SHARETIPSINFO >>Research Reports >>UFLEX (29-01-2010)

COMPANY OVERVIEW:
UFLEX Group was established in the year 1983. It has grown into one of the biggest multi integrated packaging group in the world.  Company is into manufacturing of polyester chips, Films (BOPET, BOPP and CPP-both in plain and metalized form), coated film, laminates, pouches, holographic films Gravure cylinders, Inks and adhesives to all types of packaging & printing machines, offering total flexible packaging solutions to the entire world.
Uflex has manufacturing in India and Dubai. It has offices UAE, Europe and North America and market presence in 80 countriesaround the world.

PRODUCT MIX:

INDUSTRY OUTLOOK:
Indian packaging industry is growing at rate of 15% annually. It is expected that the growth will increase further in coming years. The packaging industry in India is $14 billion industry today. Change in the consumption pattern and emphasis o branding of the product will help the industry to grow rapidly. As if now total packaging in India is rigid packaging and 20% flexible packaging. The rigid packaging is the old form and now the shift is being seen from rigid to flexible packaging.
India`s packaging consumption is less than $ 15 against world average of $ 100. This shows the potential for the companies in the industry. They have ample opportunity to exploit the market.
Pharma and FMCG are the key drivers of the Indian packaging industry.

INVESTMENT RATIONAL:
Uflex is trading at 5X to FY10E earning while the industry average is 15.
Industry is growing at rate of 15% annually and still the stock has not appreciated to catch the growth potential of the industry.
Good demand is coming from the FMCG companies.
Company`s presence in the Middle East will help in capturing the Middle East market which is growing very rapidly.
Company has very diversified line of product. So it is one stop shop for packaging materials.
Booming retail sector to fuel flexible packaging growth.

SHAREHOLDING PATTERN:

FINANCIAL:

Key Highlights:
CAGR IN TOTAL INCOME IS 14.08%.
CAGR IN PBDITA IS 29.77%.
CAGR IN PAT IS 28.72%.

RATIOS:

Key Highlights:
EPS has grown consistently at CAGR of 11.07%.
PBDITA margin also has improved from 11.7% to 17.28%.
NPM has shown improvement over the last four years from 3% to 4.3%.
Interest cover has declined slightly over the period from 2.61% to 2.15%. The decline shows debt portion increasing in the company`s book.

COMPARISION OF Q2FY2010 WITH Q2FY2009:

Key Highlights:
Total Income declined by 9.35% to Rs 418.95 crore in Q2FY10 on YoY basis.
PBDITA increased by 6.55% to Rs 74.13 crore in Q2FY10 on YoY basis.
PAT increased by 26.26% to Rs 18.51 crore in Q2FY10 on YoY basis.

VALUATION &OUTLOOK:
At cmp of Rs 95 stock is trading at 5X to FY10E earning. We expect FY10 EPS to be somewhere near Rs 20 per share. The average PE for the packaging industry is 13X. The PEG (Price earning to Growth) ratio for the stock is 0.2. This shows the how the stock is undervalued at current price.
At current scenario even if we price the stock at half the industry PE, the fair price we get is Rs 140.
Company also pays consistent dividend. It has given 40% div last year and the dividend yield come at 4.05%. The consistent and good dividend limits the downside risk.

CONCLUSION:
The down side on the counter is very limited. We expect the stock will sooner or later catch its valuation. Investor could take position on the counter with investment horizon of 8-10 months. Investor can also utilize the dips to accumulate the stock.

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