| The sheer size of India's economy has opened tremendous opportunities across all industries including the packaging industry, which is one of the fastest growing industries in India. We believe Uflex is in a unique position to tap these opportunities for the following reasons:
We expect a 20% CAGR in volume growth over the period FY10-FY12E. Our EPS estimates for FY11E and FY12E are at Rs. 23.8 and Rs. 33.7 respectively.
The stock is currently trading at an EV/EBITDA multiple of 5.0x and 4.4x times its FY11E and FY12E numbers. We are bullish on the stock with a STRONG BUY rating and a price target of Rs. 315 at an EV/EBITDA multiple of 6.0x Large, vertically integrated player with significant market share Uflex is the largest flexible packaging company in India and an emerging player in the global market. With current capacity of 214,560 TPA across its plastic film and flexible packaging product segments, it has a domestic market share of 17% in BOPP films, 22% in BOPET films and 19% in flexible packaging laminates. Strategic locations provide access to global markets The strategically located manufacturing facilities of the company provide access to global markets. While its India facilities help to serve the large domestic market, its facilities in Mexico, which is part of NAFTA, provide access to the large and lucrative North America markets. In addition, its Dubai facilities help cater to the Middle East, West Asia and CIS countries. Its new facility planned in Egypt is expected to further strengthen its presence in the GCC countries in addition to providing access to the African and South European markets. Strong expansion plans to drive revenues and margins In order to tap the large opportunities in the flexible packaging business in India and increase its footprint globally, Uflex has planned for an aggressive expansion of capacity. The plan comprises of adding 27,000 TPA of flexible packaging product capacity in India and 103,400 TPA of various plastic film capacity in Mexico and Egypt. This is expected to drive revenues and improve margins on the back of increased contribution of its higher margin flexible packaging products business from 37% currently to about 50% over 2-3 years. Focus on innovation and new product development The customers of the packaging industry increasingly view packaging as a key element of their brand building strategy and hence focus on product innovation has become imperative for manufacturers of flexible packaging products. Uflex's strategy of providing end-to-end flexible packaging solutions on the back of its strong product innovation capabilities has translated into acquisition of and business generation from large, multinational customers. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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