Shaily Engineering Plastics Ltd. share price target

Revenue grew ~41% YoY to | 148 crore led by a ramp up of new products in the healthcare and toy segment. Volumes were up ~20% YoY The EBITDA margin declined 381 bps YoY to 14.1%, mainly due to a delay in passing on high raw material costs and higher other expenditure PAT increased 16% YoY to ~ | 9 crore, tracking sales growth...

Shaily reported a strong performance in Q4FY21 with revenue, PAT growth of ~38%, ~40%, respectively. Further, the company has guided for strong revenue growth in FY22 despite lockdown related disruptions in Q1. A home furnishing major (HFM) remains a key contributor to the overall topline (55% of overall revenue). However, significant growth opportunities in the healthcare segment (revenue growth of 2-3x in the next three to five years) and strong order pipeline in the toy business provide strong revenue visibility in the next two years. With better operating leverage and a...

After posting ~42% revenue drop in Q1FY21, the company saw robust sales growth of ~13% and ~20% YoY in Q2FY21 and Q3FY21, respectively. That led to ~98% sales recovery in 9MFY21. We believe execution of pending orders in addition to new orders from existing clients helped drive this recovery. On the margin front, withdrawal of export incentives (2% of revenue) led to reduction in gross margin that finally dragged EBITDA margin down ~85 bps YoY to ~16%. According to the company, the incentive will be restored in the coming period (in the form of RoDTEP) in...

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...