Date : 18th September, 2012
ENGLISH INDIAN CLAYS LTD. (EICL)
Stock Performance Details Background
English Indian Clays Ltd (EICL) was Current Price : Rs. 38.10** incorporated in 1963 in technical & financial Face Value : Rs. 2 per share collaboration with English China Clays (ECC) 52 wk High / Low : Rs. 47.60 / Rs. 30.05 Ltd., U.K. The collaboration with ECC ceased Total Traded Volumes : 1,780 shares** in the year 1992. Recently, the company has Market Cap : Rs. 191 crore** formally changed its name from English India Sector : Commodity Chemicals Clays Ltd. to EICL. EPS (FY2012) : Rs. 2.14 per share
P/E (TTM) : 17.62 (x)^ EICL has two key Divisions, viz., Clay & Starch P/BV (TTM) : 1.65 (x)^ Divisions. The Clay Division has three Financial Year End : 1st April – 31st March manufacturing locations in Kerala and BSE Scrip Name : EICL LTD specialises in mining and processing of high BSE Scrip Code : 526560 end kaolins. **as on 18th September, 2012; ^ as on June 2012
EICL’s Clay business is the largest integrated Shareholding Details – June 2012 clay facility in Asia that is into mining and refining high end Calcined and Hydrous Shareholding Clays. The total installed capacity is 240,000 Particulars Nos. (%) tonnes per annum. The Calcined Clay Promoter & Promoter Group capacity is 60,000 tonnes. 3,91,74,603 77.92 Holding Some of the end user industries for Clay Total Institutional Holdings include Paper & Board, Paint, Printing Inks, 29,93,544 5.95 (FIIs & DIIs) Rubber, Cable, Plastic, Glass Fiber, Public Holdings 81,07,866 16.13 Ultramarine and Concrete Industries.
Total 5,02,76,013 100.00 The Starch Division has two manufacturing units, one located at Yamuna Nagar, Haryana
Strategy Focus which manufactures Starch and its derivatives, and the other located at Shimoga The company is witnessing increasing competition in the that exclusively specializes in the Calcined Clay Business. To counter the same, it has set up manufacture of value added Modified Starches warehouses at strategic locations to offset the long for various Industrial applications. delivery cycle in Kerala.
The company produces Starches for different For the starch business, the company plans to focus on applications, with particular focus on value research and Development and provide better import added Speciality Starches. The business today substitutes to sustain its market share. It is also looking at has capacity of 76500 MT per annum (both export markets in Asia and Africa. Maize and Tapioca products). For its Speciality Clay business, EICL has set up a Green Field plant in Shimoga, Karnataka and shut down the The Starch Division was started under the unviable Pondicherry plant for the Starch business. This it name of Bharat Starch Industries in the year expects , will enhance its competitive positioning and also 1937. It was subsequently taken over by EICL increase the capacity utilisation levels. Meanwhile, for its Limited in the year 2002. clay business, it plans to set up a manufacturing facility at Bhuj in Gujarat. EICL Starch finds applications in Paper Industry, Paper Sack/ Packaging Industry, The company is also focussing on modernisation of its Pharmaceutical Industry, Confectionery, Food facilities to improve efficiencies. It continues to lay thrust & Beverage Industry, Textile Industry and Oil on exports which is expected to drive growth in FY 2013. well Drilling Industry.
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Financial Snapshot
Particulars Standalone Financials Income Statement FY12 FY11 FY10 Net Sales / Income from Operations 3,780.9 3,561.5 3,364.6 Expenses Cost of material consumed 1,351.40 1,031.8 1,025.9 Change in Inventories -51.7 -4.8 -1.5 Employee Benefit Expenses 368.5 328.1 299.5 Administrative & Other Expenses 1,587.6 1,518.0 1,353.4 EBIDTA 531.1 695.2 687.4 Depreciation & Amortization 133.7 123.6 118.5 Finance Costs / Interest Expense 195.9 137.6 143.7 Other Income 21.7 19.8 19.8 Profit After Tax (PAT) 148.4 303.9 294.1 Key Ratios – Income Statement EBIDTA Margin (%) 14.0 19.5 20.4 PAT Margins (%) 3.9 8.5 8.7 Balance Sheet Networth 1,543.6 1,451.0 1,244.0 Non – Current Liabilities / Loan Funds 587.0 398.3 1,071.6 Non Current Assets / Fixed Assets 2,435.9 2,023.5 1,968.2 Inventories 425.4 366.2 295.0 Debtors 463.2 460.4 381.8 Key Ratios – Balance Sheet Debt : Equity (x) 0.63 0.69 1.02 Book Value (BV) (in Rs.) 24.72 22.88 211.19 Return on Capital Employed (ROCE) (%) 20.67 28.11 25.7 Return on Equity (ROE) (%) 16.95 25.76 25.70 Debtors Turnover Ratio (x) 8.45 8.72 9.89 Inventory Turnover Ratio (x) 9.86 11.1 11.97 Valuation Ratios P/E (x) 17.76 8.72 10.31 P/BV (x) 1.54 1.95 2.78 EV / EBDITA (x) 4.42 3.62 5.13 Source : Capitaline.com; as on 31st March, 2012
From the Research Desk of LKW’s Gurukshetra.com
Net Sales for FY2012 on a standalone basis stood at Rs. 3,780.9 million which has increased marginally by 6% y-o-y. The sales have not grown as expected due to the slowdown witnessed by the manufacturing industries. However, exports increased from Rs. 173.7 million in FY2011 to Rs. 253.1 million for the period under review thus marking an increase of about 46% y-o-y.
The Clay business segment accounts for about 54% of the total turnover while the balance comes from the starch business. In terms of growth in these segments, though volumes in the clay business remained flat, higher realization due to higher prices and product demand. Meanwhile, the starch segment revenues were marginally better than previous year on account of improved sales realizations.
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However, the operational profit as measured by EBIDTA came under pressure thereby squeezing the EBIDTA margins for FY2012. This was primarily due to rising input costs, especially the prices of maize, high power and fuel costs and a rise in inventory levels. The EBIDTA stood at Rs. 411.8 million against Rs. 416 million in FY2011. Further, for the starch segment, the impact was felt of the slowdown witnessed by the paper and other industry segments and also due to slower than expected product approvals that were rolled out from the Shimoga Plant.
For the year ended 31st March, 2012 the power and fuel costs as a percentage of sales were 21.5% and stood at Rs. 811.5 million as compared to FY2011, where it was 694.7 million. Further, rise in price of maize the key raw material input too led to expansion of the costs as increase in raw material prices could not be fully passed on to its customers.
In addition to this, high finance costs too seem to have impacted the bottomline performance. The PAT stood at Rs. 148.4 million as compared to Rs. 303.9 million in FY2011 marking a decline of 51% on y-o-y basis. Resultantly, the PAT margins slipped from 8.5% in the previous year to 3.9% during FY2012.
The R&D expenditure of the company for FY2012 stood at 0.59% as a percent of total turnover as against 0.51% in FY2011.
The inventory as at 31st March, 2012 have increased by 16% and stood at Rs. 425.4 million as compared to Rs. 366.2 million during the last fiscal.
In Q1 FY13 too EICL reported a huge decline of 58% in bottomline at Rs. 35.1 million because of increase interest costs, slower growth in the topline and increased cost of manufacturing. The net sales stood at Rs. 1,011.4 million as compared to Rs. 974.2 million which improved marginally by 4% y-o-y. However, the EBIDTA declined by over one fourth due to a sharp rise in the power and fuel costs for Q1 FY13 as compared to Q1 FY12.
Performance on the Bourses
as on 17th September 2012 Stock Performance
160 140 120 100 % 80 60 40 EICL BSE Small Cap 20 0
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Peer Comparison
While the company operates in the Chemicals segment within the Indian Chemical Industry, it faces competition from the organized as well as unorganized players in the industry. However, within the listed space, Riddhi Siddhi Gluco Biols and Sukhjit Starch & Chemicals are some of the companies which operate in similar lines of business. However, these are not directly comparable. The financial snapshot for 2012 is given in the table mentioned below for EICL and its peers. (Rs. In million) Standalone Financials English Indian Riddhi Siddhi Sukhjit Starch & Particulars Clays Gluco Biols Chemicals Net Sales 3,780.9 10,017.3 3,534.3 EBIDTA 531.1 2,548.3 444.8 PAT 148.4 1,644.9 221 EBIDTA Margins (%) 14.0 25.4 12.5 PAT Margins (%) 3.9 16.4 6.3 P/E (x)^ 17.62 1.37 8.06 P/BV (x)^ 1.65 0.63 0.81 Debt : Equity (x) 0.63 0.9 0.30 EV / EBITDA (x)^ 5.26 1.90 4.64 Source : Capitaline Database, ^TTM as on June 2012
About the Industry Outlook
The company's products find application in a wide Given the macroeconomic headwinds, the range of industries including Paper & Board, company is expected to be impacted by the Paint, Printing Inks, Rubber, Cable, Plastic, Glass downward trend in some of its key user Fiber, Ultramarine, Concrete, Paper Sack/ industries. Packaging Industry, Pharmaceutical Industry, Confectionery, Food & Beverage Industy, Textile The rising fuel prices and chemical prices are Industry and Oil well Drilling Industries. expected to hamper the growth of the company. Further with rising contribution of Thus its prospects will be directly linked to those exports, the impact of currency fluctuation also of these end user industries. The company has needs to be taken into account. witnessed a slowdown in its end user clients from the paper, paints as well as textile segments. The With no major capacity expansions in the paint industry which usually witnesses sound industry the competitive scenario is expected growth in thrid quarter was impacted during to remain unchanged. However, successful FY2012 and a recessionary phase in the textile commissioning and increasing capacity industry too impacted the perfroamnce of utilization of the company's manufacturing commodity chemical providers. plants may enhance EICL’s competitive positioning. Further it has seen a downturn in the starch import cycle form August 2011 on account of Disclaimer rising fuel prices and imposition of anti dumping duty on some of the imported chemicals. All information contained in the document has been obtained by LKW’s Gurukshetra.com from sources believed to be accurate and reliable. The user industries are also adversely impacted Although reasonable care has been taken to ensure that the information herein is true, such information is provided as is without any warranty of due to rising fuel prices as well as high interest any kind, and LKW’s Gurukshetra.com in particular makes no representation or warranty express or implied, as to the accuracy, rate scenario. The clay industry is expected to timeliness or completeness of any such information. All information grow by 6-8% while the modified starch industry is contained herein must be construed solely as statements of opinion, and LKW’s Gurukshetra.com shall not be liable for any losses incurred by also expected to show moderate growht of 4-5% users from any use of this document or its contents in any manner. (Source: Company Annual Report ). Opinions expressed in this document are not the opinions of our company and should not be construed as any indication of our recommendation to buy, sell or invest in the company under coverage.
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Financial Graphs
Net Income from Operations
3,900
3,750
3,600
3,450 3,781 Rs.in Millions Rs.in 3,562 3,300 3,365 3,150 FY 2010 FY 2011 FY 2012
EBITDA & EBITDA Margins
20.4 750 19.5 25 14.0 600 20 450 15 % 687 695 300 531 10 Millionsin Rs. 150 5 0 0 FY 2010 FY 2011 FY 2012
EBIDTA EBIDTA Margins
PAT & PAT Margins
400 8.7 8.5 10 8 300
3.9 6 200 % 294 4 100 304 Rs. in Millions Rs. 2 148 0 0 FY 2010 FY 2011 FY 2012 PAT PAT Margins
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Disclosure
Each member of the team involved in the preparation of this report, hereby affirms that there exists no conflict of interest.
The report has been sponsored and published as part of Initiative of BSE’s Investors’ Protection Fund
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