Commodity Online
MUMBAI: Parekh Aluminex Ltd (PAL), India’s largest manufacturer and exporter of aluminium foil containers is likely to acquire two bakery and food processing companies in USA and Europe.
The move is likely to give it access to the manufacturing facilities and client base. In the long-run, the company plans to shift the manufacturing activity to India, officials said.
On the domestic front the company is expanding its manufacturing facility from 11,500 MT to 28,500 MT with a capital outlay of Rs 2.4 bn. Orders have been placed for machinery and moulds. The plan is to manufacture high value, high margin products from the facility.
The company has 80% market share in the Indian Railway’s aluminium foil containers (AFC) segment and over 85% MS in Jet Air, Indian Airlines and Air India. With the acquisition of DES, Singapore it has become a dominant player to SE Asian airlines. The sales composition was 80% from thedomestic market and 20% from exports.
The fourth quarter of financial year 2007-08 saw its net sales grow by 45% on year on year basis from Rs 588mn to Rs 851m. The company’s EBIDTA margin improved by 190bpsfrom 14.3% to 16.2% YoY due to the decline in material cost and other expenses.. The company’s net profit grew by 101% YoY from Rs29m to Rs58m .
“We expect the company to report 35% compounded annual growth rate (CAGR) in net sales and 43% CAGR in net profit over FY08-10. We also expect its EBIDTA margin to improve from 16.2% in FY08 to 17.6% in FY10 due to economies of scale, introduction of new products, higher exports and entry into new geographies.
At the current market price of Rs120, the stock trades at 5.7x FY09E EPS of Rs 21.0 and 3.4x FY10E EPS of Rs35.8. We reiterate BUY rating on the stock with a price target of Rs215 (6x FY10 earnings) over the next 12 months,”according to Prabhudas Liladhar
PAL’s export prospects in the coming years are high on account of its strong presence in UK, analysts said. The company has entered into new global markets namely the US, Germany, Portugal, Greece, and South Africa in FY08. PAL has commenced exports to United Emirates and Australia in FY09. PAL commenced the US business with four containers/month in April 2007, which has reached 15 containers/month currently.
