Kabra Extrusiontechnik .....my old call finds place in ET today.....

Rising demand comes in handy

Augmenting Product Portfolio To Help Kabra Extrusiontechnik Gain Market Share
Ramkrishna Kashelkar ET INTELLIGENCE GROUP


MUMBAI-BASED Kabra Extrusiontechnik (KETL) gained 0.4% on Tuesday, outperforming an otherwise weak market, with the BSE Sensex tumbling 1.4%. The company has outperformed the market nearly tripling in the past one year against a 23% gain in the benchmark Sensex. Much of the scrip’s gain has come in 2010, as it jumped 81% in the past six months, while the Sensex stagnated.


In the second half of FY10, the company had emerged out of the stagnation that had engulfed its operations for the past couple of years. The company’s sales in the second half jumped 52% against the year-ago period, while profits soared 218%. Still, the company is seeing a strong order flow, which has enabled it to carry an order book of nearly Rs 100 crore in the first half of FY11. Considering the fact that the first half is typically a lean period for the company, the company’s order book is expected to strengthen further in the second half.


KETL is a cash-rich, debt-free company with a history of strong operating cash flows. Its cash and equivalent investments have grown at a cumulative annualised growth rate (CAGR) of 58% in the past five years to Rs 46.3 crore as on March 31, 2010.


The company is a leader in India manufacturing machines for the plastic processing industry. The demand for KETL’s extrusion machinery to produce plastic pipes and packaging films is growing fast, with the rising plastic consumption in India. According to industry estimates, India consumed 8 million tonne of plastics in 2009, which is expected to double in the next 5-6 years. It is estimated that the plastic processors will have to invest nearly $10 billion over the next 5-6 years to create the necessary plastic processing capacity.


The company has embarked upon an expansion plan to gain from this trend. It has embarked upon an investment plan of Rs 85 crore, which will more than double its gross block by FY12. The company is setting up an additional assembly shop in Daman by August 2010, which will improve the efficiency of its existing facility. Another manufacturing unit is being set up in Daman by end-2011.


The company is also augmenting its product portfolio with new offerings. It is the only company in India manufacturing machinery for window and door profiles. It has recently launched a new product to manufacture drip irrigation tube lines in collaboration with Drip Research Technology Services of the US. It is also planning to launch new high-speed multi-layer blown films plants by end-2010.