CMP 310.00

Target Price 344.00

ISIN: INE10A01028

SEPTEMBER 16th

,2014

SIGNET INDUSTRIES LIMITED

Result Update (PARENT BASIS): Q1 FY15

BUYBUYBUYBUY

Index Details

Stock Data

Sector Plastic Products

BSE Code 512131

Face Value 10.00

52wk. High / Low (Rs.) 385.90/274.80

Volume (2wk. Avg. Q.) 2940

Market Cap (Rs. in mn.) 9047.97

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY14A FY15E FY16E

Net Sales 6124.66 7043.36 7994.21

EBITDA 679.64 749.12 818.94

Net Profit 156.49 184.19 215.13

EPS 5.36 6.31 7.37

P/E 57.82 49.12 42.06

Shareholding Pattern (%)

1 Year Comparative Graph

SIGNET INDUSTRIES LTD BSE SENSEX

SYNOPSIS

Signet Industries Ltd, was incorporated in 1985,

Maharashtra. The company is engaged in the

manufacture, trade, and export of poly products in

India & also distributes HDPE, LDPE, PVC, PP, PET

resins and manufactures Plastic products.

In Q1 FY15, Net profit jumps to Rs. 47.71 million an

increase of 11.08% against Rs. 42.95 million in the

corresponding quarter of previous year.

The company’s net sales registered 10.10% increase

and stood at Rs. 1610.85 million from Rs. 1463.11

million over the corresponding quarter of previous

year.

Operating profit is Rs. 159.71 millions as against Rs.

160.63 million in the corresponding period of the

previous year.

Profit before tax (PBT) at Rs. 66.23 million in Q1

FY15 compared to Rs. 59.45 million in Q1 FY14,

registered a growth of 11.40%.

Interest income for the quarter ended 30th June

2014 of Rs. 9.96 million against Rs. 15.02 million for

the corresponding quarter of previous year.

During the quarter, the Company has launched

CPVC Pipes and Fittings for hot and cold water

applications used in household and infrastructure

projects.

Net Sales and PAT of the company are expected to

grow at a CAGR of 12% and 22% over 2013 to

2016E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Signet Industries Ltd 310.00 9047.97 5.36 57.82 16.75 12.00

Astral Poly Technik Ltd 823.80 46289.60 15.26 53.98 14.71 32.50

Max India Ltd 343.95 91659.90 6.20 55.48 2.88 180.00

Ushdev International Ltd 310.00 10493.30 47.24 6.56 1.60 21.00

QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q1 FY15,

The company has achieved a turnover of Rs. 1610.85 million for the 1st quarter of the financial year 2014-15 as

against Rs. 1463.11 million in the corresponding quarter of the previous year. EBITDA of Rs. 159.71 million in Q1

FY15. Net profit of the company Jumps to Rs. 47.71 million in Q1 FY15 as against Rs. 42.95 million in the

corresponding quarter of the previous year. The company has reported an EPS of Rs. 1.63 for the 1st quarter as

against an EPS of Rs. 1.47 in the corresponding quarter of the previous year.

Break up of Expenditure

During the quarter, total Expenditure rose by 11 per cent mainly on account of Employee benefits Expenses by

32% Cost of Material consumed by 18% and Purchase of Stock in Trade by 13% are the primary attribute for the

growth of expenditure when compared to corresponding quarter of previous year. Total expenditure in Q1 FY15

stood to Rs. 1466.29 million as against Rs. 1318.23 million in Q1 FY14.

Break up of Expenditure ( Values in million)

Q1 FY15 Q1 FY14

Cost of Material consumed 524.78 445.38

Depreciation 15.12 15.75

Employees Benefit Expenses 27.50 20.82

Other Expenditure 95.19 91.73

Purchase of Stock-in-Trade 813.45 718.12

Rs. In million June-14 June-13 % Change

Net Sales 1610.85 1463.11 10.10

PAT 47.71 42.95 11.08

EPS 1.63 1.47 11.08

EBITDA 159.71 160.63 (0.57)

Segment Revenue

COMPANY PROFILE

Signet Industries, earlier know as Signet Overseas, was incorporated in the year 1985, Maharashtra. The

company belongs to the Signet group which has a diverse portfolio ranging from international trading and

domestic distribution of polymers, chemicals, and jumbo.

The company is engaged in the manufacture, trade, and export of poly products in India. It distributes HDPE,

LDPE, PVC, PP, and PET resins. The company is also involves in the manufacture of various plastic products; and

the distribution of chemical products, including food chemicals, phosphate, and paints. In addition, it operates

wind turbine power unit; and offers wax products and spices.

Businesses

� Domestic Distribution & Trading

� Products

• PVC Resin

• Polyolefin

� HDPE

� LLDPE

� PP

• Pet Resin

• Plasticizers

Manufacturing

Saurabh Shaktiman

� Micro Irrigation System

� HDPE Sprinkler Pipe, HDPE Pipes & Cable

Duct

� PVC Pipes & Fittings

� Spray Pumps

� Crates

� Ghamela

Signet Modular Furniture

� Chairs

� Stools

� Kids Corner

Logic

� Exclusive Trays

� Dinner set

� Baskets

� Seal N Safe Range

� Planters

� Ergonomic stools

� Store Well Range

� Worthy Microwave Boxes

� Keepers

� Material Storage Racks

� Soap Cases

� Bulky Drums

� Multi-Purpose Basins

� Water Mug

� Dustbin

� Buckets

� Miscellaneous Products

Moulded Furniture

Household

Signet markets over 200 varieties of beautifully and ergonomically designed household products by the brand

name of Logic. In a short span, Logic has established its brand value in the minds of its consumers. It provides a

one stop shop for every household and establishment with its vast range of:

Electricity Generation

Electricity is derived from many non-renewable energy sources, it use windmill to generate the electricity. Signet

proudly generates electricity through windmill in the sates of Rajasthan and Maharashtra. Signet distributes the

same using government electricity grids.

FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March31, 2013 -2016E

FY13A FY14A FY15E FY16E

I. EQUITY AND LIABILITIES:

A. Shareholders’ Funds

a) Share Capital 341.87 341.87 341.87 341.87

b) Reserves and Surplus 135.72 248.32 432.51 647.65

Sub-Total-Net worth 477.59 590.19 774.38 989.52

B. Non-Current Liabilities:

a) Long-term borrowings 919.10 986.44 1040.69 1092.73

b) Deferred Tax Liabilities [Net] 104.52 115.70 126.69 138.09

c) Long Term Provisions 1.84 2.44 2.88 3.11

Sub-Total-Long term liabilities 1025.46 1104.58 1170.26 1233.93

C. Current Liabilities:

a) Short-term borrowings 1626.57 1438.45 1294.61 1159.97

b) Trade Payables 1172.62 1523.81 1828.57 2084.57

c) Other Current Liabilities 256.09 322.49 386.99 452.78

d) Short Term Provisions 10.70 83.52 133.63 164.37

Sub-Total-Current Liabilities 3065.98 3368.27 3643.80 3861.68

TOTAL-EQUITY AND LIABILITIES (A+B+C) 4569.03 5063.04 5588.45 6085.13

II. ASSETS:

D. Non-Current Assets:

Fixed Assets

i. Tangible Assets 779.24 817.38 850.08 875.58

ii. Capital work-in-progress 0.00 1.03 1.98 3.05

a) Total Fixed Assets 779.24 818.41 852.05 878.62

b) Other non-current assets 0.00 22.05 28.67 34.40

c) Non Current Investments 76.95 0.81 1.52 2.25

d) Long Term Loans and Advances 81.21 101.74 117.00 133.38

Sub-Total-Non-Current Assets 937.40 943.01 999.24 1048.66

E. Current Assets:

a) Inventories 729.14 876.73 990.70 1077.32

b) Trade Receivables 2031.07 2412.26 2706.73 3004.47

c) Cash and Bank Balances 678.15 643.00 655.86 665.04

d) Short Term Loans and Advances 110.02 161.50 206.72 258.40

e) Other Current Assets 83.25 26.54 29.19 31.24

Sub-Total-Current Assets 3631.63 4120.03 4589.21 5036.47

TOTAL-ASSETS (D+E) 4569.03 5063.04 5588.45 6085.13

Annual Profit & Loss Statement for the period of 2013 to 2016E

Value(Rs.in.mn) FY13A FY14A FY15E FY16E

Description 12m 12m 12m 12m

Net Sales 5649.75 6124.66 7043.36 7994.21

Other Income 24.51 40.71 44.78 51.50

Total Income 5674.26 6165.37 7088.14 8045.71

Expenditure -5127.99 -5485.73 -6339.02 -7226.77

Operating Profit 546.27 679.64 749.12 818.94

Interest -309.95 -403.09 -427.28 -448.64

Gross profit 236.32 276.55 321.84 370.30

Depreciation -60.59 -64.37 -69.52 -74.39

Profit Before Tax 175.73 212.18 252.32 295.92

Tax -56.37 -55.69 -68.13 -80.79

Net Profit 119.36 156.49 184.19 215.13

Equity capital 291.87 291.87 291.87 291.87

Reserves 135.72 248.32 432.51 647.65

Face value 10.00 10.00 10.00 10.00

EPS 4.09 5.36 6.31 7.37

Quarterly Profit & Loss Statement for the period of 31 DEC, 2013 to 30 SEP, 2014E

Value(Rs.in.mn) 31-Dec-13 31-Mar-14 30-June-14 30-Sep-14E

Description 3m 3m 3m 3m

Net sales 1578.95 1730.71 1610.85 1501.31

Other income 0.16 40.54 0.03 0.05

Total Income 1579.11 1771.25 1610.88 1501.36

Expenditure -1395.79 -1582.85 -1451.17 -1350.88

Operating profit 183.32 188.40 159.71 150.48

Interest -126.88 -107.93 -78.36 -75.54

Gross profit 56.44 80.47 81.35 74.94

Depreciation -16.11 -16.42 -15.12 -15.57

Profit Before Tax 40.33 64.05 66.23 59.37

Tax -13.51 -12.56 -18.52 -16.21

Net Profit 26.82 51.49 47.71 43.16

Equity capital 291.87 291.87 291.87 291.87

Face value 10.00 10.00 10.00 10.00

EPS 0.92 1.76 1.63 1.48

Ratio Analysis

Particulars FY13A FY14A FY15E FY16E

EPS (Rs.) 4.09 5.36 6.31 7.37

EBITDA Margin (%) 9.67 11.10 10.64 10.24

PBT Margin (%) 3.11 3.46 3.58 3.70

PAT Margin (%) 2.11 2.56 2.62 2.69

P/E Ratio (x) 75.80 57.82 49.12 42.06

ROE (%) 27.91 28.97 25.43 22.90

ROCE (%) 20.41 25.09 26.76 27.98

Debt Equity Ratio 5.95 4.49 3.22 2.40

EV/EBITDA (x) 19.98 15.93 14.32 12.99

Book Value (Rs.) 14.65 18.51 24.82 32.19

P/BV 21.16 16.75 12.49 9.63

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs. 310.00, the stock P/E ratio is at 49.12 x FY15E and 42.06 x FY16E

respectively.

� Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.6.31 and Rs.7.37

respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 22% over 2013 to 2016E

respectively.

� On the basis of EV/EBITDA, the stock trades at 14.32 x for FY15E and 12.99 x for FY16E.

� Price to Book Value of the stock is expected to be at 12.49 x and 9.63 x respectively for FY15E and FY16E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.341.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

The Plastics Industry witnessed a steady growth in the year 2007 which is reflected in the increased

consumption figures of all types of Plastics materials. The year 2011-12 was a much futuristic and competitive

year for the Plastic Industry where there was steep increase in the consumption of Plastic Products by Retail and

Industrial customers. World-wide, the plastics and polymer consumption will have an average growth rate of 5%

and it will touch a figure of 227 million tons by 2015.

In recent years, Plastics have become the key drivers of innovations & application development. Growth-trend of

plastics has proved that there has been a quiet Plastics revolution taking place in the material sector. Plastics

material growth globally has increasing plastics applications in automotive field, rail, transport, defence &

aerospace, medical and healthcare, electrical & electronics, telecommunication, building & infrastructure,

furniture etc. Polymer-Electronics has opened up new avenues for plastics, from organic light emitting diodes to

electro-optical and bio-electrical complements, from low-cost plastic chips to flexible solar cells.

Plastic Industry in India

Indian plastics industries are enthusiastic about the acceleration of the growth engine in the next 3 to 5 years due

to capacity expansion of existing petrochemical complexes and setting up of new crackers. Plastics have helped

to significantly reduce the burden man puts on natural resources, by replacing materials like wood, paper,

metals, glass and carbons. India is the fourth largest economy in the world by volume and growing at an

unprecedented rate of 8.5 % per annum. With a population base of 1.2 billion people, a work force of 467 million

and with the massive growth of the Indian middle class this vast country may become Asia's first major 'buy'

economy. India’s consumer market will be the world’s fifth largest by 2025. India’s Consumption of plastic will

grow from 7.5 million tonnes to 15 million tones by 2015 and is set to be the third largest consumer of Plastics in

the World.

Structure of Plastic Industry

The Plastic industry can be classified into (1) manufacturing of Polymers and is called upstream and (2)

conversion of polymers into plastic articles and is known as downstream. The upstream Polymer manufacturers

have commissioned globally competitive size plants with imported state-of-art technology from the world

leaders. The upstream petrochemicals industries have also witnessed consolidation to remain globally

competitive. The downstream plastic processing industry is highly fragmented and consists of micro, small and

medium units.

Vision for Indian Plastics Industry 2015

Demand for plastics is rapidly increasing in India and soon India will emerge as one of the fastest growing

markets in the world and third largest consumer of plastics in the world. Consumption of polymers increased at

the rate of 15% CARG by 2015. Turnover of Plastic industries is expected to reach by Rs.1332450.00 million

Requirements of additional plastics processing machines will grow to 68,000 Machines by the year 2015. Thus,

provide an additional employment generation of 7 million people. Additional capital Investment of Rs. 450000.00

million for the period of 2004- 2015 will open many new areas for the Industry in the years to come and we

expect the vertical move of Plastic Industry in the Economy.

Key Growth Segment

� Packaging: Packaging which accounted for over 35% of the global consumption.

� Individual Plastics Materials: Polyolefin accounted for 53% of the total consumption, (PE with 33.5%, PP

with 19.5%) PVC – 16.5%, PS-8.5%, PET & PU - 5.5%, Styrene copolymers (ABS, SAN, etc) – 3.5% Other

engineering & high performance & specialty plastics, blends, alloys, Thermo -setting plastics – 13%.

Opportunities

� The Indian plastics industry is growing at close to 15%. Agriculture, Packaging, Automobiles, Electronics,

Telecom, Healthcare, Infrastructure, Transportation and consumer Durables are major drives of Growth in

Plastic Consumption.

� The plastic processing industry is a source of great potential for global business. There is tremendous scope

for innovative technological up gradations.

� Large investments in Telecom, ports, Roads, Power and Railways, ensures that this sector will Continue to

grow at more than 10% p.a.

� Plastics in packaging consume 3.5 million Tonnes of Polymers today and will increase to 9 Million tones by

2020.

� The die and mould technology is an essential aspect of the tooling sector in the plastics industry for collective

production. Increasing contention in the plastic industry has led to cutting-edge developments in the die and

mould technology. with the adoption of constant R&D, skill development and market expansion methods, the

domestic die & mould players are likely to sustain their position in not only local market but in global market

as well.

� The ban on the use of plastic carry bags of a certain quality by governments and civic bodies across the

country is an opportunity for the development of biodegradable plastic. Such material can be made into bags

for the same purpose, of carrying goods.

Latest Updates and Investments

• An Indian business delegate led by Manish Dedhia secretary of All India Plastic Manufacturers Association

visited UAE's Hamriyah Free Zone Authority to boost bilateral business partnership and investment

promotion. The role played by HFZA as a booster that leads to Sharjah and UAE's economic growth and

prosperity.

• India is keen to offer support to Gulf Cooperation Council (GCC) nations in their focus on value addition, from

oil economy to polymers and plastic products. This is the right opportunity for both GCC and India for co-

operating and also supplements each other.

• Sustainable Technologies & Environmental Projects (STEPS), has announced its plans to set up a plant to

convert plastic waste into light diesel, calorific value combustible gas and carbon pellets. Earlier, the

company has also come through in the generation from algae, for which it bagged the Lockheed Martin

Innovations Award thrice.

• Being inspired by the Tamil Nadu government's move of utilizing the waste plastic in the construction of

road, the Central government is mulling to enforce a national level policy on the plastic usage in laying roads.

• Dutch Manufacturers of Machinery for Food Processing and Packaging (GMV) and Karnataka State

Agricultural Produce Process and Export Corporation (KAPPEC) signed a MoU in the area of cutting-edge

technologies in food processing and packaging.

Government initiatives

• 100% Foreign Direct Investment (FDI) is allowed through the automatic route without any sectoral cap.

• Specific approvals are required from Foreign Investment Promotion Board (FIPB) in the following three

cases:

� Proposals which require compulsory license when the proposed foreign investment is more than 25% in

equity capital of a company manufacturing items reserved for the small scale sector; and

� Proposals relating to the acquisition of existing shares in an Indian company.

• Plastic raw materials products are imported freely under Open General Licence (OGL).

• The prices of plastics are market determined without any regulatory control.

• The Central government is mulling to enforce a national level policy on the plastic usage in laying roads.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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