Equity Research report by Hedge Equities Limited

1. 2010 COMPANY RESEARCH REPORT October 28, 2010
COMPANY RESEARCH REPORT
INITIATING COVERAGE
SUPREME INDUSTRIES LIMITED
RECOMMENDATION: BUY
CMP: Rs. 144
1st TARGET: Rs. 230
2nd TARGET: Rs. 244
HOLDING PERIOD: 1 – 2 Years
RISK PROFILE: AGGRESSIVE

2. BUSINESS SUMMARY Sector: Plastic NSE Code: SUPREMEIND
EPS (TTM): Rs.13.01
Supreme Industries Limited (SIL) is one of the largest PE (TTM): 11.17 BSE Code: 509930
plastic processing companies in India, processing over Industry PE: 12.29
Mkt. Cap: 1829.19 ISIN Code: INE195A01028
two lakh metric tonnes of plastic per annum. The 52 Wk high: Rs. 169.90
company’s core operations involve processing polymers 52 Wk low: Rs. 71.00 Reuters Code: SUPI.BO
and resins into plastic products which are quote P/BV: 4.84
diversified and spread over four broad product Beta: 0.45 Bloomberg Code: SI IN
Yield (%): 2.50
categories namely: - Piping products, Industrial
Face Value: 2.00 Website:
products, Consumer products and Packaging products. Debt/Equity: 0.78
www.supreme.co.in
Institutional: 4.56 %
INVESTMENT RATIONALE/RISKS
SIL is involved in an industry that is extremely under-
penetrated, fragmented and dominated by the
unorganized sector and thereby offering tremendous
scope for a large and organized player the potential to (In crores) JUN-09 JUN-10 JUN-11E JUN-12E
stake a claim and scale up their operations. The SALES 1654.94 2007.02 2616.74 2928.77
company has put in place a well thought out and PAT 94.34 142.08 259.50 335.46
rigorous strategy that is due to play out all the way until
EPS 7.42 11.18 20.42 26.40
2015.
PE 19.38 12.87 7.04 5.45
SIL has a fantastic distribution network, diversified and
vast product offerings, a superior brand image and is
very well positioned across India (SIL possesses 19
manufacturing units that are spread out across the four Sensex vs SIL
key zones across India).
25000.00 200.00
The next two years (most notably the current year) will 20000.00 150.00
15000.00 100.00
see SIL generate revenue through its non-core 10000.00
construction business which is likely to be a crucial EPS 5000.00 50.00
booster. 0.00 0.00
30-Apr-10
31-Oct-10
31-Mar-10
30-Sep-10
29-Dec-09
28-Feb-10
31-Jul-10
30-Nov-10
31-May-10
31-Aug-10
29-Jan-10
30-Jun-10
Both the historical financials and the forecasted
financials of SIL over the next two years paint a very
healthy picture of the firm, be it earnings growth rates,
ever-increasing margins, best-in-class ROE and ROCE, SENSEX SIL
cash flow position, debt levels, strength of the balance
sheet and dividend payouts.
SIL's SHAREHOLDING PATTERN
Risks include the possible volatility in PVC resin prices
(crucial component in the manufacture of piping AS AT SEP 2010
products) and rising crude oil prices (the prices of PROMOTER DII FII OTHERS
polymers such as polyethylene, polypropylene are
closely tied to crude oil prices. The other major risk is
the valuation (exemplified by the trailing PE ratio) which
is just a tad lower than the industry average. 46% 50%
Institutional participation in the stock too is relatively
lower and significant outperformance may depend on 4% 0%
renewed institutional appetite.
Source: Multiple Sources

3. December 30,
COMPANY RESEARCH REPORT
2010
Contents
BRIEF PROFILE .............................................................................................................................................................................. 2
COMPANY ADDRESS................................................................................................................................................................. 2
TOP MANAGEMENT ................................................................................................................................................................. 2
BUSINESS ...................................................................................................................................................................................... 3
SECTOR ......................................................................................................................................................................................... 7
OUTLOOK AND SCOPE.................................................................................................................................................................. 9
FINANCIALS AND VALUATIONS .................................................................................................................................................. 13
HISTORICAL FINANCIALS ........................................................................................................................................................ 13
FINANCIAL OUTLOOK ............................................................................................................................................................. 14
RISKS........................................................................................................................................................................................... 16
INVESTMENT RATIONALE........................................................................................................................................................... 17
FINANCIAL HIGHLIGHTS -CONSOLIDATED.................................................................................................................................. 20
FINANCIAL RATIOS -CONSOLIDATED.......................................................................................................................................... 21
FINANCIALS GRAPH AND PEER GROUP COMPARISON .............................................................................................................. 22
ANALYST NOTES AND COMPANY NEWS .................................................................................................................................... 23

4. December 30,
COMPANY RESEARCH REPORT
2010
BRIEF PROFILE
Supreme Industries Limited (SIL) is one of the most
prominent plastic manufacturing companies in India, COMPANY ADDRESS
having been set up in 1942, and having over 44 years Supreme Industries Limited,
of experience under the current management. The
company is today one of the largest plastic processing E-2, Ansa Industrial Estate,
companies in India, processing over 2 lakh metric
Saki Vihar Road,
tonnes of plastic per annum. The company’s core
operations involve processing polymers and resins Saki Naka,
into plastic products, which are quite diversified and
spread over four broad product categories namely:- Andheri (E),
Industrial Products, Consumer Products, Piping Mumbai- 400072
Products and Packaging Products. SIL is credited with
pioneering various products in the industry which
include Cross- Laminated Films, HMHD Films,
Multilayer Films, SWR Piping Systems, PP Mats and
more. SIL has two subsidiaries. The company has a
29.88% stake in Supreme Petrochem Limited (SPL)
which is involved in the manufacture of polystyrene,
expanded polystyrene, extruded polystyrene boards TOP MANAGEMENT
and compounds of polystyrene and polyolefins. SPL is 1. Chairman – B L Taparia
the largest exporter of polystyrene (PS) from India
2. Managing Director – M P Taparia
exporting to over 80 countries across the globe. SIL
also enjoys a 100% stake in Supreme Industries 3. Director – B V Bhargava
Overseas (FZE) which is located in the United Arab
4. Director – H S Parikh
Emirates (UAE). Another element of strength
associated with SIL is the fact that it is extremely well 5. Director – N N Khandwala
spread out across the country. This subsidiary has 6. Director – S R Taparia
enabled SIL to have a product presence in 21
7. Director – Y P Trivedi
countries. The company has 19 manufacturing
locations across all the key zones of India (North, 8. Executive Director – S J Taparia
South, West, East and Central India).
9. Executive Director – V K Taparia
2

5. December 30,
COMPANY RESEARCH REPORT
2010
BUSINESS products are not just limited to India alone and have
garnered a good response
Supreme Industries Business Targeted Customer
in territories such as the
Limited (SIL) is involved Vertical Product Portfolio Segment
uPVC Pipes, Injection UK, Australia and New
in the business of Moulded fittings,
Handmade fittings, Zealand. Some of the key
processing polymers and Portable Water
Polypropylene Random, applications where the
resins into finished Plasic Piping Co-polymer Pipes &
Supply, Irrigation,
System Drainage & company’s piping
plastic products which Fittings, HDPE Pipe
Sanitation Housing
Systems, CPVC Pipes products are used include
are broadly spread across Systems, LLDPE Tube and
Inspection Chambers the field of irrigation,
four product categories
Consumer Retail Stores and water transportation,
namely Industrial Products Furniture and Mats Exports
Auto Sector, industrial usage,
Products, Piping Electronic infrastructure
Industrial Component,
Products, Consumer Industrial Material Handling
Appliances, Water
Purification, Soft requirements, borewell
Products and Packaging Products Products (Crates, Pallets
Drink Companies,
and Dustbins) applications, the building
Products. Of the four Agriculture &
Fisheries industry, sewerage
product segments, piping Electronics, Food industry and rain water
products are the largest Industry, Sports
Specialty Films, Goods, Insulation, harvesting. The key piping
contributor to the top- Packaging Protective Packaging Construction,
product of Supreme
line having contributed Products products, Cross Agriculture,
Laminated Films Floriculture, includes UPVC Pipes,
around 43.5% in both Horticulture, Grain
Injection Moulded
2009 and 2010. It is Storage Tarpaulin
Fittings, Polypropylene
followed by the Packaging Product segment, the
Copolymer Pipes and Fittings, HDPE Pipe Systems,
Industrial Product segment and the Consumer
CPVC Pipe Systems, LLDPE Tube and Inspection
Product segment that have contributed on average
Chambers. SIL has introduced various pioneering
24%, 20% and 12% to the top line in the last two
productas in this segment which include SWR
years. SIL also has a marginal exposure to the
Drainage System, Acqu Gold High Pressure Plumbing
construction sector, a story which is expected to play
System, Indo- Green PP-R-hot and cold water
out until December 2011.
system, Eco-Drain structured wall hi-tech pipes and
Piping Products Nu-drain underground drainage system. The
company recently introduced the sprinkler system in
SIL is considered to be the leader in the plastic piping several states (which is essentially devised using
segment with its products being using in 19 different polyethylene pipes) and this is one item that is
applications. The company enjoys an 18% market expected to be a key driver in the coming years as
share in the organized domestic plastic piping the volume of polyethylene pipes had grown by
segment in India and in the broader piping segment close to 100% volume on a y-o-y basis. Another
market in India valued at Rs.1000 crore, the product that stands out in the piping product
company was able to secure a 7.3% market share in segment of SIL is the company’s lead free “Aqua
2009-10. In fact the popularity of SIL’s piping
3

6. December 30,
COMPANY RESEARCH REPORT
2010
gold” plumbing system that carries cold water. This made using 100% virgin polymers, using computer
product has been successful in replacing the GI pipes designed moulds at their various ISO certified plants.
(Galvanized Iron) in the housing industry as the cost SIL also enjoys the distinction of pioneering
of production is 50% less and enjoys far superior lacquered and upholstered moulded plastic furniture
durability. The company is also a very prominent in India and also being the first to utilize high end
manufacture of PVC pipes that are fast becoming the injection moulding technology in their
preferred mode of piping over the traditional forms. manufacturing process. The company’s strategy in
The advantages that PVC pipes has over the other the future includes focusing on the lacquered
pipes include a greater life span without any loss of segment and premium furniture products. Recently
strength, being lightweight and hence reduction in the company introduced a designer chair called
transportation costs, as well as ease of installation. “DIVA” that has been very well accepted by the
market due to its inbuilt metal legs that provides
SIL 's REVENUE BREAKUP stability, gas moulded plastic seats that provides
2500.00 strength and transparent back that provides
2000.00 aesthetic beauty.
483.89
1500.00 407.39 237.43
1000.00 193.03 411.04 In order to sell its furniture items SIL has set up 209
333.12
500.00 720.50 874.86 exlusive franchise show rooms all across India and
0.00
will be ramping up their showroom strength to 300
2009 2010
units in the current year.
PIPING PRODUCTS INDUSTRIAL PRODUCTS
SIL’s mats segment hasn’t been doing particularly
CONSUMER PRODUCTS PACKAGING PRODUCTS
well as a considerable proportion of the final
products are exported to countries abroad and that
Source: Company
segment was badly hit during the recession era. The
Consumer Products mats segment of SIL is still in a process of
convalescence. However the management is
SIL’s consumer products include furniture and mats.
confident of turning things around in this segment
The company is considered to be the second largest
and believes that the future bodes well for this
player in the plastic moulded furntiture with a
segment as most of the economies are beginning to
manufacturing capacity of 21700MT. Of the Rs.1100
come out of the woods.
crore valued market, SIL was able to garner a market
share of 13% in 2009-2010. The company’s vast Industrial Products
range of plastic furniture can be divided into eight
Under this broad product segment SIL manufactures
sub categories, namely Upholsters, Premium
industrial components and material handling
monoblock chairs, monoblock chairs, Armless chairs,
products. The estimated market size of the material
Centre tables & trolley, Dining tables, Baby chairs
handling segment is Rs.560 crores and SIL enjoys an
and Stools. Another distinct feature of SIL’s furniture
18% market share. The company’s material
manufacturing expertise lies in the fact that it is
4

7. December 30,
COMPANY RESEARCH REPORT
2010
handling and storage product range is extremely has been striving to become a tier 1 supplier in the
comprehensive, from small Bins to Super Jumbo auto industry by associating itself with suppliers
Crates, Injection SIL’S MANUFACTURING UNITS
right from the
Moulded and Roto Sr. No. Unit Location Piping Industrial Consumer Packaging conceptualization stage.
Products products Products Products
Moulded Pallets, Jalgaon Body parts are also
1 YES
Injection moulded and (Maharashtra) provided for various
Noida (Uttar
2 YES
Roto moulded Garbage Pradesh) electrical appliance
Pune
bins. The company’s 3
(Maharashtra)
YES manufacturers in the
material handling Halol country and Whirlpool is
4 YES
(Gujarat)
equipment are used in a Malanpur one of SIL key clients.
5 (Madhya YES
whole host of industries Pradesh) Earlier in the year SIL was
Raigad
ranging from the 6
(Maharashtra)
YES able to secure a rather
electronic industry, 7
Hosur
YES prestigious project from
(Karnataka)
engineering industry, Pondicherry Tata Chemicals for the
8 (Union YES YES
automotive industry, Territory)
manufacture of water
textile industry, fisheries, Silvassa purifiers called Tata
9 (Union YES
fruits and vegetable Territory) Swach and the reasoning
Khushkhera
handling, soft drinks 10
(Rajasthan)
YES for Tata selecting SIL was
handling, dairy products 11
Derabassi
YES YES due to the latter’s
(Punjab)
handling and more. Of all 12
Durgapur
YES YES
admirable geographical
(West Bengal)
these industries, SIL’s Kanpur (Uttar spread across India.
13 YES
material handling Pradesh)
14
Guwahati
YES Packaging Products
equipment are perhaps (Assam)
Jalgaon I
most popular in the soft 15
(Maharashtra)
YES YES YES YES
SIL’s packaging
drinks industry where Urse
16
(Maharashtra)
YES products are categorized
the company is 17
Jalgaon II
YES as Specialty Films,
(Maharashtra)
considered to be the Malanpur Protective Packaging
18 (Madhya YES
largest supplier of crate Pradesh) Products and Cross
equipment and related 19
Sriperumbdur
YES Laminated Films. The
(Tamil Nadu)
matter in the country. products manufactured in
Source: Company
Recently SIL has been manufacturing value additive, this division are most often
tailor made crates that are fast replacing the utilized for packaging purposes, construction
conventional and standard crates. Another industry purposes and insulation purposes. As is the case in
in which SIL’s industrial products enjoy a degree of the most of its other product segments, SIL has
popularity is the auto industry. The company introduced various path-breaking technologies in the
supplies various body parts for illustrious auto country such as Instant Polyurethane Foams,
makers such as Tata Motors and Maruti Suzuki. SIL Reticulated foam for air filtration, Sound absorbing
5

8. December 30,
COMPANY RESEARCH REPORT
2010
open cell foam, High temperature and File Resistant Construction Business
Melamine Foam. SIL also has the distinction of being
SIL has established a 11 storied state-of-the-art
the only Indian company to have the technology to
commercial complex in Andheri, Mumbai called
manufacture XF films under the brand name of
Supreme Chambers. The complex was designed by
Silpaulin. Silpaulin is used in agricultural
Sanjay Puri who is considered to be one of India’s
applications, civil engineering applications,
leading architects. SIL is now looking to sell 2,75,000
packaging application, export marketing and general
square feet of the project and in fact has already
application purposes.
been successful in selling about 40,000 square feet
In the previous fiscal the company’s collaborators and raising Rs.60.20 crore through that sale. The
had developed the Cross Line Bonded Films which is management is now looking to sell the entire
essentially a next generation XF film with superior complex except one floor and is looking to achieve
properties. SIL has been granted Indian patents uptil sale closure by December 2011, with a sales target of
2023 and also enjoys the exclusive right to produce Rs.375 crore. There has been no clarity on whether
the same, in India & SAARC this construction activity of
Countries, as well as the right to SUPREME CHAMBERS- A LUCRATIVE AVENUE Supreme is just a one-off, or
export the product to all the FOR SIL something that the company will
countries in the world, except  2,75,000 sq.feet to be sold for continue to look at in the future
Portugal, Spain and Rs.375 crore. as well.
 Project cost- Rs. 155 crore.
Switzerland. In the last fiscal
 40,000 sq.feet already been sold Research & Development
there was another interesting
for Rs.60.20 crore.
development for the packaging For a company that is involved in
 Sale to fructify by December
product segment as the 2011. the business of churning out
company’s Khopoli pioneering products on a
manufacturing unit was able to consistent basis, one would
procure the BRC (British Retail Consortium) expect SIL to have a strong R&D culture and the
Certificate, thereby making in the First Multilayer company doesn’t disappoint on that front. The
Packaging company in India to receive this company’s R&D centre is located in Mumbai and
certification. An admirable facet of this product is undertakes CAD (Computer Aided Design), CAM
that since it is a flat product it is not freight (Computer Aided Manufacture) and CAE (Computer
intensive. This first mover advantage will enable the Aided Engineering) related projects, particularly for
company to tap the European Marketand the engineering and fabricating intricate moulds and
company has already been in touch with various dies. Before the product is sent out for commercial
companies that have been scouting for materials manufacture, an evaluation of the product is done
that have the BRC certification. by simulating the prospective performance of the
product. Product development teams at all Supreme
Divisions work in synergy with the Centre, to
effectively turn specific customer requirements into
6

9. December 30,
COMPANY RESEARCH REPORT
2010
precisely tailored products. In addition to the in- India plastic manufacturers today are proving to be
house R&D Centre, SIL has also collaborated with quite popular on
global partners in places such as Switzerland, the global front.
Belgium, Japan and Korea to develop a whole host of While the INDIAN PLASTIC
products, most notably in its packaging products qualities of SECTOR HIGHLIGHTS
segment. finished goods  The Indian plastic industry
are quite is characterized by
SIL’S R&D COLLABORATIONS
superior, what fragmentation, under-
actually swings it penetration and the
COMPANY PRODUCT LINE
in the Indian domination of the
Rasmussen Polymer
Development, Cross Laminated Films plastic unorganized sector.
Switzerland
manufacturers’  Indian plastic
Sapac Packaging Instant Packaging Solution
Solution, Belgium favour is the cost manufacturers are noted
for their low cost expertise.
Foam Partner, Reticulated PU Foam of production.
Switzerland  Plastic consumption in
Production costs
Sanwa Kako, Japan 2 Stage Foam India in terms of volume
in India are
PE Tech, Korea Cross Linked Foam grew by 16% last year.
estimated to be However India’s plastic
Source: Company 20-25% lower consumption is just 1/5th of
than in the US. the world average.
SECTOR Some of the  Polymer production is
The origins of the Indian plastic industry extend all characteristics expected to rise in the
the way back to 1957 which was the year which saw that are utilized current year thereby
the modest and promising beginning of the to describe the allaying fears of raw
production of Polystyrene, which is essentially a Indian plastic material shortage for
polymer (Polymers are further processed and refined industry today is domestic players.
to produce plastic). In the initial phases, the plastic  Going forward, government
that it is highly
was manufactured using natural and synthetic initiatives such as the
fragmented,
Jawaharlal Nehru National
materials of different forms, attributes and under penetrated
Urban Renewal Mission
appearances. However with time, organic and possesses a and the Housing and Urban
compounds (materials containing carbon, hydrogen highly dominant Poverty Alleviation
and other elements) were preferred as ingredients unorganized programe are expected to
over natural and synthetic materials. Economic sector. Per capita boost the fortunes of plastic
liberalization from 1991 stimulated the Indian plastic consumption of piping manufacturers in
industry even further, as joint ventures, foreign plastic and India.
investments and easier access to technology from polymers in India
developed countries began to unfold. leaves much to
be desired in comparison with the world levels. Even
7

10. December 30,
COMPANY RESEARCH REPORT
2010
though plastic consumption in India, in volume terms National
grew by 16% (yoy) in the last fiscal, to reach 8 million Urban
tonnes, the quantum of consumption in relative Renewal
LESS-PUBLICIZED MERITS OF
terms is extremely low. To put things into Mission PLASTIC
perspective, India’s consumption of plastic is just (JNNURM),  Plastic has a strong utilitarian
1/5th of the world average. The per capita polymer the Central value in road construction
activities saving 5-10% of
consumption stood at a lowly 5.66 kgs. In the US that Government bitumen costs per kilometer.
figure stood at 71.46 Kgs., while China and Brazil has given a  Contrary to the general
posted figures of 30.74kgs and 22.71 kgs. However special focus perception, plastic can
actually be recycled into non-
there is tremendous scope for growth, as the current to improve
critical items of daily use.
consumption level of 8 million tonnes is expected to the  Usage of plastic over metals in
double to 16 million tonnes by 2018 and reach 20 infrastructur automobiles reduces CO2
million tonnes by 2020. e of 91 cities emissions by 50 mmt per year
for the automobile sector
from 63 globally.
The cost of raw materials too are not expected to be
citiers and
a huge impediment in the near term as the
towns as
domestic supplies of polymer are expected to
announced
increase and hence serve as a boon for the polymer
earlier in the country. Under this scheme the
processors such as SIL. The expanded capacity of
government has budgeted Rs. 11619 crore in FY11
the PP (Polypropylene) plant of Reliance Industries
to improve drinking water supply and solid waste
Limited at Jamnagar began production earlier in the
management. In addition to that the government
year. Another major manufacture of polymers-
has budgeted another Rs.1000 crore for Housing
Haldia Chemicals too increased the capacities of its
and Urban Poverty Alleviation in FY11.This will
PP (Polypropylene) and PE (Polyethylene) units in
increase the market for plastic piping systems as
West Bengal. If there is a risk however it is the rising
real estate developers go about their business. PVC
crude oil prices as it is a key ingredient in the
plastic pipes are fast turning out to the preferred
manufacture of polymers.
piping system across the world with China being
While the under-penetration of plastics in India is one of the biggest propagators of this product. PVC
quite evident there also exists a number of key pipes
growth drivers that are likely to help bridge the
Increasing urbanization, improving lifestyles in
level of under-penetration in the country and
semi-urban and rural segments and a pickup in
provide a fillip to the plastic manufacturers in India.
consumer sentiment in the export markets are
And these growth factors extend across all four of
likely to aid the consumer product segments in the
SIL’s broad product segments. SIL ‘s piping product
near term. The industrial products division will be
segment is likely to see significant traction due to
looking to strong growth drivers in the auto
the government’s thrust on irrigation facilities and
industry and the soft drink industry which are the
urban sanitation. Under the Jawaharlal Nehru
biggest users of SIL’s industrial products and
8

11. December 30,
COMPANY RESEARCH REPORT
2010
material handling equipment. The packaging is still below world levels. In fact contrary to
segment as well is bound to prosper due to general perception plastic can be recycled into non-
increased urbanization and a greater thrust on critical items of daily use and waste plastic can also
packaged foods by the government. The increasing be used to generate fuel. According to CRISIL,
sale of white goods is expected to be another plastic waste has tremendous utilitarian value in
stimulant. road construction as it can be blended with Bitumen
to improve binding properties and increase savings
There is also great scope in the export market as
of 5-10% per kilometer in the cost of bitumen. Also
currently India only has a miniscule share of 1.5% of
what most people aren’t aware of is the fact that
the export volume of plastic. According to CRISIL
plastic has energy saving properties. Its energy
world trade in plastics is expected to be 140 MMT
savings properties are best
by 2012 and there lies a
exemplified in the auto and the
very lucrative opportunity 5 YEAR STRATEGY OF SIL
electrical appliances industries.
for Indian based plastic  Reach the Rs.4500 landmark on the
According to the Automotive
manufacturers. The rating
topline. Research Association of India,
agency goes on to stress
 Increase share of value added the replacement of metals by
that however, India would
products (Products with OPM>17%). plastics improves the mileage of
need to realign its trade
vehicles and reduces CO2
basket to focus more on  Diversify product portfolio.
emissions by 50 mmt per year
high value plastic products  Expand capacity to 595000MT by
for the automobile sector
rather the polymers as is 2014-15. globally.
the case currently. India’s  Increase the number of manufacturing
trade basket is skewed
units from 19 to 31. OUTLOOK AND
towards polymers with
polymers accounting for
 Capital expenditure of Rs.1000 crore SCOPE
68% and processed plastic over the next 5 years. SIL has done remarkably well up
accounting for 32%. until now, with its compelling
According to CRISIL, in the future, plastic growth growth story. In a hypothetical sense most
will best be seen in Packaging usages(processed companies that may have followed SIL’s growth
foods, agricultural produce), plasticulture usages chart may be tempted to consolidate for a while
(irrigation, mulch films, green houses) and before embarking on further growth initiatives but
infrastructure usages (pipes, power and telecom when one is involved in an extremely under
cables and geo-synthetics). penetrated and fragmented market such as the
Indian plastics market that would represent an
A well-publicized drawback of plastic products or opportunity lost. Keeping this is mind SIL has put in
perhaps a big misconception is that it is not place some very interesting targets that it hopes to
environmentally friendly and this could perhaps be achieve by 2014-2015. It is already widely
one of the reasons why plastic consumption in India acknowledged to be the leader in the Indian plastics
9

12. December 30,
COMPANY RESEARCH REPORT
2010
segment and has such a vast spread in terms of will be looking to develop electrofusion and
distribution network and strategically positioned compression moulded fittings. The company also
manufacturing units, but the management now wants to widen and deepen its distribution network
wants to take the company to the next level. and increase the number of its channel partners.
The management feels that there are still several
If the “Management Discussion and Analysis”
towns where dealer net works have to be created
segment in an annual report is anything to go by,
and over the next two years the target will be to
then one can certainly expect a very eventful future
cover the unrepresented towns with growth
for SIL. Some of the targets that the management
potential.
has set until 2014-2015 SIL’S LIST OF NEW MANUFACTURING UNITS TO BE
include increasing the SET UP BY 2015 However while all those plans
number of manufacturing Division
No. of New Proposed are going to transpire in the
Locations Locations
units from the existing 19 long-term, things are looking
units to 31 units, enhancing Industrial Ahmedabad, fairly encouraging in the near-
Moulded 3 Jamshedpur &
the manufacturing capacity to Products Pondicherry term as well and the next two
595000MT augmented by years particularly the current
Rs.1000 crores of capital Plastic Piping year, one could see a huge
1 West Bengal
System
expenditure, diversifying surge in the company’s top line
their product portfolio even Cross Laminated and bottom line as it goes
1 Halol
further by focusing on Film about disposing blocks of its 12
technological innovation and storied commercial complex-
Protective Hosur,Gujarat,
increasing the component of Packaging 4 West Bangal &
The Supreme Chambers. SIL is
value added products and Products Rajasthan looking to sell 275000 square
specialty products across all feet of the state-of-the art
its four product segments Furniture 3
Andhra,East Zone property that is estimated to
& North Zone
(The value added products fetch them revenues to the
are essentially high margin Source: Company tune of Rs.375 crores. The
products or OPM>17%, that contribute additional management has stated their
value without adding to the cost. The company desire to see the fructification of the entire sale of
wants to increase the contribution of value added the commercial complex bar one floor by December
products of SIL to 30% by 2014 and 20% in the 2011. There are obviously certain question marks
current year. Last year the contribution of value over SIL’s corporate focus as it is not clear if the
added products to total sales was 17.78%). As part construction business is something that the
of the company’s initiative to develop and company will be looking to continue with, in the
introduce innovative products for new applications, future, but it is certainly going to be earnings
the company sees great scope in the micro accretive in the current year and that is something
irrigation and composite segment and the shareholders or prospective shareholders of SIL
infrastructure and gas distribution segment where it should welcome.
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13. December 30,
COMPANY RESEARCH REPORT
2010
Interestingly enough SIL is also able to secure crucial cash flow
looking to strengthen its strong from the sale of the land and
brand equity position and has TWO YEAR OUTLOOK OF SIL building as well.
set up a training centre to train
In the last fiscal the company’s
people about the right method Sale of SIL’s Supreme Chambers to
fructify by December 2011. material handling equipment
of the installation of its wide
Strengthening of brand equity, division (crates) was adversely
range of piping products. It has
particularly through the new affected by the disappointing
also set up a Display Centre
training and display centres that monsoon conditions as retail
showing various systems made
were set up in September 2010. chains tend to use the
by the company. Both the
Retail marketing initiatives will be company’s material handling
training and display centres
stepped up on a pan India basis. equipment for the
have started operations since
Demand for SIL’s food handling transportation of crops such as
September 2010. The crates (particularly Tomatoes and Tomatoes and Grapes during
management is quite Grapes) to increase in the current
post harvest transportation (SIL
optimistic about this initiative fiscal.
is the preferred supplier of
and is encouraging its channel The number of consumer product
crates in this segment). In the
partners to bring their showrooms to be increased from
209 to 300 in the current year.
current year due to the
dealers/sub-dealers and end
Besides the West Zone consume spectacular monsoon, this
customers to visit the training
product market to flourish due to segment is likely to post better
and display centre.
logistical advantages provided by results. SIL has also developed
The company’s core activities of the Gadgeaon plant that several new moulds to cater to
converting polymers and resins commenced manufacture of its ever increasing applications
into finished plastic products furniture in September 2010. and the supplies of these
across four broad categories, The furniture manufacturing products have just started.
too looks fairly encouraging. capacities of SIL’s Durgapur,
Pondicherry and Guwahati plants to With regard to its consumer
The management took the
be enhanced. product segment, the company
decision of shutting down its
Production generating capacity of is continuing to ramp up the
Nandesari unit which was not
the Kanpur plant to be increased production of its value added
contributing to the business from 8000 tonnes p.a. to 15000 products and recently launched
growth due to pollution issues tonnes p.a.
its Designer Chair “DIVA” which
and other factors. Since then Demand for SIL’s piping products to
is already proving to be quite
the company has reconditioned get stimulated from the
popular. The company currently
and shifted all the major replacement market.
has 209 exclusive showrooms
equipment to other plans and
that showcase SIL’s superior
those equipments are now
range of furniture and intends to
running to their original design
increase the number of
capacity. The company was also
11

14. December 30,
COMPANY RESEARCH REPORT
2010
showrooms to 300 by the end of the year. To environment of the mixing division and consistency
augment the increase in showrooms the company in quality. PVC resin is one of the crucial components
will also be increasing the furniture manufacturing used for making SIL’s pipes and the prices of that
capacity of its Durgapur, Pondicherry and Guwahati material are something that could affect margins of
plants. Besides, in September 2010, the company this division. The company will also be launching
started the manufacture of furniture from its sprinkler systems in several states for the first time
Gadegaon plant in order to cater to the West Zone and that should contribute decently to SIL’s
market. Previously it was catering to this market financials. The management also sees significant
from its Pondicherry unit and this was nurturing scope in the replacement market as more and more
logistical disadvantages for the company. Andhra buildings are undergoing renovation. To meet the
Pradesh is another territory where the company is additional requirement of this market the
looking to set up a furniture manufacturing plant in management has stated that they will be focusing on
order to nullify the logistics cost disadvantage and it retail marketing on a PAN India basis.
has also initiated actions to acquire land in the state
There have also been recent reports suggesting that
as well as look for channel partners in this region.
SIL is in the process of manufacturing plastic gas
The mats’ sales of the company as well are expected
cylinders which, if true, could prove to be a path
to pick up as most of the economies across the
breaking product. It would also give the company a
world, are slowly coming out of the woods and
first mover advantage. However the management
exports account for a bulk of the mats’ sales of SIL.
has stated that one of their thrust areas in the future
As far as its piping products division is concerned the will be electro fusion and compression moulded
company is looking to enhance the production fittings for infrastructure and gas distribution.
generating capacity of its Kanpur plant from 8000
While the management is going to be investing
tonnes p.a to 15000 tonnes p.a. To facilitate the
around Rs.180-270 crores of capex in the current
expansion, the company had acquired a further 7
year, most of it is going to be devoted to the
acres of adjoining land. At its Piping manufacture
Industrial products division, Consumer products
plant at Gadegaon the company had not only
division and Piping products division. The
completed the expansion of its UPVC and CPVC
management will not be devoting much to the
production lines but had also increased the level of
performance packaging films segment and the cross
automation in the production capacity. In the last
laminated film segment as committed capacities in
fiscal due to severe drought conditions a lot of state
these two segments still have to go into production
governments had enforced a ban on the digging of
due to low capacity utilization and a shortage of
new borewells and this had affected the business of
labour.
this division. Due to the fantastic monsoon in the
current year, the situation is expected to be
reversed. This has thrown up a number of benefits
for the firm such as increase in output, reduction in
man power requirements, improvement in the
12

15. December 30,
COMPANY RESEARCH REPORT
2010
FINANCIALS AND VALUATIONS Depreciation too has been another item that hasn’t
caused a lot of strain on the profits. Depreciation as a %
HISTORICAL FINANCIALS of Net sales which stood at 3.4% at the end of June 2007
dropped to 2.63% at the end of June 2010. All in all the
The historical financials of the company provide a profits of the
relevant picture of the degree of prosperity that SIL has company have
enjoyed up until now. Before dissecting the financials, it grown at a HISTORICAL FINANCIALS
must be noted that SIL’s annual results are published notable CAGR of
every June (SIL follows a July-June time period for 44% from Rs. 47 3 year historical sales has grown at
accounting). a CAGR of 19.7% from Rs.1116.22
crores at the end crore to Rs.2007 crores.
From June 2007 - June 2010, SIL‘s revenue has grown of June 2007 to
Piping products are the biggest
from Rs. 1116.22 crore to Rs. 2007 crores, growing at a Rs.142 crores at
contributor to the topline
CAGR of 19.7%. Taking into consideration a two year the end of June contributing around 44%, followed
2010. PAT by packaging products, industrial
average, the plastic piping product segment has been
products and consumer products
the biggest contributor to SIL’s annual revenue margins as well that contributed 24%, 20% and 12%
contributing around 44 % to the topline, the next big have moved up respectively.
contributor is the packaging product segment in the last three
Debt equity ratio has ranged from
contributing around 24 % to the top line. The industrial years (there was 1.03 to 0.78 in the last three years.
products segment and the consumer products segment a decline in 2008
3 year operating profits have grown
contribute around 20% and 12% respectively to the however on a at a CAGR of 33% from Rs.121 crore
overall top line. yoy basis due to to Rs.289 crore.
increase in the
The operating profit for the same time period has grown 3 year net profits have grown ata
interest CAGR of 44% from Rs.47 crores to
from Rs. 121 crores to Rs. 289 crores, growing at a rather Rs.142 crores.
component. The
impressive CAGR of 33%. Operating margins (OPM) have
company had Operating profit margins in the last
climbed up the ladder quite impressively. OPM which
increased its three years have increased from
stood at 10.4% moved up year on year to end at 14.79% 10.4% to 14.7%.
secured loan
at the end of June 2010.
component Net profit margins in the last three
SIL’s debt levels have always hovered around a significantly by years have increased from 4% to
7%.
manageable level and consequently interest payments Rs.72 crore in
haven’t been a major impediment in transferring the that year) from Last year’s ROE and ROCE were
39.8% and 38.7% respectively.
buoyancy at the operating level down the bottom line. 4% at the end of
The debt equity ratio which stood at 1.03 at the end of June 2007 to 7%
June 2007 rose up marginally for the next two years to at the end of
reach 1.13 before petering down to 0.78 at the end of June 2010.
June 2010. Consequently interest as a % of sales has
SIL also has a decent set of cash levels. It has been able
been quite negligent. Interest as a % of sales was 2.9% at
to maintain a strong set of cash at both the operating
the end of June 2007 and even though it rose to 3.3% the
levels and net levels in every year. At the end of June
double impact of expanding top line growth and
2010, SIL has generated cash worth Rs.146 crores from its
decrease in interest payment sent that figure to a lowly
operating activities and Rs.19 crores of net cash.
1.7% at the end of June 2010.
13

16. December 30,
COMPANY RESEARCH REPORT
2010
FINANCIAL OUTLOOK of total products. Value added products are products
SIL’s management has put in place a set of targets that have an OPM >17%.
which it hopes to achieve by 2014-2015 and has However since we are only forecasting for a two year
given a decent guidance on some of the initiatives it time horizon we have only considered information
will be taking up until then. The management has set that is relevant within that stipulated time frame for
a target of achieving Rs.4500 crore on the top line by arriving at our share price targets. All things
2014-2015 which would represent a CAGR of around considered the next two years look very encouraging
17%+. This top line growth will be augmented by for SIL both from a top line and bottom line
increasing the number of manufacturing units from perspective. In addition to the management’s
the current 19 to 31 by the end of 2014-2015 and a initiatives to spur top line growth, there also exists
grand capital expenditure plan of Rs.1000 crores (an some strong tailwinds (macro-economic, industry-
average of oriented and government oriented factors) that are
around Rs.200 likely to stimulate SIL’s fortunes.
2 YEAR FINANCIAL OUTLOOK
crore per year).
 Top line to grow by 30% in the first What’s also Despite putting up a decent set of financials in the
year and 12% in the second year.
quite last fiscal, the sales of some of SIL’s key products
 The contribution of value added impressive is came under pressure due to the drought like
products (products with OPM>17%)
that the scenario. However this year’s superior monsoons are
to total sales to increase from
17.78% to 20% in the current year. management is likely to rectify that scenario. Of particular relevance
looking to was SIL’s piping product segment, where the
 Operating profits to grow at a 2 year
CAGR of 37%. generate this government had to ban borewell digging due to the
figure through drought situation. Besides PVC pipes are fast
 OPMs to increase from 14.3% to
16.6% and 18.6% for the next two superior sales becoming poular around the world, with China
years. and internal placing special emphasis on PVC pipes over the
 Rs.180 crore to Rs.270 crore of accruals rather traditional pipes. This year will also see SIL introduce
CAPEX to be spent in the current than debt. SIL the sprinkler system for the first time in various
year.
has also set states. In addition to the likely buoyancy in the
 Interest as a % of net sales to be dual objectives piping segment, the industrial product division
brought down to less than 1%. It of seeking (material handling equipemt) too is likely to benefit
was 1.7% in the previous year.
greater top line this year after having faced some difficulties in the
 Depreciation to grow at a 2 year growth and last year. SIL’s crates are used by retail chains for the
CAGR of 20% as rapid plant
expansion comes into play. increasing the transportation of crops such as Tomatoes and
component of Grapes during the post harvest season and last year
 Net profits to grow at a 2 year CAGR of
54% and NPMs to reach 10% and 11.4% value added there was some pressure seen due to the poor
over the next two years. products or monsoon. The thrust of the government in various
specialty issues tied directly or indirectly to the plastic
products as a % industry, too, are likely to boost top line growth.
14

17. December 30,
COMPANY RESEARCH REPORT
2010
Under the FY11 Union Budget, the government has 12% (high base effect, marginal income from
allocated Rs.11619 crore for the Jawaharlal Nehru construction business).
National Urban Renewal Mission (JNNURM), to
As previously mentioned the SIL management has
improve the infrastructure of 91 cities and improve
already stressed their desire to gradually increase
the drinking water supply and solid waste
the contributions of value added products or
management. Besides the government has also
specialty products across all its product segments
allocated a further Rs.1000 crore under the Housing
and this is likely to throw up much superior
and Urban Poverty Alleviation in FY11 which will lift
operating margins. The contribution of value added
real estate development and demand for piping
products to total sales was 17.78% at the end of June
products. SIL is also resorting to significant brand
2010 and SIL intends to increase that figure to 20% in
building exercises and strengthening its presence in
the current year and 30% by 2014. The management
untapped towns and the unorganized sector of India.
is also looking to maintain cost competitiveness
However perhaps the most attractive features of SIL through continuously enhancing operational
over the near term is going to be the revenue they efficiencies, leveraging on economies of scale and
will secure through their construction business. The effective working capital management. Assuming a
company in collaboration with one of India’s leading degree of stability in commodity prices, the rationale
architects (Sanjay Puri) has completed the of high value added products and superior top line
construction of Supreme Chambers, a 2, 75,000 growth operating profits for the next two years are
square feet commercial complex for which the expected to grow at a CAGR of 37% while operating
company has already sold 40,000 square feet, raising margins are expected to rise from 14.3% to the
Rs.60.20 crore ( but only Rs.36 crore accounted for in 16.6% in June 2011 and 18.6% in June 2012 (SIL’s
the previous quarter which means the remaining management wants to maintin OPMs of >15% till
Rs.24 crore will be accounted for in the December 2015 at least).
quaryer. The management has stated their desire to
From different sources of data it is determined that
fructify the entire sale by the end of December 2011
SIL will be spending anything between Rs.180 crores
and is looking to accrue a total of Rs.375 crore
to Rs.270 crores in the current fiscal and perhaps the
(inclusive of the Rs.60.20 crore). The cost of the
most impressive facet of that figure is that the
project is estimated to be Rs.155 crore so taking a
management is looking to procure that sum mainly
net figure of Rs.220 crore and providing for the sum
through sales revenue and internal accruals which
already received, one is expecting at least Rs.184
means it is all but certain that the debt component
crore to be collected at an average of around Rs.37
or interest component isn’t likely to go down. In fact
per quarter for the next five quarters.
the management has stated that they will be looking
Keeping all these factors in mind and including the to bring down the interest as a % of net sales figure
construction income, we are forecasting the sales of to less than 1 in the current year. Interest as a % of
SIL to grow by 30% from the June 2010 figure of net sales stood at 1.7% at the end of June 2010. SIL
Rs.2007 crore to Rs. 2470 crores and grow by a lower will also be increasing the number of manufacturing
15

18. December 30,
COMPANY RESEARCH REPORT
2010
units from 19 to 31 in the next 5 years and the feel that SIL’s spectacular bottomline growth over
depreciation component is most certain to go up. the last three years (35%) and the prospect of an
Even though it is not likely to increase in terms of even better bottom line growth metric (53%) over
sales (due to the greater sales effect), depreciation in the next two years more than justifies entry at this
isolation, is likely to go up in absolute terms. This point. Besides, in comparison to the valuation of
non cash expense which grew at a miserly 6.3% from India’s benchmark index, a PE multiple of 11.3
FY06-FY10 is expected to grow by a far superior 20% doesn’t appear too daunting, particularly while
over the next two years. considering the fact that the company is one of the
biggest players or perhaps the biggest player in an
Bringing all these factors into the equation, we are
extremely under penetrated, all pervasive and
forecasting the net profits to grow at a 2 year CAGR
growth oriented industry such as the plastic
of 53.6% with an June 2011 EPS of 20.4 and a June
industry.
2012 EPS of 26.4. At a CMP of Rs.148, the stock is
trading at 7.3 times its June 2011 EPS and 5.7 times Pedantic business theorists, who attach
its June 2012 EPS. considerable attention to corporate focus, may not
be particularly buoyed by SIL’s significant, one-off
RISKS (unconfirmed) construction venture, despite it
PVC resin prices are a crucial component in the being earnings accretive in the near term.
manufacture of SIL’s PVC pipes, and in the last fiscal
these prices were fairly stable with less volatility. In
RISKS
fact last year there was a supply shortage in the
domestic shores, and about 0.6 million tonnes had  PVC resin prices were fairly stable last year. However
to be imported to make up for the demand. No in the current fiscal, no major capacity additions are
forecasted in the world market and this might result
major large capacity additions of PVC resins are
in price rise if demand goes up in the current year.
expected in the world markets and there is a Rising crude oil prices are another concern as it
likelihood that SIL will continue to depend on these shares a very close correlation to plastic oriented
huge imports that could see significant price rises if polymers.
demand moves up. Crude Oil is another commodity
 The trailing PE multiple of the SIL stock is very close
that plays a key role in SIL’s manufacturing process to the average industry PE and value investors may
(the prices of PVC resin, polyethylene and question the prospect of outperformance at these
polypropylene are linked to crude oil prices) and if levels.
crude oil prices continue their northward journey
 SIL’s one-off construction business may not wholly
that could as well hurt SIL’s cost of production. appeal to pedantic or traditional business theorists.
The valuations of the SIL stock when viewed from a
price to earnings multiple are quite close to the
industry average of around 12, and may not wholly
appeal to the consummate value investor, but we
16

19. December 30,
COMPANY RESEARCH REPORT
2010
INVESTMENT RATIONALE opportunity for SIL to stake a claim and dominate
the plastic industry and the management has set in
The SIL stock has pretty much all the ingredients
place a whole host of initiatives in order to
that make for a fundamentally robust stock. SIL is
capitalize, all the way uptil 2015 atleast.
involved in the business of manufacturing a product
that is ubiquitous and has tremendous utilitarian SIL is hoping to reach the Rs.4500 crore sales figure
value in a whole host of applications. In fact, if one landmark by 2015 and that is to be augmented by
were to just pause and look around one’s increasing the number of manufacturing units from
surroundings, it would be hard to disregard the 19 to 31 for the same time period. Product wise as
prevalence of plastic in one’s life. Being such an well, they have a nice diversified mix across four
omnipresent product one would expect the plastic broad segments, and the company’s R&D unit (and
market to be dominated by a whole host of players in some cases), in collaboration with global
with little scope for growth but that is not the case technology majors (Schoeller Wavin Systems
in the Indian plastic market. Firstly compared to the International Services Germany, Rasmussen
global rates, consumption of plastic in India leaves Polymer Development AG Switzerland is constantly
much to be desired. The country’s consumption of looking to add more innovative and value added
plastic is just one-fifth of the global consumption products across its entire product basket. The
average. Under penetration, fragmentation, company is also looking to strengthen its dealer
domination by the unorganized sector and very few network, its channel partners and try and capture
publicly listed players all suggest that the Indian various untapped towns and regions that have good
plastic market is crying out for a strong plastic growth potential. With regard to its consumer
manufacturer to grab it by the scruff of the neck product segment which it displays through 209
and stake a claim. The Indian plastic market is a showrooms, SIL has set a target of increasing the
fantastic market to build a strong market share and number of showrooms to 300 by the end of this
scale up, and SIL with its impressive branding year.
initiatives, geographical diversification and spread
in both its manufacturing and distribution network A number of government policies such as the
and superior resources, diversification in the JNNURM and the Housing and Urban Poverty
product portfolio and leadership (SIL’S leadership Alleviation programme coupled with strong
theory is far from irrefragable as Sintex Industries, a industry and other macroeconomic tailwinds
listed peer, posted marginally better sales in the (monsoon, better harvest season, pickup in global
previous year on a standalone basis and has a far economies that will benefit SIL’s consumer
superior market capitalization to SIL. However products, strong prospects in various plastic
“leadership” is not an absolute term in the Indian dependent economies such as infrastructure,
plastic industry as it is such a wide industry with irrigation oriented, real estate, soft drinks, autos,
innumerable products and dominated by the electrical appliances) too are quite conducive for
unorganized sector). There exists a wonderful SIL’s fortunes, atleast over the next two years.
17

20. December 30,
COMPANY RESEARCH REPORT
2010
Another impressive facet of is going to be generating a
SIL’s strategy is to increase the construction income over the
component of value added next two years. While the
INVESTMENT RATIONALE
products in terms of total sales debate over corporate focus
which will lead to better may be stimulated, we see this
 SIL is functioning in an industry that is
margins for the company. In avenue being a one-off, shot in
under-penetrated, fragmented and
fact the management of SIL lacks leadership in the real sense of the the arm for the company’ two
has set a strong base target of word. SIL has all the ingredients to year EPS.
maintaining a 15% OPM become a dominant force in this
industry in years to come. While fundamentally, SIL has
(Operating Profit Margin) for
 Macro-economic factors, government ticked pretty much all the boxes,
the next five years and that
policies and industry opportunities are the current valuation of the
certainly gives out an air of all very conducive for SIL to flourish.
stock may worry some of the
reassurance. Overall its  SIL has put in place a very lucid and
impressive growth strategy up until core value investors as the stock
historical financials have been
2015. is currently trading at 11.3 times
very good and over the next
 Key facets of the strategy include its trailing earnings in
two years as well, that trend is
expanding manufacturing units, comparison to the industry
expected to continue. Solid showrooms and distribution network,
average of 12 and this would
growth rates, ever-increasing funding a bulk of the expansion plans
through internal accruals and sales perhaps suggest limited upside
margins, best-in-class ROE and
rather than debt, increasing the at current levels. We would
ROCE, moderate or low levels
prevalence of value added products in however like to argue that SIL’s
of debt and strong cash flows
the product structure, diversifying the strong earnings growth more
are some of the strong points product basket even more, maintaining
than justifies a PE of 11.3.
of SIL. a base level for OPMs and achieving
Rs.4500 crore on the top line. Historically earnings have grown
Traditionally SIL has been  SIL’s construction income is expected at a four year CAGR of 35% and
extremely generous with to be a pivotal EPS booster for the next thus employing a PEG ratio one
rewarding its shareholders two years. gets a figure of 0.32 which is
 Dividend payout ratios of SIL have
with divided largesse. The extremely encouraging. If one
varied between 29-41% for the last four
dividend payout ratios have years. were to consider future eps
hovered between 29-41% for  Best-in-class ROE and ROCE (close to growth rates the PEG drops even
the last four years. In the 40%). further to 0.21.
previous year, the dividend  Current trailing PE valuations may
suggest that it is not an ideal entry Investors may note that our
payout ratio stood at 29.32%.
point, particularly for value investors, share price targets are quite
but a trailing PEG ratio of 0.32 and a
However the big positive steep from current levels and
forward PEG ratio of 0.21 provides
kicker for SIL over the next our justification for the same, in
ideal support for an entry into the SIL
two years, particularly in the stock. addition to the strong
current year is the fact that it investment rationale thesis, is
18

21. December 30,
COMPANY RESEARCH REPORT
2010
that our share price targets are based on annual eps
targets. Considering that SIL’s annual results will
only be announced at the end of June of every year
as opposed to the popular and standard trend of
announcing annual results at the end of every
March, expectations have been built in for a longer
period (nine months as opposed to other companies
which have only about six months left to run,
before annual results are announced).
Investors with a one-two year time horizon and
those with an aggressive risk appetite (because of
the high valuation feature) are advised to consider
investing in the SIL stock at current levels with a 1-2
year time horizon with share price targets of Rs.230
and Rs.244.
19