY13
Domestic market (Egypt)
Exports to Europe,America, the Middle-East
and Africa
The Indian tea business caters only to the
domestic market. The Malawi tea business
will cater largely to export markets
Market position Became the largest domestic player following capacity expansion in Haldia.
Will be one of the top global PET manufacturers after commissioning of
Egypt capacity
Currently produces 1% of the overall
tea produced in India, which is a
highly fragmented market
Cater to the international markets
through two Malawi acquisitions
Is the market leader in Rajasthan
Industry growth
expectations
Domestic demand is expected to grow
at 15-18% over the next three years
Global PET demand is expected topost a CAGR of 5-6% over the next
five years
Global PET demand isexpected to log a CAGR of
5-6% over the next five
years
Tea consumption is expected to growmoderately at 2.2% over the next five
years
Production is expected to be at the
same level
Sales growth
(FY11-FY13 2-yr CAGR)24% - 16%
Sales forecast(FY13-FY15E 2-yr CAGR)
28% Revenues of 29 bn estimatedin FY15
21%*
Demand drivers Growing packaging industry and increasing applications
Superior product characteristics of PET
Rising population and growing
preference for tea
Affordability, increasing healthawareness associated with tea
consumption and emergence of new
variants
Margin drivers Robust demand growth, shift from fueloil to coal-based plant
Close proximity to ports leading tolower logistics cost
Cyclicality in industry being a
commodity business
Over-supply of PET globally to put
pressure on margins
Proximity to end-usermarkets and raw materials.
Power available at cheaper
rates
Tax-free zone
Focus on improving efficiencies,increase in yield per hectare by
replacing old plants
Key competitors Reliance Industries Ltd and JBF Industries
Ltd
Indorama Ventures, M&G,
DAK and other global players
Assam Tea, McLeod Russell, Jayshree
Tea, Goodricke Group and Warren Tea
Key risks Continuous social unrest and political instability in Egypt
Foreign exchange fluctuation
Dependent on a single supplier for its key raw material supply in the PET business
Tea business is labour sensitive; labour cost accounts for about 25% of net sales
*FY13 figures include Malawi acquisition number for four months.
Source: Company, CRISIL Research
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Dhunseri Petrochem and Tea Ltd
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Grading Rationale
Dominant domestic player in PET resins based on capacity
Dhunseri became a dominant domestic PET resin manufacturer with the capacity to produce
410,000 TPA following the capacity expansion in Haldia in November 2012, thereby enjoying
economies of scale which are key to any commodity business. Plant I reported capacity
utilisation of 107% whereas plant II, commissioned in November 2012, achieved 100%
utilisation in the last quarter of FY13. The companys PET resin sales increased by 23% from
17.86 bn in FY12 to 21.92 bn in FY13 largely driven by volume growth, which increased by
21.8% on account of commissioning of plant II in Haldia. Domest ic sales volume accounted for
55% of total PET sales and the rest was exported to around 50 countries.
Figure 1: Collective domestic PET capacity = 9,62,000 TPA in FY13
Source: Industry, CRISIL Research
Table 2: Project expansion details
India (plant II) Egypt
Location Haldia Ain Sukhna
Capacity in TPA 210,000 420,000
Technology Oerlikon Barmag, Germany Oerlikon Barmag, Germany
Company Parent Subsidiary
Holding (%) 100 70
Capex 4.7 bn US$169 mn (8.9 bn)
Capex/tonne 22,380 21,200
Debt (%) 66.7 70
Construction started November 2010 June 2011
Commissioned\expected commissioning Commissioned in November 2012 Plant I January 2014
Plant II March 2014 (six-month delay)
Note:Exchange rate 1US$ = 53
Source: Company, CRISIL Research
Dhunseri43%
RelianceIndustries35%
JBF Industries15%
Futura
7%
Became dominant domesticplayer in PET resins with
commissioning of plant II in
Haldia
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Capacity expansion to put Dhunseri amongst the top 12 players
Dhunseri is also setting up a new PET plant with a capacity of 420,000 TPA through a
subsidiary company in Egypt in a joint venture (JV) with Egyptian Petrochemicals Holding
Company (ECHEM - a nodal agency for the development of the petrochemical industry in
Egypt) and Engineering for Petroleum & Process Industries (ENPPI - another Egyptian
government agency). Dhunseri holds 70% stake in the project. Plant I of the project is
expected to be completed by January 2014 and the plant II by March 2014. Post
commissioning of the plant, Dhunseris total capacity would be 8,30,000 TPA, making it one of
the largest producers of PET globally.
Table 3: Global PET players capacity
S.No. Company Capacity (KTPA) Remarks
1 Indorama Ventures 3,596 Including capacity expansion plan of 490 KTPA
2 China Resources 2,200 Including capacity expansion plan of 900 KTPA
3 DAK 2,059 -
4 SFX 2,050 Including capacity expansion plan of 400 KTPA
5 Yisheng Petrochemicals 2,000 Including capacity expansion plan of 1,000 KTPA
6 FENC 2,000 Including capacity expansion plan of 800 KTPA
7 M&G 1,749 -
8 Octal 1,250 Including capacity expansion plan of 500 KTPA
9 Nan Ya 1,060 Including capacity expansion plan of 150 KTPA
10 Lotte Chemical 1,020 Including capacity expansion plan of 200 KTPA
11 Reliance Industries 988 Including capacity expansion plan of 648 KTPA
12 Dhunseri 830 Including capacity expansion plan of 420 KTPA
Source: Industry, CRISIL Research
Locational advantage in Haldia gives competitive edge
Dhunseris plant in Haldia is strategically located in proximity to its raw material source. The
major raw materials for manufacturing PET resins are purified terephthalic acid (PTA powder
form) and mono-ethylene glycol (MEG liquid form). Collectively, they account for about 95%
of the total raw material costs.
Dhunseri sources PTA from the Haldia-based plant of Mitsubishi Chemical Corporation (MCC)
PTA India which is around 7 km from the plant. The strategic location results in lower logistic
and inventory holding costs (the company maintains inventory of five-seven days for PTA)
and, thereby, overall production costs. It has entered into long-term supply agreement with
MCC PTA India for PTA requirements of its newly commissioned plant in Haldia.
The company imports MEG for Indian operations from Mitsui, Singapore. The Haldia PET
facilitys proximity to the port reduces the lead time. The company is in the process of
commissioning underground pipes from the port to the plant, to transfer MEG, to further
reduce cost and time. MEG pipelines are expected to be commissioned by December 2013.
Dhunseris existing plant is
strategically located near the
raw material source
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Dhunseri Petrochem and Tea Ltd
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Egypt plant to strengthen its size and scale
With commissioning of the 420,000 TPA plant in Egypt, Dhunseri will become one of the
largest producers of PET resins globally. The plant would double its scale of operations in
terms of capacity and revenues. Being located at Ain-El-Sokhana (a deep sea port in the Red
sea) with proximity to end markets (mainly Europe and the US) and also to the raw material
source i.e. MEG from the Middle-East, Dhunseri would have tremendous competitive
advantage (lower freight cost). As per the management, the plant would be the first PET plant
in Egypt, giving Dhunseri a first-mover advantage as well in the region, which currently imports
its annual requirement of ~1,60,000 TPA from Korea and China. The plant will cater to Egypt
and also export to Europe, the US and the Middle-East. We expect it to contribute 42% to total
revenues in FY15.
Proximity to end-markets and raw material sourc es
With the commissioning of the PET manufacturing facility at Ain-El-Sokhana in Egypt,
Dhunseris shipment time to its key markets of Europe and the US would reduce considerably
-- it would be able to ship to any European market within two-three days and to the US within
seven days compared to seven days and 20-25 days for shipments from India to Europe and
America, respectively. This gives it a competitive edge over exporters from China and Korea
(Asia). Proximity to rapidly growing PET resin markets in Africa (Algeria, Morocco, Libya and
Tunisia), Israel, the US and the European Union is expected to strengthen the companys
global footprint.
PET, PTA and MEG logistics movement market
Source: CRISIL Research
Europe
USA
Middle East
SouthKorea
Egypt
PETMarket
PTAsource
China
MEG
Egypt plant is close to end-markets and raw material
sources
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Dhunseri plans to import PTA, a key raw material, from Korea and China (the largest
producers of PTA globally) for its Egypt facility. Of the total greenfield capacities added in
2012, about 70% are located in China, the world's largest consumer of PTA. In 2013,China is estimated to add another 10 mn tonnes; thereby, further increasing the supply in
the global market. Egypts plant being located on the deep sea port in the Red sea would
reduce the logistics cost for transportation of PTA from the port to the plant.
Traditionally, MEG capacities were concentrated in America, accounting for 36% of the
global capacities in 2002. However, over the years, the capacities have shifted to Asia
Pacific and Europe/Middle-East/Africa due to increased availability of raw materials at
lower costs. In 2011, America accounted for around 17%, while Asia Pacific accounted
for 44% and the Middle-East, Africa and Europe together accounted for 39% of the total
global capacities. The shift in capacities from America has made the Middle-East (Asia) a
major MEG producer and exporter. Egypt plants proximity to high MEG-producing
regions in the Middle-East, especially Saudi Arabia, is expected to reduce procurement
costs.
Tax and other incentives
The Egypt plant, being located in a private free zone, is exempt from corporate income tax
and is also entitled to receive duty-waiver benefits on the import of capital goods and raw
materials as well as finished goods. Dhunseri is also expected to benefit from lower power,
fuel (power and fuel cost in Egypt is around one-third of that in India) and overhead costs and
also good infrastructure/ port facilities, thus lowering its overall cost of production and
improving the profitability. Dividend distributed by the Egyptian companies to non-
resident/foreign companies is also tax-exempt. Moreover, Egypt enjoys free trade status with
many African/Middle-East countries. However, the political instability and unrest in the country,
which has already led to delay of more than six months in the commissioning of the plant,
continues to be a concern. GDP growth of Egypt is expected to come down to 1.5-2% in 2013
from 4-7% in the previous years. The overall slowdown in the economy due to political
instability and unrest may have an impact on Dhunseris operations and profitability. Moreover,
there is no definite tax holiday period and in case it is withdrawn, there could be significant risk
to our earnings estimates for the Egypt plant.
Large geographical footprint
Dhunseri has widened its international presence from 40 countries to 50. Exports increased to
9.4 bn (43% of total PET revenues in FY13) from 5.6 bn in FY12. Following the expansion,
the company has created an international sales team to market the products. The company
has started a Dubai marketing branch office to cater to the European and American markets.
It has also carved out a greater market share in Bangladesh, Sri Lanka and Nepal. The
company believes that by leveraging on its strong and widely distributed clientele across the
globe and also with aggressive marketing strategy to tap other markets, selling products from
Egypt would be easy.
Proximity to rapidly growing African
markets and raw material supplying
nations are some of the key
advantages of the Egypt plant
Withdrawal of tax holiday in Egypt
to have an impact
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Figure 2: Country-wise exports in FY13
Source: Company
Stands to gain from healthy growth in domestic industry
The ~US$24 bn Indian packaging industry is expected to record 12-13% CAGR over 2012-16
as per Packaging Industry Association of India faster than the global average of 5-6% on
account of increase in incomes, brand consumption and preference based on decisions of
affordability, convenience and hygiene. Owing to strong growth in the domestic packaging
industry and preference for PET as a packaging material, demand for PET grew by 30%
during FY07-12. All three leading players Dhunseri, Reliance and JBF recorded a strong
rise in domestic sales volume.
Figure 3: PET demand driven by growth in packaging
industry Figure 4: Market segments for PET chips in India (FY13)
Source: Industry, CRISIL Research Source: Industry, CRISIL Research
PET is a preferred packaging material
PET is a polyester resin widely used for non-industrial usage - packaging foods and
beverages, especially in convenience-sized soft drinks, juices and mineral water bottles. Due
to varied applications, PET is preferred to other packaging materials such as aluminum, glass,
paper etc. PET has become the worlds preferred packaging material due to its unique
Italy19%
Bangladesh16%
United States ofAmerica
12%
Romania10%
Belgium9%
Nepal4%
Germany4%
France3%
Peru3%
Others20%
148 177 244 309 409 500
49%
20%
37%
27%32%
22%
0%
10%
20%
30%
40%
50%
60%
0
100
200
300
400
500
600
FY07 FY08 FY09 FY10 FY11 FY12
('000 tonnes)
Domestic demand Growth (y-o-y) (RHS)
CSD30%
Mineral water& Jars 21%
Liquor8%
Edible oil10%
Juices &sauces
7%
Pharma10%
Confectionary12%
Others2%
Dhunseris focus is on
enhancing prospects in the local
markets
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properties eco-friendly and 100% recyclability. The other significant properties of PET are
rigidity, transparency, hygiene, strength, lightness, durability, inertness, cost-effectiveness,
attractiveness and freshness-retention capability among others.
Table 4: PET bottles vs glass bottles
PET bottles Glass bottles
Low one-time cost Difficulty in recovery of bottles
Convenience of usage Chances of breakages are high
Light weight Heavy weight
Easy disposal Cannot be disposed easily
Cost 4-5 per bottle Cost 8 per bottle
Source: CRISIL Research
Indias PET consumption is low
India accounts for 2-3% of the global packaging market; though it has 16% of the global
population, the per capita consumption of PET is only 0.4 kg compared with the global
average of 2 kg. Thus, there is tremendous growth potential considering the growth in various
packaging applications, strong demand from end-user industries such as FMCG and newer
applications (pharma and beverages). Growing middle-class population, rising per capita
income and an organised retail sector are expected to drive growth in the packaging segment.
CRISIL Research expects demand for PET to grow at a three-year CAGR of 15-18% to
10,42,000 TPA by FY16.
Table 5: Indias PET consumption lowest in the world
Regions Total demand '000 tonnesIncrease on 2012
Proportion of world total Per capita consumption (in Kg)'000 Tonnes %
North America 4,066 73 1.8 21.4 7.7
South America 1,599 125 8.5 8.4 4.2
Middle East/Africa 2,256 188 9.1 11.9 1.7
Europe 4,113 111 2.8 21.6 5.9
China 4,026 416 11.5 21.2 2.8
India 605 95 23.2 2.7 0.4
Rest of Asia 2,351 112 4.8 12.9 1.7
Total 19,016 1120 6.3 100 2.4
Source: Company, Industry, CRISIL Research
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Figure 5: PET sales volume growing strong
Source: Company, CRISIL Research
New capacities in global PET market to put pressure onmargins
At a f ive-year ~5% CAGR, PET is one of the fastest growing polyester inputs globally. Based
on widening applications and replacement of container/glass bottles, the PET industry is
expected to grow at a fast pace. Growth in the global PET resin market is being fuelled by the
rapid growth coming out of the Asia-Pacific market. However, the global PET industry has
been experiencing a surplus situation over the past two years, which has reduced operating
rates from more than 85% to 80% in 2011 and 2012. Moreover, massive new capacity is
scheduled during 2013-15 led by China. Total world capacity is estimated to reach 34 mn
tonnes in FY15; this is not only in China, which is expected to add 4.75 mn tonnes by 2014,
but across the world. This may lead to oversupply, thus lowering utilisation rates and putting
pressure on PET spreads and, thereby, margins of all players.
Figure 6: Operating rates low due to capacity additions Table 6: Major capacity addition over next two years
MMT: Million metric tonnes
Chinese players Nameplate capacity (KTPA)
Yisheng Petrochemical 1,000
China Resources 900
FENC 800Zhejiang Wankai 500
Guangdong Indorama 300
Other players globally Nameplate capacity (KTPA)
OCTAL Oman 500
Reliance India 648
Polyplex Turkey 300
PQS Brazil 450
Ibn Rushd KSA 420
Source: Industry, CRISIL Research Source: Industry, CRISIL Research
4,649
6,087 9,01512,207
12,435
6,464
4,016 5,1755,648
9,485
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY09 FY10 FY11 FY12 FY13
(mn)
Domestic Export
18 18 19 21 23 25
82%
87%
85%
81%80%
78%
72%
74%
76%
78%
80%
82%
84%
86%
88%
0
5
10
15
20
25
30
2008 2009 2010 2011 2012 2013
(MMT)
Capacity Global operating rate (RHS)
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Figure 7: Dhunseris realisations higher than its peers Figure 8: Utilisation rate has been higher than its peers
*JBFs capacity inclusive of its UAE plant capacity of 4,32,000 TPA
Source: Industry, CRISIL Research Source: Industry, CRISIL Research
Figure 9: Delta trends (PET-PTA-MEG) Figure 10: EBITDA per tonne
Source: Industry, CRISIL Research Source: Industry, CRISIL Research
58,73470,709
86,318 87,009
55,67465,272
79,970 82,728
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,00090,000
100,000
FY10 FY11 FY12 FY13
(/ton ne)
Dhunseri JBF
200 200 410 998 1,040 1,040 1,402 2,886 3,261
100%104% 107%
83%77%
73%
93%
80% 78%
0%
20%
40%
60%
80%
100%
120%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
FY11
FY12
FY13
FY11
FY12
FY13
FY11
FY12
FY13
Dhunseri JBF Indorama
(mn)
Capacity Utilisation rate (RHS)
-
50
100
150
200
250
300
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
(US$/tonne)Delta (PET-PTA-MEG)
Delta (PET-PTA-MEG)
79
150 137
91
162
181
123
77
-
20
40
60
80
100
120
140
160
180
200
FY10 FY11 FY12 FY13
(US$/tonne)
Dhunseri Indorama
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Table 7: Competitive landscape
Dhunseri JBF Industries*
FY10 FY11 FY12 FY13 FY10 FY11 FY12 FY13
Revenues (mn) 11,582 16,593 19,820 24,411 49,369 64,658 71,772 74,558EBITDA (mn) 1,154 2,679 1,467 1,547 4,721 9,629 7,141 7,140
EBITDA margin (%) 10.0% 16.1% 7.4% 6.3% 9.6% 14.9% 10.0% 9.6%
Capacity (TPA) 200,000 200,000 200,000 410,000 910,800 998,000 1,040,000 1,040,000**
Utilisation rate (%) 84% 100% 104% 107% 87% 83% 77% 73%
Sales volume (TPA) 172,023 200,681 206,857 251,923 607,425 554,732 529,512 522,720
Sales value (mn) 10,104 14,190 17,855 21,920 33,818 36,209 42,345 43,244
Realisations per kg () 59 71 86 87 56 65 80 83
Debt service ratios
Debt equity ratio times (x) 0.7 0.6 1.2 2.4 1.1 1.3 1.8 2.4
Interest coverage ratio (x) 42.2 12.2 1.2 2.4 3.1 5.1 2.7 2.2
Working capital ratio
Debtor days 45 38 44 77 33 39 37 48Creditor days 81 97 102 52 64 73 57 75
Inventory days 29 52 48 83 44 51 46 54
Gross asset turnover (x) 1.9 2.2 2.5 2.3 2.2 2.5 2.3 1.8
*JBFs numbers Include bottle grade, textile grade and film grade chips.
**Including 4,32,000 MT capacity of the UAE plant
Source: Company, CRISIL Research
Table 8: Capex cost comparison
Dhunseri
Haldia
Dhunseri
Egypt JBF RAK JBF Belgium
Project cost (mn) 4,700 169* 7110** 200*
Capacity (tonnes) 210,000 420,000 390 390,000
Cost per tonne () 22,381 402* 18,231 513*
*Cost in US$
** Capacities added in phases from 2007 to 2012.
Source: Company, CRISIL Research
One of the top tea cultivators in India
Dhunseri is among the top 10 tea growing companies in India and a market leader in the
packet tea segment in Rajasthan. It mainly grows and processes CTC tea and a small amount
of orthodox tea. The company has 10 tea estates in Assam with production capacity of 12 mn
kgs. It produces around 1% of the overall tea produced in India. In 2012-13, overall tea
production decreased from 13.48 mn kg in 2011-12 to 10.91 mn kg in 2012-13 due to sale of
leaf factories and one tea estate. Tea revenues increased by15% y-o-y to 1,871 mn in FY13
mainly due to increase in average tea realisations, which went up from 113 per kg to 153
per kg, and Malawian tea estate acquisitions.
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Figure 11: Dhunseri is among the top 10 Indian tea producers
Source: Industry, CRISIL Research
During 2012-13, it sold its Namsang tea estate and three leaf factories to partially finance the
acquisition of two tea estates in Malawi with the capacity of 9.5 mn kgs. The acquisition offset
the loss of production due to sale of tea factories. Further, it has commenced operations from
its new factory in Hatijan Estate (Assam) with an annual capacity of 1.5 mn kg. The acquisition
and new factory in Hatijan have taken the total capacity to 22 mn kg from 10.5 mn kg.
Malawi acquisi t ions op en doors to global tea market
Dhunseri has entered the international tea market via the acquisition of two tea estates in
Malawi, Africa at a consideration of 1,220 mn (US$22 mn) through its subsidiary in
Singapore.The acquisition is funded through debt of US$12 mn and balance out of internal
accruals and sale of a tea estate in India. The two estate- Makandi and Kawalazi have the
capacity to produce 9.5 mn kg of tea, 0.4 mn kg of macadamia and 0.1 mn kg of coffee beans.
The Malawi gardens produce tea of a middling quality, being preferred by tea bag
manufacturers across the globe, it is a fast growing global tea segment. Besides, the Malawi
acquisitions have widened the companys offerings across the premium and middling
segments and created a consistent international presence with a growing geographic footprint.
It has also de-risked the concentration of the tea business in a single tea-growing area since
all its estates are in Assam. Following the acquisitions, the companys annual production is
estimated to be around 22 mn kg. We expect it to contribute 36% to total tea revenues inFY15.
Continu es to be a market leader in Rajasthan
Dhunseris strong marketing presence through its well-established brands Lal Ghora and Kala
Ghora has helped it to maintain the number 1 position in Rajasthan in the packet tea sales
segment. Packet tea sales accounted for 33.81% of total sales in FY13. Leveraging on the
existing distribution network in Rajasthan, Dhunseri has now introduced a premium variant
called Bahipookri in 1kg packets. The company has ramped up its advertising campaign with
Ms. Hema Malini as the brand ambassador for packet tea brands Lal Ghora and Kala Ghora
to boost the companys brand visibility. However, the company has no plans to foray into the
packet tea business on a national basis.
9.9 10.5 10.3
13.5
10.9
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
FY09 FY10 FY11 FY12 FY13
(Mn Kg)
Tea Production
Malawi acquisitions give
international presence in the tea
segment.
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Figure 12: Tea revenue regional break-up as of FY13
Source: Company
Focus on eff iciency impr oved the operating prof i tabi l ity of tea business
Dhunseris tea business witnessed improvement in operating profitability with EBITDA margin
increasing from 11.9% in FY12 to 24.5% in FY13. The company is taking various measures
such as plant automation to enhance labour productivity, upgradation of factories with new
drying machines, replacement of old tea plants to increase yields to enhance the efficiency
resulting in lower production cost and, thereby, improve the profitability. Factory productivity in
2012-13 at 55.19 kg was also higher compared to the industry average of 40.2 kg. Its average
tea yield per hectare of 2,090 kgs per hectare in the past three years is better than the district
average ranging between 1,800 and 1,860 kgs per hectare. The company plans to
replant/extend planting of 30 lakh saplings each year which will result in increase in yield per
hectare and, thereby, profitability.
IT SEZ park on hold due to weak demand
Dhunseri ventured into setting up an IT complex in the IT and IT-enabled services (ITeS) SEZ
at Bantala on the south-eastern fringes of Kolkata with the objective of earning stable annuity
income. The IT park is being developed on six acres of land and is mapped to consist of a
twin tower with a total built-up area of about 750,000 sq ft at a total cost of 1,300 mn. The
project is being executed in two phases of equal magnitude.
Construction work in phase I (370,000 sq ft) has been completed and it is ready for
mechanical, electrical and plumbing (MEP) and other exterior works. Piling work has been
completed for phase II. The company has spent around 450 mn on the project as of FY13.
Though the project was progressing well and the first phase was expected to be completed by
February 2013, due to the poor industry scenario, Dhunseri has put the project on hold until
the situation improves and accordingly has revised the commencement of phase I and phase
II to June 2014 and December 2015, respectively. Hence, we have factored lease rentals f rom
FY16 onwards in our projections.
East13%
Rajasthan(North)
47%
South23%
West17%
Profitability of tea business has
improved over the years
IT SEZ park put on hold due to
the poor industry scenario
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Key Risks
Social unrest and political instability: key risk for Egypt plant
Dhunseri is in the process of setting up a greenfield PET plant with capacity of 420,000 MTPA
in Egypt. The project is expected to get commissioned in January 2014. The timely execution
of this large project is a challenge for the company since political instability and uncertainty
have already led to a delay of more than six months in the commissioning of the plant.
Continuous social unrest and political instability may pose a threat to smooth functioning of its
operations.
Profitability vulnerable to forex fluctuations
Though Dhunseri follows a prudent hedging policy for its export sales, it does not hedge for
MEG imports. Further, the company had foreign currency loan of 18 bn in FY13 in its book,
which is un-hedged, and the quantum of external commercial borrowings (ECBs) is set to
increase to fund the expansion plan. Therefore, the company is exposed to forex risk. It has
reported forex losses of 380 mn on term loan and other monetary items in FY13 due to rupee
depreciation.
Dependent on single supplier for key raw material
Dhunseri is highly dependent on MCC for PTA. Consequently, when MCCs operations were
adversely affected in FY10 due to its expansion, Dhunseris PET production declined owing to
lack of PTA supply. Production declined by almost 11% from 190,000 tonnes in FY09 to
170,000 tonnes in FY10. Post commissioning of plant II (210,000 TPA), Dhunseris PTA
requirement has doubled to 0.35 mn tonnes, which will be ~25% of MCCs production.
Volatility in crude oil prices
PTA and MEG, the key raw materials for PET, account for 83% of total operating costs for the
segment. Historically, prices of PTA and MEG (both crude oil derivatives) have been volatile
and are currently on an upward trend at the heels of rising crude oil prices. PTA prices are
directly linked to naphtha prices while MEG prices are linked to ethylene prices, both of which
are volatile in nature. Hence, the companys spreads/EBITDA margins are sensitive to the
movement in raw material prices, more so in a downcycle.
Political instability and social
unrest in Egypt, volatility in crude
oil prices and forex fluctuations
are key risks
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EBITDA margin to improv e from c urrent levels
Dhunseris EBITDA is expected to grow at a two-year CAGR of 78% to 4,906 mn in FY15.
EBITDA margin is expected to improve to 7.3% in FY15 from 6.3% in FY13 mainly driven by
improvement in PET spreads. We expect an improvement in PET spreads in the long run with
supply rationalisation of PET and PTA globally and pick-up in demand. Spreads are expected
to improve from the current levels over the next two years. Further various cost reduction
measures and high capacity utilisation rates will reduce the overhead cost thereby lowering
cost of production and improving operating profitability.
Figure 18: EBITDA margin to improve from FY13 levels
Source: CRISIL Research
PAT margin to remain at FY13 levels
We expect Dhunseris PAT margins to remain at the FY13 level, i.e. 2.6%, in FY15. We expect
improvement in operating profitability but higher depreciation and finance cost (on account of
capitalisation of the Egypt plant) are expected to keep PAT margin at FY13 levels. We expect
PAT to grow at a CAGR of 32% to 1,758 mn in FY15.
Figure 19: PAT margin to remain at FY13 levels
Source: CRISIL Research
2,679 1,467 1,547 3,054 4,906
16.1%
7.4%
6.3%7.5%
7.3%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
-
1,000
2,000
3,000
4,000
5,000
6,000
FY11 FY12 FY13 FY14 E FY15E
(mn)
EBITDA EBITDA margins (RHS)
1,187 238 1,005 1,239 1,758
7.2%
1.2%
2.6%3.0%
2.6%
0%
1%
2%
3%
4%
5%
6%
7%
8%
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
FY11 FY12 FY13 FY14 E FY15E
(mn)
PAT PAT margins (RHS)
Operating margin to improve to
7.3% in FY15 driven byimprovements in PET spreads
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We estimate Dhunseris EPS at 35.4 for FY14 and 50.2 for FY15. EPS is expected to more
than double in FY15 with the commissioning of the Egypt facility and higher utilisation at the
Haldia plant.
We expect its RoE to improve to 17.3% in FY15 from 7.9% in FY13. RoE of the Egypt plant is
expected to be significantly higher as it enjoys 100% tax exemptions. Dhunseris gearing
increased to 2.4x in FY13 from 1.2x in FY12 on account of debt-funded acquisition of Malawi
tea estates and debt funded capex. However, it is expected to be 2.0x in FY15 with
improvement in profitability and repayment of debt.
Figure 20: EPS and RoE to improve significantly Figure 21: Gearing to moderate to 2.0x in FY15
Source: CRISIL Research Estimates Source: CRISIL Research Estimates
Wor king capital cyc le increased sharp ly in FY13
Dhunseris working capital days increased from 25 days in FY12 to 78 days in FY13. This was
mainly due to increase in debtor and inventory days. Debtor days went up from 44 days to
77 days in FY13 as the company has extended the credit period to its customers against letter
of credits (LCs). Moreover, the company follows the accounting policy of classifying LCs of
customers discounted with the bank as bills receivable until the maturity of LCs, thereby
resulting in higher debtor days. Inventory days increased from 48 to 83 days as there was
inventory pile-up - of raw materials as well as finished goods - from Haldia plant II which
achieved optimum utilisation rate last quarter. Moreover, raw materials and finished goods
worth 1,150 mn in transit also pushed up inventory days. Creditor days decreased from
102 days to 52 days in FY13.
33.9 8.8 18. 0 35.4 50.2
18%
4.2%
7.9%
13.9%
17.3%
0%
2%
4%
6%
8%
10%
12%
14%
16%18%
20%
0
10
20
30
40
50
60
FY11 FY12 FY13 FY14 E FY15E
()
EPS RoE (RHS)
0.6
1.2
2.42.4
2.0
-
0.5
1.0
1.5
2.0
2.5
3.0
FY11 FY12 FY13 FY14 E FY15E
(x)
Gearing
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Management Overview
CRISIL Researchs fundamental grading methodology includes a broad assessment of
management quality apart from other key factors such as industry, business prospects and
financial performance. Overall, we believe the management is good.
Experienced management
Dhunseri has a strong and experienced top management headed by promoter directors,
Mr Chandra Kumar Dhanuka (executive chairman) and Mr Mrigank Dhanuka (vice chairman
and managing director). They are ably supported by Mr Biswanath Chattopadhyay (managing
director and CEO) and Mr Rajiv Kumar Sharma (executive director - finance).
The Dhanuka family has been in the tea business for over five decades and in the
petrochemicals business for around a decade. The top management is well experienced in
both the businesses and well versed with the dynamics of these segments.
Despite being a promoter-driven company, we believe that Dhunseris management has a
professional approach towards managing the company.
Second line of management
Based on our interactions, we believe that the companys second line is reasonably
experienced. Key managerial personnel have several years of experience in their respective
fields.
Top management has strong
domain expertise
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Corporate Governance
CRISILs fundamental grading methodology includes a broad assessment of corporate
governance as well apart from other key factors such as industry, business prospects,
financial performance and management quality. In this context, CRISIL Research analyses
shareholding structure, board composition, typical board processes, disclosure standards and
related-party transactions. Any qualifications by regulators or auditors also serve as useful
inputs while assessing a companys corporate governance.
Overall, corporate governance at Dhunseri reflects good practices supported by a fairly
experienced board. We feel that the company's corporate governance practices are adequate
and meet the statutory requirement supported by reasonably good board practices and
involvement of an independent board.
Board compositionDhunseris board comprises 12 members, of whom six are independent, which is in
accordance with the stipulated SEBI guidelines relating to the Clause 49 of the listing
agreement. Given the background of the directors, we believe that the board is fairly
experienced and diversified. The independent directors have a fairly good understanding of
the companys business and its processes.
Table 9: Profile of independent directors
NameAge
Year of
appointment Qualification/background
Mr Joginder Pal
Kundra83 2010
He is a Bachelor of Arts and a Bachelor of Law. He is the former managing director of the State
Bank of India and has also been the chairman of the Banking Service Recruitment Board. He
has around 53 years of experience in the field of finance and banking
Dr Basudeb Sen 65 2010
He is a Master in Economics and has a PhD from the Indian Statistical Institute. He has over
three decades of executive experience in commercial and development banking and investment
management organisations
Mr Raj Narain
Bhardwaj68 2010
He was the former managing director/chairman of Life insurance Corporation of India. He was
also a member of the Securities Appellate Tribunal (SAT)
Mr Bharat Bajoria 60 2008
He has more than 35 years of experience in the tea industry. He is the managing director of
Teesta Valley Tea Co. Ltd and Bormahan Tea Co (1936) Ltd and holds directorship in other
companies. He was the chairman of the Indian Tea Association and Consultative Committee of
Plantation Association in the past
Mr Anurag Bagaria 37 2010 He is qualified as a chemical engineer and has a MBA. He has over 13 years of experience in avariety of companies
Mr Dharam Pal Jindal 63 2012He is a graduate from St. Xaviers College. He is the chairman of Jindal Pipes Ltd, Maharashtra
Seamless Ltd, Jindal Drilling & Industries Ltd and other allied companies
Boards processes
The companys quality of disclosure can be considered good judged by the level of
information and details furnished in the annual report, websites and other publicly available
data. The company has all the necessary committees audit, remuneration, nomination and
investor grievance in place to support corporate governance practices. The audit committee
is chaired by an independent director, Mr Joginder Pal Kundra.
Dhunseris corporate governance
practices are adequate and meet
the minimum required standards
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Valuation Grade: 5/5
We have used the discounted cash flow method (DCF) method to value Dhunseri and arrived
at fair value of 187 per share. This fair value implies P/E multiple of 3.7x FY15E EPS and
P/B multiple of 0.6x FY15E book value. The stock is currently trading at 110 per share.
Consequently, we assign Dhunseri a valuation grade of 5/5, indicating that the market price
has strong upside from the current levels.
One-year forward P/E band One-year forward EV/EBITDA band
Source: NSE, CRISIL Research Source: NSE, CRISIL Research
P/E premium / discount to CNX 500 P/E movement
Source: NSE, CRISIL Research Source: NSE, CRISIL Research
Terminal growth rate
TerminalWACC
1.0% 2.0% 3.0% 4.0% 5.0%
11.2% 224 267 320 388 477
12.2% 173 206 246 297 361
13.2% 131 157 187 227 275
14.2% 97 118 143 173 209
15.2% 68 85 105 129 157
0
100
200
300
400
500
600
Jan-08
May-08
Sep-08
Jan-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Aug-13
Dec-13
()
Dhunseri 1x 3x
6x 9x 12x
0
5,000
10,000
15,000
20,000
25,000
Jan-09
May-09
Sep-09
Jan-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Mar-12
Jul-12
Nov-12
Mar-13
Aug-13
Dec-13
(mn)
EV 2x 3x 4x 5x
-100%
-80%
-60%
-40%
-20%
0%
20%
Jan-09
May-09
Sep-09
Jan-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Mar-12
Jul-12
Nov-12
Mar-13
Aug-13
Dec-13
Premium/Discount to CNX 500
Median premium/discount t o CNX 500
0
2
4
6
8
10
12
14
16
1820
Jan-09
May-09
Sep-09
Jan-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Mar-12
Jul-12
Nov-12
Mar-13
Aug-13
Dec-13
(Times)
1yr Fwd PE (x) Median PE
+1 std dev
-1 std dev
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Company Overview
Dhunseri manufactures PET resin and grows/processes tea. It is also setting up an IT SEZ at
Bantala in Kolkata with the objective of earning stable annuity income. It has become a
dominant PET resin manufacturer in India following expansion in Haldia with a total capacity
of 4,10,000 TPA. The company is also setting up a PET resin plant in Egypt with a capacity of
4,20,000 TPA. Its PET resins for bottle/sheet/jar are marketed under the ASPET brand. The
company has six gardens in Upper Assam and four gardens in Lower Assam. Its packet tea is
marketed under the Lal Ghora and Kala Ghora brands. Following the acquisition of two tea
estates in Malawi, the companys total production capacity is 22 mn kgs as of FY13.
Products (capacity) Indian operations Overseas subsidiary
PET resin (TPA) 4,10,000 4,20,000*
Tea (mn kgs) 12 10
*Proposed Egypt plant
Milestones
1916 Incorporated as Dhunseri Tea Company
1955 S L Dhanuka Group took over management of the company from James Finlay &
Company
1970 Changed name to Dhunseri Tea & Industries
1980 Acquired the Namsang and Dilli Gardens in Assam
1991 Took over Bahadur Tea Company and amalgamated with Dhunseri Tea
1992 Came out with a public issue
1994 Acquired Santi, Khetojan and Khagorijan tea estates
1996 Promoted South Asian Petrochem Ltd to manufacture PET resins under technical and
financial collaboration with Lurgi Zimmer AG of Germany
2009 Dhunseri Tea & Industries and South Asian Petrochem merged together to form
Dhunseri Petrochem and Tea Ltd
2010 Construction work started at the Haldia plant
2011 Construction work started at the Egypt plant; acquired four tea factories
Acquired 100% shareholding of Dowamara Tea Company Private Ltd (DTCPL)
2012 Two acquisitions in Malawi, Africa
Commissioning of second PET plant in Haldia
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Annexure: Financials (Consolidated)
Source: CRISIL Research
Income statement Balance Sheet
(mn) FY11 FY12 FY13 FY14E FY15E (mn) FY11 FY12 FY13 FY14E FY15E
Operating income 16,593 19,820 24,411 40,818 67,552 Liabilities
EBITDA 2,679 1,467 1,547 3,054 4,906 Equity share capital 350 350 350 350 350
EBITDA margin 16.1% 7.4% 6.3% 7.5% 7.3% Reserves 6,785 7,130 7,411 8,403 9,844
Depreciation 312 333 401 702 1,129 Minorities - - 726 561 860
EBIT 2,368 1,134 1,146 2,352 3,777 Net worth 7,135 7,481 8,487 9,314 11,054
Interest 194 916 475 1,184 1,438 Convertible debt - - -
Operating PBT 2,174 218 670 1,168 2,338 Other debt 4,098 8,997 20,160 22,660 22,090
Other income 323 217 319 175 233 Total debt 4,098 8,997 20,160 22,660 22,090
Exceptional inc/(exp) (642) (72) 376 - - Deferred tax liability (net) 671 724 901 1,008 1,214
PBT 1,854 362 1,365 1,343 2,572 Total liabilities 11,904 17,201 29,548 32,982 34,358
Tax provision 667 125 228 269 514 Assets
Minority interest - - 132 (165) 299 Net fixed assets 5,857 5,954 9,935 17,993 18,372
PAT (Reported) 1,187 238 1,005 1,239 1,758 Capital WIP 483 5,447 7,000 1,079 754
Less: Exceptionals (642) (72) 376 - - Total fixed assets 6,339 11,401 16,935 19,072 19,126
Adjusted PAT 1,829 310 629 1,239 1,758 Investments 612 339 211 211 211
Current assets
Ratios Inventory 1,824 2,276 4,772 6,710 8,328FY11 FY12 FY13 FY14E FY15E Sundry debtors 1,722 2,517 5,324 8,387 12,955
Growth Loans and advances 2,454 1,419 3,149 4,082 4,729
Operating income (%) 43.3 19.4 23.2 67.2 65.5 Cash & bank balance 2,905 4,064 2,184 1,943 1,609
EBITDA (%) 132.1 (45.2) 5.4 97.5 60.6 Marketable securities - 590 330 330 330
Adj PAT (%) 152.8 (83.1) 103.0 96.9 41.9 Total current assets 8,905 10,867 15,759 21,452 27,951
Adj EPS (%) 152.8 (83.1) 103.0 96.9 41.9 Total current liabilities 4,001 5,444 3,556 7,932 13,089
Net current assets 4,904 5,424 12,203 13,519 14,862
Profitability Intangibles/Misc. expenditure 49 37 199 179 159
EBITDA margin (%) 16.1 7.4 6.3 7.5 7.3 Total assets 11,904 17,201 29,548 32,982 34,358
Adj PAT Margin (%) 11.0 1.6 2.6 3.0 2.6
RoE (%) 28.2 4.2 7.9 13.9 17.3 Cash flow
RoCE (%) 22.5 8.2 5.1 7.8 11.6 (mn) FY11 FY12 FY13 FY14E FY15E
RoIC (%) 32.8 14.6 8.1 8.7 12.2 Pre-tax profit 2,497 435 989 1,343 2,572
Total tax paid (379) (72) (51) (161) (309)
Valuations Depreciation 312 333 401 702 1,129Price-earnings (x) 3.0 12.3 4.9 3.1 2.2 Working capital changes (846) 1,230 (8,919) (1,558) (1,676)
Price-book (x) 0.8 0.5 0.4 0.4 0.3 Net cash from operations 1,584 1,926 (7,580) 326 1,716
EV/EBITDA (x) 2.5 5.6 13.9 8.1 5.1 Cash from investm ents
EV/Sales (x) 0.4 0.4 0.9 0.6 0.4 Capital expenditure (894) (5,384) (6,097) (2,820) (1,163)
Dividend payout ratio (%) 15.5 77.1 18.2 20.0 18.0 Investments and others 203 (317) 389 - -
Dividend yield (%) 3.4 4.8 5.9 6.4 8.2 Net cas h from inves tme nts (690) (5,701) (5,708) (2,820) (1,163)
Cash from financing
B/S ratios Equity raised/(repaid) 233 - (148) 0 -
Inventory days 52 48 83 65 50 Debt raised/(repaid) 123 4,899 11,163 2,500 (570)
Creditors days 97 102 52 70 69 Dividend (incl. tax) (184) (183) (183) (248) (316)
Debtor days 38 44 77 71 68 Others (incl extraordinaries) (590) 219 576 0 -
Working capital days 35 25 78 94 65 Net cash from financing (418) 4,934 11,408 2,252 (886)
Gross asset turnover (x) 2.2 2.5 2.3 2.4 3.0 Change in cash position 476 1,159 (1,880) (241) (334)
Net asset turnover (x) 3.0 3.4 3.1 2.9 3.7 Closing cash 2,905 4,064 2,184 1,943 1,609
Sales/operating as sets (x) 2.7 2.2 1.7 2.3 3.5
Current ratio (x) 2.2 2.0 4.4 2.7 2.1
Debt-equity (x) 0.6 1.2 2.4 2.4 2.0 (m n) Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14
Net debt/equity (x) 0.2 0.6 2.1 2.2 1.8 Operating Income 4,738 5,924 8,524 9,241 10558
Interest coverage 12.2 1.2 2.4 2.0 2.6 Change (q-o-q) -3% 25% 44% 8% 14%
EBITDA 380 534 616 856 1141
Per share Change (q-o-q) 0% 40% 15% 39% 33%
FY11 FY12 FY13 FY14E FY15E EBITDA margin 8.0% 9.0% 7.2% 9.3% 10.8%
Adj EPS () 52.2 8.8 18.0 35.4 50.2 Reported PAT 476 67 293 101 402
CEPS 61.1 18.4 29.4 55.4 82.4 Adjusted PAT 253 319 272 645 756
Book value 203.7 213.5 242.3 265.9 315.5 Change (q-o-q) -804% -86% 336% -66% 17%
Dividend () 5.2 5.2 5.2 7.1 9.0 Reported PAT margin 10.1% 1.1% 3.4% 1.1% 3.8%
Actual o/s shares (mn) 35.0 35.0 35.0 35.0 35.0 Reported EPS 13.6 1.9 8.4 2.9 11.5
Quarterly financials (standalone)
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Dhunseri Petrochem and Tea Ltd
25
Focus Charts
Revenue and revenue growth trend EBITDA and EBITDA margin trend
Source: Company, CRISIL Research Source: Company, CRISIL Research
EPS and RoE trend PAT and PAT margin trend
Source: Company, CRISIL Research Source: Company, CRISIL Research
Dhunseri has underperformed CNX500 Fair value movement since initiation
-Indexed to 100
Source: Company, CRISIL Research Source: Company, CRISIL Research
16,593 19,820 24,411 40,818 67,552
43%
19% 23%
67% 65%
0%
10%
20%
30%
40%
50%
60%
70%
80%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
FY11 FY12 FY13 FY14 E FY15E
(mn)
Revenue Growth (RHS)
2,679 1,467 1,547 3,054 4,906
16.1%
7.4%6.3% 7.5%
7.3%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
-
1,000
2,000
3,000
4,000
5,000
6,000
FY11 FY12 FY13 FY14 E FY15E
(mn)
EBITDA EBITDA margins (RHS)
33.9 8.8 18. 0 35.4 50.2
18%
4.2%
7.9%
13.9%
17.3%
0%
2%
4%6%
8%
10%
12%
14%
16%
18%
20%
0
10
20
30
40
50
60
FY11 FY12 FY13 FY14 E FY15E
()
EPS RoE (RHS)
1,187 238 1,005 1,239 1,758
7.2%
1.2%
2.6%3.0%
2.6%
0%
1%
2%
3%
4%
5%
6%
7%
8%
-
200
400600
800
1,000
1,200
1,400
1,600
1,800
2,000
FY11 FY12 FY13 FY14 E FY15E
(mn)
PAT PAT margins (RHS)
0
50
100
150
200
250
300
Apr-08
Aug-08
Dec-08
Apr-09
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Apr-10
Aug-10
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Apr-13
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Dec-13
Dhunseri CNX500
0
200
400
600
800
1,000
1,200
1,400
1,600
0
50
100
150
200
250
300
Oct-09
Jan-10
Mar-10
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Jul-12
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('000)()
Traded Quantity (RHS) CRISIL Fair Value Dhunseri
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