Saral Gyan Hidden Gem - Jan 2015

UNEXPLORED MULTIBAGGER SMALL CAP STOCKS
EQUITY RESEARCH REPORT
PLASTIBLENDS INDIA LTD. BSE CODE: 523648
NSE CODE: PLASTIBLEN
Industry: Specialty Chemicals CMP: Rs. 236.70 (31/01/2015)
Market Cap: 3075.82 (INR in Millions) Target Price: Rs. 480.00
Date: January 31, 2015 Time Period: 18 – 24 months
Saral Gyan Capital Services
An Independent Equity Research Firm
www.saralgyan.in | www.saralgyan.com

HIDDEN GEMS – JANUARY 2015
- 2 - SARAL GYAN CAPITAL SERVICES
TABLE OF CONTENT
S.No Content Page No.
1. Company Background 03
2. Recent Developments 08
3. Financial Performance 09
4. Peer Group Comparison 11
5. Key Concerns / Risks 11
6. Saral Gyan Recommendation 12
7. Disclaimer 14

1. Company Background
Plastiblends India Ltd, a part of the
Kolsite Group of Companies, is
India’s largest manufacturer and
exporter of color and additive
masterbatches and thermoplastic compounds for the plastic processing Industry. The
company’s products include white, black, color, additive, and functional masterbatches;
electrically conductive compounds based on polyethylene and polypropylene with
surface resistance; polywhite antifibrillation; transparent fillers; and fillers for HM
carry/shopping bags. It also offers specialty products, such as masterbatches for BOPP
films, PET filaments and yarns, PP filaments and fibers, conductive compounds, and
biodegradable additives and compounds. The company supplies masterbatches through
dealers to polymer producers and large processors in packaging, as well as medium and
small scale processors.
Headquartered in Mumbai,
Plastiblends world class
manufacturing, product
development and application
facilities are located in Daman
and Roorkee.
Company’s masterbatches are
used to impart colors and
various special properties to
the products manufactured from plastics. Masterbatches find applications in various
plastic processing industries (for colouring, corrosion and hardness), such as flexible
packaging (fast moving consumer goods and pharmaceuticals), paints, irrigation, pipings
and telecommunications wires. Masterbatches are considered as a vital component in
plastic industry worldwide, as it consists of pigments and additives which provides
aesthetic looks as well as functional properties to polymer. With the development of
anti-statics, flame retardant, anti-microbial Masterbatches, its demand is set to boost
substantially across various end user industries. Additives are chemicals that improve
physical properties and other characteristics of polymer. The improvement achieved in
various functional properties of ordinary polymers using additive masterbatches is
significant in polymer industry.
Masterbatch Industry is highly fragmented with few major players and large number of
small and medium players who account for majority of the market share. Plastiblends
India Limited a leading manufacturer of masterbatches in organized sector with 12%
market share, produces a wide variety of specialty and high performance masterbatches
and compounds. Masterbatches constitute a highly successful and an essential segment
of the global plastics industry.

The Company has in-house full-fledged Research & Development Department equipped
with a wide range of lab machines, equipments, instruments and testing facilities that
enables to deliver a broad spectrum of new & customized solution for tailor made
product and formulations like bio-degradable masterbatches and masterbatches for
BOPP Films, PP Yarns, Fibres etc. with excellent price benefit ratio. The Company also
has technical experts with latest technical know-how & innovative abilities focusing on
upgradation of the existing masterbatches and development of new products. The
manufacturing units are highly automatic and equipped with sophisticated laboratory
facilities to conduct stringent tests.
Manufacturing Facilities
Company operates with four facilities having manufacturing capacity above 75000 MT
annually. Plastiblends extensive manufacturing facilities include three manufacturing
units in the Union Territory of Daman (two owned and one on lease) and one unit in
Roorkee, Uttarakhand, consisting of state of the art production lines employing
advanced manufacturing technology to produce premium quality products. The
manufacturing capacity includes: High speed, high capability LCM lines, Co rotation,
Counter rotation Extruders, Specifically designed mixers, High end Computerised
Gravimetric Systems and sophisticated Fully Computerised Process Control Systems,
Electronically controlled Automatic Weighing and Bagging Systems and Extensive Raw
Material & Finished goods stores and inventory management systems. These efficient
production capacities ensure consistent product quality and lower production time
enabling faster delivery to the customers. It has a product portfolio of 800 varieties in
masterbatches in colors and additives.
Achievements:
 The first Master Batch Company with the Status of an Export Hours by Government
of India.
 Awarded the highest recognition for exports, the prestigious certificate as “Largest
Exporter of Master Batches” from India for eight consecutive years since 2003-04 by
the Plastic Export Promotion Council, Govt. of India.
 Won the Gold Trophy “Fastest Growing Enterprises” for processing commodity
polymers for the year 2009-2011 by PLASTINDIA Foundation
The Kolsite Group
Plastiblends Ltd is a part of Kolsite Group which came into existence over five decades
ago. The Kolsite Group, formed in 1960’s, is a leader in the manufacture of plastic
extrusion plants and masterbatches. Today, Kolsite is a brand synonymous with quality
and reliability with consistent commitment to develop and deliver premium quality
products. The Kolsite Group primarily consists of 2 divisions: Machinery manufacturing
& Processing. Each group company is a leader in its line of business with unrivaled
domain competence.

The machinery manufacturing division consists of Kabra Extrusiontechnik Ltd. Kabra
Extrusiontechnik Ltd is engaged in the manufacture of single and twin screw plastic
extrusion plants with allied machines, is the market leader in the production of pipe
extrusion lines.
The processing division consists of two companies – (i) Maharashtra Plastics & Industries
and (ii) Plastiblends India Ltd. Maharashtra Plastics & Industries, has years of experience
in the extrusion of HDPE / Polypropylene strapping and is one of the largest
manufacturers.
Kolsite group has proven itself over the years, has strong financials, is a leader in most
areas of operations and has investor friendly polices (like bonus issues and healthy
dividend payments).
Product Range:
Plastiblends Masterbatches merge seamlessly with plastics enhancing their performance
and appearance. Company produces a large range of White, Black, Colour and
Functional Masterbatches, Additives and Compounds suitable for all major plastic
processing types.
POLYWHITE : Anti-fibrillation filler masterbatches for Raffia and film
POLYCOLOR : Pigment colour masterbatches - Black, White and Colours
POLYEFFECT : Pearlescent and metal effect colour masterbatches
POLYULTRA : UV additive masterbatches
POLYBRIGHT : Optical brightener additive masterbatches
POLYCLEAR : Nucleating agent additive masterbatches
POLYDRY : Desiccant additive masterbatches
POLYNOX : Antioxidant additive masterbatches
POLYBIO : Bio-degradable additive masterbatches
POLYPET : Masterbatches for POY and recycled staple fibre
POLYTRANS : Transparent filler masterbatches for coloured woven fabric

Hiqh Quality Products meeting International Standards
Plastiblends products match international quality standards making them globally
acceptable. Countries exported to include Italy, Canada, Australia, Middle East, SAARC
countries etc. Currently, it exports to 60 countries, including South Africa, Kenya,
Tanzania, the UAE, Sri Lanka and Bangaldesh, and generates 30% of export revenues
Company leadership position is determined by continuously meeting its customer’s
requirements/expectations. Company uses latest manufacturing technologies and
methods for design development and manufacture of high quality products to laid down
specifications, both internal and those specified by the customers.
The Quality Assurance Process Flow Chart

Indian Masterbatch Market Forecast & Opportunities – 2018
Plastic industry is one of the fastest growing manufacturing sectors in India and the
demand of plastics has surged up as a result of increased market penetration in
industries such as packaging, agriculture, healthcare, aerospace, electronics,
automotive, consumer goods, etc. Masterbatch is considered as a vital component in
plastics industry worldwide, as it consists of pigments and additives which impart
required color and characteristics to the end products.
According to India Masterbatch Market Forecast & Opportunities, 2018, the
Masterbatch volume sales in India are expected to grow at 23% CAGR till 2018. The
market for Masterbatch is driven by the growth in its end user industries as well as the
increasing penetration of plastic products in the Indian market. However, use of plastics
is being regulated by Ministry of Environment & Forests, Government of India, as solid
plastic waste impacts the environment adversely and also causes blockage of gutters,
sewerage system and drains. With the development of bio-additives, usage of
masterbatches holds positive prospects for the manufacturing of bio-degradable
plastics. Other important innovations such as development of anti-microbial
masterbatches, flame retardant masterbatches, antioxidant masterbatches is set to
drive the market for masterbatches across various end user industries.
The leading players in Masterbatches market in India are:
 Plastiblends India
 Clariant Chemicals
 Poddar Pigments
Performance comparison of these companies is covered under Peer Group Comparison
section.

2. Recent Development
Plastiblends to double capacity by 2015 – Dec’13
Plastiblends India Ltd will double its manufacturing capacity by this year. Along with
some nominal expansions that will take place at its existing plants that are situated in
Daman in Western India and Roorkee, Uttarakhand, the company is setting up a new
manufacturing unit.
As per SN Kabra, Vice Chairman & Managing Director, company has expanded capacities
by 25% in its existing facilities. Company is looking at setting up a new plant that will
cater to demands of the export market. Most likely this plant will be situated in one of
the Special Economic Zones (SEZs) in Gujarat. Close to 40% of the production from this
new plant would service the export market.
At present the company is actively exporting its products to almost 60 countries with
contribution of 30% in total revenue. Exports during last financial year were 1414.6
million as against 1316.4 million in the previous financial year registering an increase of
7.46 % over previous year. Company exports to various countries around the globe with
strong presence in Middle East, Africa SAARC & CIS Countries. With the addition of a
new manufacturing facility, the company’s total export business will increase by 50%.
Increase in Share Holding by Promoters – Dec’14
During last 5 years, promoters have increase their stake in the company by 5.3%, from
56.5% in Mar’10 to 61.8% in Dec’14.
Promoters continue to buy shares of their company. Being a small company with low
market capital, the promoters buying shares from open market adds comfort in terms of
associated downside risk in stock price in case of market correction.
YEAR FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Dec'14
Promoters Holding 56.5% 56.8% 56.8% 57.2% 61.7% 61.8%
% Increase (YoY) 0.0% 0.3% 0.0% 0.4% 4.5% 0.1% (9M)
At the end of Dec’ 14, promoter shareholding stands at 61.76%. During last financial
year, promoters have increased their stake by 4.5%. During first nine months of FY 14-
15, promoters have increased stake by 0.08%. Considering attractive valuations and
good future prospects, we expect promoters will continue to buy the shares from open
market to further increase their stake in the company.
Moreover, there has been no equity dilution for the last 10 years, which is very
impressive. There is no issuance of new shares to raise capital, no dilution of stake by
promoters which further strengthens the company’s positioning.

3. Financial Performance
Plastiblends India net profit rises 1.14% in the September 2014 quarter
Net profit of Plastiblends India rose 1.14% to Rs 89.0 million in the quarter ended Sept
2014 as against Rs 88.0 million during the previous quarter ended Sept 2013. Sales rose
19.41% to Rs 1334.2 million in the quarter ended Sept 2014 as against Rs 1117.3 million
during the previous quarter ended Sept 2013.
Plastiblends India net profit rises 4.36% in the June 2014 quarter
Net profit of Plastiblends India rose 4.36% to Rs 59.9 million in the quarter ended June
2014 as against Rs 57.4 million during the previous quarter ended June 2013. Sales rose
4.17% to Rs 1169.7 million in the quarter ended June 2014 as against Rs 1122.9 million
during the previous quarter ended June 2013.
1 2 3 4 5 6
Net Sales 1122.95 1117.33 1173.61 1244.51 1169.66 1334.16
Net Profit 57.44 88.04 59.32 67.59 59.91 89.02
1122.95 1117.33
1173.61
1244.51
1169.66
1334.16
57.44 88.04 59.32 67.59 59.91 89.02
0
200
400
600
800
1000
1200
1400
1600
RsinMillions
Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14
Last 6 Quarters Net Sales & Profit

Current & Expected Earnings
Quarterly Ended Profit & Loss Account
Expected Earnings for 3rd
and 4th
Qtr FY 2014-15:
Masterbatches are essential ingredients for the Plastic Processing Industry, which is
growing rapidly in India and has shown a growth rate that is twice of the GDP growth
rate. In last 5 years, Plastiblends sales have been doubled with CAGR of 21.1% with
profit CAGR of 30.67% and ROE of 20.53%
We believe that company will deliver robust revenue growth, operating margins will
improve with increase in net profit considering fall in raw material prices, entry into new
geographies for exports and focus on high value products.
Particulars
(Rs in Millions)
Dec
2013
Mar
2014
Jun
2014
Sep
2014
Dec
2014 E
Mar
2015 E
Audited / UnAudited UA UA UA UA UA UA
Net Sales 1173.61 1244.51 1169.66 1334.16 1407.47 1483.92
Total Expenditure 1064.26 1116.79 1055.3 1186.25 1255.32 1286.47
PBIDT (Excl OI) 109.35 127.72 114.36 147.91 152.15 197.45
Other Income 3.03 1.06 4.4 9.33 6.63 4.53
Operating Profit 112.38 128.78 118.76 157.24 158.78 201.98
Interest 14.62 12.14 9.38 8.77 8.75 9.41
Exceptional Items 0 0 0 0 0 0
PBDT 97.76 116.64 109.38 148.47 150.03 211.39
Depreciation 10.9 10.64 16.55 16.12 16.81 18.74
Profit Before Tax 86.86 106 92.83 132.35 133.22 192.65
Tax 27.55 38.41 32.92 43.33 43.40 62.73
Provisions & contingencies 0 0 0 0 0 0
Profit After Tax 59.32 67.59 59.91 89.02 89.82 129.92
Extraordinary Items 0 0 0 0 0 0
Prior Period Expenses 0 0 0 0 0 0
Other Adjustments 0 0 0 0 0 0
Net Profit 59.32 67.59 59.91 89.02 89.82 129.92
Equity Capital 64.97 64.97 64.97 64.97 64.97 64.97
Face Value (IN RS) 5 5 5 5 5 5
Reserves
Calculated EPS 4.57 5.2 4.61 6.85 6.91 9.99
Calculated EPS (Annualised) 18.26 20.81 18.44 27.4 27.65 40.00
No of Public Share Holdings 5110351 4978526 4978526 4972566 4969699 NA
% of Public Share Holding 39.33 38.31 38.31 38.27 38.24 NA

4. Peer Group Comparison
PEER GROUP Plastiblends India Poddar Pigments Clariant Chemicals
CMP 236.70 132.00 903.90
52 W H/L 312.45/93.00 42.75/181.90 594.45/1185.00
Market Cap 3075.82 1400.52 24098.65
Results (in Million) Sep-14 Dec-14 Sep-14
Sales 1334.16 816.28 2560.70
PAT 89.02 44.80 -13.20
Equity 64.97 106.10 266.60
EPS 21.23 15.07 34.94
P/E 11.15 8.76 25.87
In comparison to Poddar Pigments, Plasiblends India has healthier profit margins and
has grown at a faster pace. Being larger in size, the stock also commands a slightly
higher P/E and P/BV multiple. Further, the company has a healthy dividend policy,
company has consistently paid 30-40% of PAT as dividend for the past many years.
5. Key Concerns / Risks
Increasing Competition from Domestic & Overseas Players
Company faces stiff competition in domestic and global market. Masterbatches is a
scattered industry in India, with more than 250 players. Key operators in the organized
segment hold about 50% of the market. Plastiblends competes with Clariant Chemicals
and Poddar Pigments in the organized segment. Increasing competition from overseas
manufacturers is putting pressure on the margins and affecting performance of
Company.
No Pricing Power
As company operates in highly fragmented industry, it would not be able to pass on rise
in cost to its clients due to competition from unorganized sector. High volatility in crude
oil prices can have negative impact on production costs
Forex Exposure
Exports contribute about 30% of Plastiblends sales while it imports raw materials like
titanium dioxide. In FY14, exports were valued at Rs. 141.7 crores while imports
amounted to Rs. 140 crores. Hence, company is impacted to the extent of difference
between export receivable days and import payable days.

6. Saral Gyan Recommendation
Polymer consumption in India is poised to grow multifold, with the help of new
developments in packaging applications, infrastructure growth, modernization of
agriculture sector, improved healthcare facilities, improved lifestyle and disposable
incomes, automobile demand and rural penetration. Masterbatch industry will get a
direct benefit by this growth in polymer consumption. Plastiblends produces almost
800 grades of Masterbatches and has over 2,500 customers which include polymer
producers like Reliance Industries, polymer processors like Supreme Industries,
Cosmo Films, Jain Irrigation etc and plastic moulding companies like Nilkamal
Plastics. About 10% of company’s sales are from direct sales to some large OEM
clients while the rest is though a distribution network of about 70 dealers. Such a
wide network enables Plastiblends to tap a larger number of customers.
Company’s EBITDA and PAT margins have increased from FY 11-12 to FY 13-14 with
ROE and ROCE above 20%. During FY2012-14, it reported CAGR of 17% in revenues
with the net profit margin improving by 100 basis points. Moreover, company has
reduced its debt significantly during last financial year and total debt to equity ratio
is at 0.23. With fall in crude prices, we believe company will show significant
improvement in its profit margins by delivering strong growth in bottom line going
forward.
Important Ratios Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014
Margin Ratios
Core EBITDA Margin (%) 8.66 9.70 8.72 7.18 9.46
EBIT Margin (%) 7.45 8.94 7.72 6.59 9.29
Pre Tax Margin (%) 6.40 7.87 6.50 5.27 8.13
PAT Margin (%) 4.63 6.18 4.53 3.51 5.46
Performance Ratios
ROA (%) 8.17 11.48 8.74 7.04 11.25
ROE (%) 13.18 20.91 16.54 13.75 21.49
ROCE (%) 16.95 21.12 19.05 17.44 27.11
Financial Stability Ratios
Total Debt/Equity(x) 0.35 0.50 0.46 0.49 0.23
Plastiblends has a strong balance sheet with a debt to equity ratio of less than 0.3x.
With limited capex needs and strong internal cash generation, we expect the debt
on books to remain at the same levels. Investment in gross block accompanied with
higher sales will result in better return ratios.
Product obsolescence is a common feature in the masterbatch and other plastic
product industry, hence product innovation is the master key to future growth.
Plastiblends focus on R&D has enabled it to introduce new products in this segment
in addition to the manufacturing of more than 800 grades of masterbatches. Product
innovations, competitive cost structure, higher domestic market share and

continuous penetration into the exports markets makes the company well placed to
capture the surge in demand for masterbatches.
Plastiblends key raw materials include polymers, titanium dioxide and pigments.
Polymer is one of the major raw material and is directly co related with international
crude prices. As crude prices have fallen significantly during last couple of months,
company operating margins are expected to improve with increase in profitability.
Company focus towards value added products in its portfolio is expected to improve
its product mix in next 2 years. This will help company to achieve its target by
increasing export revenue contribution from 30% to 50% in next couple of years.
Company has increased its capacity from 52000 MT in 2011 to 75000 MT in 2014.
Company is now looking to grow in terms of volumes by exporting to new markets
to meet increase in demand of organized sector.
Management has rewarded shareholders by paying consistent dividend since last 14
years. Company has been maintaining a healthy dividend payout above 20%,
dividend yield at current market price is 2.1%. With expected increase in revenue
and profitability in coming quarters, we believe company dividend payout to
increase significantly.
YEAR Mar'10 Mar'11 Mar'12 Mar'13 Mar'14
EPS 8.02 13.94 12.85 11.82 20.95
Dividend / Share (In Rs) 6.00 7.00 3.50 3.50 5.00
Dividend Payout Ratio 31.1% 21.0% 22.8% 24.6% 19.8%
As per our estimates, Plastiblends India Ltd can deliver bottom line of 368.7 million
for full financial year 2014 – 15, annualized EPS of Rs. 28.4 with forward P/E ratio of
8.3X for FY 2014-15, which makes stock an attractive bet at current market price for
long term investors.
On equity of Rs. 64.97 million, the estimated annualized EPS for FY 14-15 works out
to Rs. 28.4 and the Book Value per share is Rs. 116.6. At current market price of Rs.
236.7, stock price to book value is 2.
Considering improvement in demand outlook and better operating efficiency coupled
with focus on higher revenues from exports and value added products, Saral Gyan
team recommends “Buy” on Plastiblends India Ltd at price of Rs. 236.70 for target of
Rs. 480 over a period of 12 to 24 months.
Buying Strategy:
 70% at current market price of 236.70
 30% at price range of 190-210 (in case of correction in stock price in near term)
Portfolio Allocation: 3% of your equity portfolio.

7. Disclaimer
Important Notice: Saral Gyan Capital Services is an Independent Equity Research Company.
© SARAL GYAN CAPITAL SERVICES
This document prepared by our research analysts does not constitute an offer or solicitation for
the purchase or sale of any financial instrument or as an official confirmation of any transaction.
The information contained herein is from publicly available data or other sources believed to be
reliable but we do not represent that it is accurate or complete and it should not be relied on as
such. Saral Gyan Capital Services (www.saralgyan.in) or any of its affiliates shall not be in any
way responsible for any loss or damage that may arise to any person from any inadvertent error
in the information contained in this report. This document is provide for assistance only and is
not intended to be and must not alone be taken as the basis for an investment decision.

Saral Gyan Hidden Gem - Jan 2015

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