Fwd: Ester Industries-BUY

 

Ester Industries  produces PET films & Engineering plastic, whereindemand and realizations are moving northwards in recent past. Company's utilization levels are more than 100% for PET film andlooking to realization trend in last 6 months, this division will be a big money spinner for now.
 
The company is also doubling the capacity of PET Films, which may be commissioned by the end of calendar year 2010. Engg Plastic division which caters to Automobile, Engg & Electrical segments is also doing well.
 
Over 80% revenues come from PET films, where realizations are very strong since April'10. Per Kg prices have moved up from around Rs.100 in March'10 to Rs 140 in June'10. Fortunately PTA & MEG prices are more or less stable, so whole incremental revenues will add to the profits. Thus June Qtr will be much better then March'10; plus next i.e. Sept Qtr will be much much better; for not only this company, but for the whole industry.
 
Most of the sales are to the domestic markets [80%%], catering to flexible packaging segment which in turn depends upon FMCG sector where demand is strong at 20‐22% [and least affected by any slowdown], rest is exported.
 
Company is also having large metalizing facility which adds valueto basic PET films. It is also developing and commercializing someother value added products of PET films. Company has innovated unique cost cutting measures like – using Biomass based fluid heaters, which can also generate some CERs for the Co.
 
Recommendation
 
With stable input prices and sustained strength in realizations, the margins are improving for biggest division PET Films. Even Engg plastic division is experiencing good demand and healthy margins.FY'11 EPS estimates are over Rs 10, while FY'12 EPS could spurt[due to commissioning of fresh 27,000 MTs PET Film capacitybefore end of 2010] to around Rs 20/‐.