Management expects recovery from H2FY21 supported by macro tailwinds along with margin expansion on back of better product mix and operational efficiency. FY21 will see the start of contribution from CSF, CRC and toys and will be further ramped up in FY22. Further FY22 will also witness revenues from medical devices and auto contracts. We maintain our forecasts of revenue/ EBITDA/PAT CAGR (FY20-22) of 19.6%/19.1%/25.2% to Rs 4805m/Rs 824m/ Rs370m in FY22E. Going ahead, healthcare will be an area of focus and likely to see 2-3x growth in next 3-5 years (based on ongoing discussions and orders in hand) making it the second highest revenue contributor after HF (~55%). We feel this...

Management expects recovery from H2FY21 supported by macro tailwinds along with margin expansion on back of better product mix and operational efficiency. FY21 will see the start of contribution from CSF, CRC and toys and will be further ramped up in FY22. Further FY22 will also witness revenues from medical devices and auto contracts. We maintain our forecasts of revenue/ EBITDA/PAT CAGR (FY20-22) of 19.6%/19.1%/25.2% to Rs 4805m/Rs 824m/ Rs370m in FY22E. Going ahead, healthcare will be an area of focus and likely to see 2-3x growth in next 3-5 years (based on ongoing discussions and orders in hand) making it the second highest revenue contributor after HF (~55%). We feel this...

During Q3, trial batches of 4 medical pens were submitted to customers. 8 other pens are also under development and will be submitted from Q1-Q3FY21E. All 12 pens are to be commercialized in FY21E. Pharma revenues grew by 65% in FY20. In toys, SHEP has made initial shipments to Spin Master' (ramp up by Q1FY21E) and is looking to add one more client during Q4. Carbon steel facility (CSF) is slated to begin supplies in Q4FY20. In FY21E it can generate revenues of Rs 600m and peak revenues of Rs 1.3bn in FY22E. SHEP lost substantial revenues of Rs 265m during 9MFY20 on account of labor...

During Q3, trial batches of 4 medical pens were submitted to customers. 8 other pens are also under development and will be submitted from Q1-Q3FY21E. All 12 pens are to be commercialized in FY21E. Pharma revenues grew by 65% in FY20. In toys, SHEP has made initial shipments to Spin Master' (ramp up by Q1FY21E) and is looking to add one more client during Q4. Carbon steel facility (CSF) is slated to begin supplies in Q4FY20. In FY21E it can generate revenues of Rs 600m and peak revenues of Rs 1.3bn in FY22E. SHEP lost substantial revenues of Rs 265m during 9MFY20 on account of labor...

During Q2FY20 SHEP received new business confirmations for bottle caps from a Japanese company and for supply of rods to an automotive customer. Supplies for both will start after 6-8 months. They are also in negotiation with a large MNC in the personal care segment. Polymer volumes grew 10.8% QoQ. The CSF project and toy supplies will begin in Q4FY20. Due to the extended monsoon, labour issues and slowdown in the SHF business we have revised our revenue/EBITDA estimates downwards by 5.5%/7.2% to Rs 3789m/Rs 637m respectively in FY20E. In order to achieve...

During Q2FY20 SHEP received new business confirmations for bottle caps from a Japanese company and for supply of rods to an automotive customer. Supplies for both will start after 6-8 months. They are also in negotiation with a large MNC in the personal care segment. Polymer volumes grew 10.8% QoQ. The CSF project and toy supplies will begin in Q4FY20. Due to the extended monsoon, labour issues and slowdown in the SHF business we have revised our revenue/EBITDA estimates downwards by 5.5%/7.2% to Rs 3789m/Rs 637m respectively in FY20E. In order to achieve...

During the quarter SHEP forayed in to the toy segment and has received business confirmation for it. The company also received confirmation for 1 new drug delivery device. Machine utilization stood at 58.7%. Polymer volumes grew 3% QoQ but were down 14% YoY due to slowdown in SHF business as well as auto segment. There has been a slight delay in the CSF project due to the rains in Baroda and will hence commence by February 2020. Revenues from toys and pen injectors will also begin during Q4FY20. Based on current orders and business confirmations, we expect Revenues/...

Shaily Engineering Plastics SHF plays spoilt sport again Shaily Engineering Plastics (SHEP) reported weak FY19 results. Revenues grew 6.3% to Rs3,383m, EBITDA was flat at Rs526m and PAT fell 19.0% to Rs193m. Volume growth was flat and lower than expected at 13,258 MT as production faced concerns on account of labor and power issues in H1FY19, followed by slowdown in SHF client orders due to change in their inventory policy. FY19 revenues were lower by Rs800m due to 1) slow off-take from Swedish House Furnishing Retailer (SHF) due to change in its inventory policy, 2) delay in other project...

We met the management of Shaily Engineering Plastics (SHEP) to better understand their growth prospects due to change in inventory policy of the Swedish Home Furnishing Retailer (SHF). Based on our discussion, we have understood that this is a one-time change and while ordering in the immediate quarter will surely see a slowdown, revenues from this client are likely to bounce back from Q3FY20 led by commissioning of the new carbon steel plant, opening of their Mumbai store and launch of their online sales portal. Pharma and Automotive are likely to be the key growth drivers going ahead. Pharma is expected to witness the highest percentage growth in sales over the next 3-4 years on back...

We met the management of Shaily Engineering Plastics (SHEP) to better understand their growth prospects due to change in inventory policy of the Swedish Home Furnishing Retailer (SHF). Based on our discussion, we have understood that this is a one-time change and while ordering in the immediate quarter will surely see a slowdown, revenues from this client are likely to bounce back from Q3FY20 led by commissioning of the new carbon steel plant, opening of their Mumbai store and launch of their online sales portal. Pharma and Automotive are likely to be the key growth drivers going ahead. Pharma is expected to witness the highest percentage growth in sales over the next 3-4 years on back...

Shaily recorded another tepid performance in Q3FY19 with volume degrowth of 9% YoY. We believe the sales growth of ~9% YoY was largely driven by price hike and a change in product mix. The lower volume growth was attributable to revised inventory policy by key client which has decided to reduce inventory holding from 80-90 days earlier to 45 days now. We believe the revised inventory policy by one of its key clients and slow volume offtake from a new client (global department stores) would keep volume growth under check in the current quarter. The management guided for recovery in growth from 2HFY20E and...

We initiate coverage on Shaily Engineering Plastics (SHEP) with an Accumulate' rating and a price target of Rs1,103 (21x FY20E EPS). SHEP is a leading supplier of high performance engineering polymers based precision components to leading Home Furnishing, Pharma, Consumer and Engineering companies globally. We are positive on SHEP's prospects due to 1) deeper penetration in existing plastic line (with its Home Furnishing customer's India entry) 2) ramp-up in machine utilisation of CRC plant and 3) foray in to a new product line, enabling it to inch closer to its revenue target of US$ 100mn by FY20E. The company has ~85% visibility for achieving this target....

ICICI Securities Ltd | Retail Equity Research Shaily recorded a Q2FY19 tepid performance with volume growth of mere 2% YoY. We believe the sales growth of ~10% YoY was largely driven by price hike and a change in product mix. According to the management, while the power issue has been resolved in Q2FY19 (which impacted Q1FY19 performance) the labour issue remained intact during Q2FY19. Lower plant utilisation coupled with a delay in passing on higher raw material prices led to a decline in EBITDA margin by ~118 bps YoY to...

ICICI Securities Ltd | Retail Equity Research Shaily recorded a Q2FY19 tepid performance with volume growth of mere 2% YoY. We believe the sales growth of ~10% YoY was largely driven by price hike and a change in product mix. According to the management, while the power issue has been resolved in Q2FY19 (which impacted Q1FY19 performance) the labour issue remained intact during Q2FY19. Lower plant utilisation coupled with a delay in passing on higher raw material prices led to a decline in EBITDA margin by ~118 bps YoY to...

During Q1FY19, revenue growth of 26% YoY to | 89 crore was led by ~35% YoY volume increase. According to the management, while volume growth was lower-than-expected owing to labour shortage and power issues, lower realisation was due to a change in product mix and delay in passing on higher raw material prices. As a result, gross margins declined ~60 bps YoY whereas EBITDA margin declined ~155 bps YoY mainly due to a sharp increase in employee and other cost by 40% and 36% YoY, respectively. The management further guided that power and...

We recently met the management of Shaily Engineering Plastics (SEPL) to understand the business model and outlook, going forward. Incorporated in 1987, SEPL is into the manufacturing of precision component using the high performance polymers. Over the years, SEPL has become the preferred outsourcing partner for Fortune 100 companies by offering total solutions in plastics including development, manufacturing and validation. SEPL's business segment includes home furnishings, automotive, home personal & beauty care, appliances & lightings, medical...

13.8%/1.7%/6.3%, respectively. Sub-par growth at EBITDA and PAT level is because of the drop in margins on YoY basis. We expect Shaily Engineering Plastics' sales/EBITDA/PAT to grow 22%/66%/270%, respectively. The difference in sales and EBITDA growth is because 3QFY17 was a washout quarter for the company. Sales for CCL Products is expected to grow 16.8%. However, EBITDA and PAT are expected to decline 6.7% and 3.6%, respectively, on YoY basis. Margins in 3QFY17 had peaked at 27% and are not expected to touch that level in the near term. Supreme Industries' growth is expected to pick up during the quarter (low base effect of 3QFY17 because of demonetisation). However, we believe that margins for the company peaked out in FY17. As a result, we expect EBITDA/PAT to grow 5.4%/11.8%, respectively. Bata India is expected to grow its sales/EBITDA/PAT by 13%/15%/60.6%, respectively. The...

Shaily Engineering Plastics' (SEPL) 2QFY18 sales grew 21% to Rs788mn (our estimate Rs766mn). Gross profit stood at Rs298mn with a 70bps decline in gross margin. Gross margin stood at 37.8%. EBITDA grew 36% to Rs144mn (our estimate Rs131mn). Operating margin marginally increased by 190bps to 18.2% (our estimate 17.1%). Improvement in operating margin was mainly on account of operating leverage. Capacity utilisation improved from 67% in 2QFY17 to 82% in 2QFY18. Volume of polymer processed improved by 22% to 3,374tn. Profit after tax (PAT) grew 33% to Rs63mn (our estimate Rs48mn). SEPL has continued its healthy growth momentum since the past three quarters and expects the trend to continue in the...

Shaily Engineering Plastics' (SEPL) 1QFY18 sales grew 18% to Rs695mn (our estimate Rs681mn). Gross profit stood at Rs262mn with a 170bps decline in gross margin. Gross margin stood at 37.8%. EBITDA grew 17% to Rs117mn (our estimate Rs124mn). Operating margin marginally declined 10bps to 16.8% (our estimate 18.2%). Other income remained flat at Rs5mn. PBT grew 31% to Rs69mn, in line with our estimate. Effective tax rate increased 210bps to 35.4%. PAT, as a result, grew 26% to Rs44.3mn (our estimate Rs40.5mn). EPS for the quarter stood at Rs5.3. Volume of polymers processed grew 4.4% to 2,642 tn. Plant capacity utilisation stood at 73.8% (versus 66.3% in 1QFY17). Contribution from exports declined from 78% to 72%...