Originally posted by rushabh Hi Saurabh, would you please throw a light on the management of this company in context of their ability, reliability, efficiency, insight, etc. Further, i would like to know about their growth potentiality and niche areas. Your views on this would be appreciated.   Thank You

Rushabh,

While the PE, P/BV etc. looks attractive and the management has been running this business for a while - the challenge is that the business by itself does not have too many differentiation factors and don't see any niche being created.

China now is focussing more on their internal needs which is a plus for this business but most countries have put trade barriers plus dollar uncertainity also has not helped in the exports.

It is at a discount compared to Polyplex - but Polyplex is much better placed with facilities in Thailand and Turkey. Garware polyster is a bigger player and available at more discount and also has better ROEs.

My thought is that currently there are many interesting options in the market today than this one - this one might deserve a look closer to Dec. when their capacity expansion is due or when the market is grossly overpriced.

going through a report,to summarize the positives and negatives:

Positives:

demand of PET films growing annually at 15% mainly used for packing in FMCG sector(packaged food)

Engg. plastics div. that caters to electrical, automotive sectore to grow 20%

low D/E ratio of around 0.35

sound promoter holding of 67%

capacity expansion to further increase sales



Negatives:

single most important factor is dependency on crude prices, so any increase or decrease significantly affects the margins

Ban on use of plastics for gutka n pan masala packing have hurt margins

Conference Call      
          Ester Industries
Margin declined owing to decline in PET film realizations coupled with increase in prices of raw material


The company held its conference call for discussing Q1 FY12 results.

Key highlights
The net sales was up by 53% to Rs 169.41 crore while net profit was down by 81% to Rs 1.27 crore due to fall in OPM from 14.3% to 7.83% on Y-o-Y basis.
PET film sales including PET Chips increased significantly on the back of 1.8x increase in sales volume of PET films from 6935 MT to 12651 MT
OPM declined owing to decline in PET film realizations coupled with increase in prices of raw material. Raw material prices as a percentage of revenue increased from 58.4% in Q1 FY11 to 67.9% in Q1 FY12
Net Sales from polyester film & chips up 62% to Rs 148.54 crore. It contributes 88% of total revenue compared to 83% in Q1 FY11.
There was a strong growth in PET Film sales volume in both domestic as well as export markets. Domestic sales for PET films increased 30% from 4829 MT in Q1 FY11 to 6288 MT in Q1 FY12. Export sales for PET films increased 202% from 2106 MT in Q1 FY11 to 6363 MT in Q1 FY12.
The capacity utilization for Polyester film segment stood at about 90%.
Net Sales from engineering plastics division up 11% to Rs 20.86 crore. It contributes 12% of total revenue compared to 17% in Q1 FY11.
The domestic market contributes 56% of revenue compared to 80% in Q1 FY11 while export market contributes 43.6% of revenue compared to 20% in Q1 FY11.

Conference Call      
          Ester Industries
Polyester film prices should go up by Rs 12-15 per kg to achieve break-even levels


Ester Industries held conference call on November 16th, 2011 to discuss its performance for the quarter ended September 2011.

Key highlights

Net revenues grew by 10% to Rs 161.66 crore primarily on the back of increase in BOPET sales volumes by 75% on y-o-y basis to 25,000MT in Q2FY12 against 14,300 MT in Q2FY11 in spite of awful market conditions.

The operating profit declined by 74% to Rs 14.94 crore as operating profit margin crashed from 38.6% in Q2FY11 to 9.2% during the quarter under review on the back of decrease in sales realization and increase in raw material costs.

Increase in interest costs by 202% to Rs 7.20 crore and rise in depreciation costs by 78% to Rs 6.68 crore coupled with the Forex loss of Rs 3.18 crore due to currency fluctuations together lead to a loss of Rs 1.07 crore during the quarter ended September 2011 as against net profit of Rs 36.71 crore in Q2FY11.

For the H1FY12, the Company witnessed 29% increase in revenues to Rs 331.47 crore on y-o-y basis majorly on increase in polyester film sales (PET) by 34% to Rs 293.3 crore.

During H1FY12, polyester film segment contributed about 89% to the total revenues and the remaining 11% of revenues was from engineering plastics segment. The share of Exports in sales was 44% and domestic sales share was 56%.

The Company has made its entry into new specialty PET resin business. It is a knowledge-based business, which is completely dependent on R & D capability.

The Company stated that around 30,000 tonnes of capacity is available in the polyester segment and it will be utilized in the PET resin business. The capex planned for the business is Rs 12-13 crore towards some modernization equipments .It is expected that it would start generating revenues from the beginning of FY13 and might attain about Rs 150-200 crore in the same fiscal year.

During the quarter, the other expenditure increased by 923 bps to 22% on higher selling and packing expenses etc on surge in the polyester films production on y-o-y basis.

During the quarter, the average price of the polyester films declined by sharp 32% to Rs 108 / Kg and the current price is at Rs 92-95/Kg.

During the quarter, the capacity utilization of polyester films is 90% (optimum) and the capacity utilized for the polyester chips and the engineering plastics stood at 50% and 40% respectively.

As on September 30, 2011, the Forex loans stood close to Rs 130 crore (11 million in Euro terms and 6 million in USD terms). The Rupee term loans stood at Rs 22-25 crore and the working capital is at Rs 72-80 crore.

The Company is incurring losses at the current price of Rs 92-95 per kg of polyester films. The break-even levels will be achieved only when the product prices by Rs 12-15/Kg, without corresponding increase in input costs.

The Company expects higher margin and profits in FY13 on the back of new specialty PET resin business.