Stock Note

RETAIL RESEARCH

31 Aug 2016

Uflex Ltd
Industry

CMP

Recommendation

Add on Dips to band

Sequential Targets

Time Horizon

Packaging

Rs. 234

Buy at CMP and add on declines

Rs. 197-207

Rs. 280-342

2-3 quarters

HDFC Scrip Code

UFLEXLEQNR

BSE Code

500148

NSE Code

UFLEX

Bloomberg
CMP as on 30 Aug 16

UFLX IN
234.30

Eq. Capital (Rs crs)

72.21

Face Value (Rs)

10.00

Equity Sh. Outs (Cr)

7.22

Market Cap (Rs crs)

1691

Book Value (Rs)

463.1

Avg. 52 Week Vol

480000

52 Week High (Rs)

253.0

52 Week Low (Rs)

132.2

Shareholding Pattern-% (Jun-2016)

Promoters

44.02

Institutions

10.05

Non Institutions

45.93

Total
Research Analyst: Atul Karwa

[Link]@[Link]

100.00

Uflex Ltd (Uflex) is one of Indias leading flexible packaging companies with large capacities of plastic film and packaging
products which provide end to end flexible packaging solutions. Since its inception in 1983, Uflex has grown from strength
to strength providing end-to-end solutions to clients across over 140 countries. It has successfully integrated its operations
from manufacturing of polyester chips, plastic films (BOPET, BOPP & CPP), laminates, and pouches to all types of packaging
and printing machines thus offering complete flexible packaging solutions. Headquartered in Noida it has packaging film
manufacturing facilities in India, Dubai, Mexico, Poland, Egypt and USA with a cumulative capacity in excess of 337,000 TPA.
It is the worlds largest supplier of polyester films for flexible packaging applications.

Investment Rationale

Latest foray into Aseptic packaging to aid revenue growth and margins
Low per capita packaging consumption in India
Marquee clients with long standing relations
Focus on increasing export revenues
Higher focus on packaging products to lead to higher margins
Innovation / R&D thrust to help differentiate company in the me-too sector

Concerns

Highly fragmented and competitive industry

Low entry barriers; especially in polyester film business
Slowdown in FMCG sector
Currency fluctuations due to presence in multiple countries with different currency moves
Teething problems in new project of aseptic packaging and delay in approval from customers
Increasing regulation on use of plastic products
Poor return ratios due to regular greenfield and brownfield expansions (especially those set up abroad) not yielding
profits soon and sufficiently.

Financial Summary
(Rs Cr)
Net Sales
EBITDA
PAT
EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)

Q4FY16
1506.6
218.7
86.2
11.9

Q4FY15
1581.2
214.9
77.2
10.5

YoY (%)
-4.7
1.8
11.6

Q3FY16
1482.3
190.5
80.2
11.1

QoQ (%)
1.6
14.8
7.4

FY15
6180.3
731.6
254.7
35.3
6.6
4.7
8.7

FY16
6105.8
802.3
312.8
43.3
5.4
4.3
9.9

FY17E
6372.4
952.7
381.7
52.9
4.4
3.6
10.9

FY18E
7028.0
1100.4
448.6
62.1
3.8
3.1
11.5

(Source: Company, HDFC sec)

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View and Recommendation
Uflex has an established position in the global and domestic BOPET films industry and top position in Indias organised
flexible packaging industry. Its profitability and cost structure are strengthened by its backward integration into
polyethylene terephthalate chips, inks, adhesives, printing cylinders, holography, metallisation and packaging machines. It
is among the lowest cost producer of packaging films in India and its integrated nature makes it more resilient to turmoil in
packaging industry. The company has an in-house R&D facility which offers better and innovative products resulting in
higher margins. Foray into aseptic packaging for liquid products would drive the future revenue growth and margin
expansion for Uflex.
The company has realised the need to improve the return on invested capital and has started the process of weeding out
non profitable customers/products. Uflex is consolidating its holding structure by bringing in the entire overseas film
business under one subsidiary Flex Middle East Dubai. The restructuring aims at monetising the same for expansion/debt
prepayment. Although the return ratios have been low due to industry specific issues (which Uflex has been fighting in its
own way), the scrip deserves better valuation than that at which it currently trades. Further we have not estimated FY19
numbers which could be better than FY18 as the Aseptic packaging unit (which is expected to earn higher margins) could
operate at ~70% utilisation in FY19 vs 40% in FY18.
We feel investors could buy the stock at the CMP and add on declines to Rs 197-207 band for sequential targets of Rs 280
(4.5x FY18E EPS) and Rs 342 (5.5x FY18E EPS) in 2-3 quarters.
Volume Growth

Capacity Utilisation

(Source: Company, HDFC sec)

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Company Overview
Uflex Ltd is engaged in the manufacture and sale of flexible packaging products. Uflex was set up in 1988 as Flex Industries
Ltd by Ashok Chaturvedi who is a technocrat promoter (having worked in the past with Rollatainers Ltd). The Company
offers flexible packaging solutions to its customers across the globe. The Company's products include printed, laminated,
metalized, co-extruded, coated, embossed, plain plastic films and hologrammed sticker sheets. Its plastic film products
include oriented polypropylene (OPP) films, polyester films, metalized and specialty films, and polyester chips of different
grades. Its flexible packaging products include laminates, made of various combinations of polyester, bi-axially oriented
polypropylene (BOPP), poly, metalized and hologram films and others in roll form and in various preformed pouches and
bags of many sizes, and rotogravure cylinders for various types of rotogravure printing. It offers finished packaging to a
range of products, such as snack foods, candy and confectionery, sugar, rice and other cereals, beverages, tea and coffee,
desert mixes and noodles.
UFlex is Indias largest end to end flexible packaging solutions company serving as a one stop shop for all flexible packaging
needs across varied industry sectors spanning USA, Canada, South America, UK, Europe, Russia, CIS countries, South Africa
and other African countries, Middle East and the South Asian Countries.
Company Structure

(Source: Company, HDFC sec)

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All throughout the journey, Uflex has grown through value additions in terms of product innovations, quality enhancements
and cost effective products to its valued customers. It has manufacturing units at 4 locations in India at Jammu, Noida,
Malanpur and Sanand and 5 locations abroad at Mexico, USA, Egypt, Poland and Dubai.
Plant Capacities
Products (TPA)
(A) Main Products
Laminates/ Pouches/ Tubes/ Big Bags
(Flexible Packaging Products)
Liquid Packs (Mn packs)*
Packaging Films
PET Film
PP Film
CPP Film
(B) Intermediary Products
Polyester Chips
Poly Film
Metallization
Holography
Inks & Adhesives
Rotogravure Cylinders (Nos)
Packaging & Converting Equipment (Nos)

India

Dubai

Mexico

Egypt

Poland

USA

Total

1,00,000

1,00,000

7,000

7,000

54,000
30,000
4,000
88,000
72,000
6,000
33,600
8,600
41,000
69,000
1,570

52,000

60,000

52,000

60,000

4,800

15,600

30,000
35,000
12,000
77,000

18,000

30,000

30,000

30,000

30,000

10,800

10,800

2,56,000
65,000
16,000
3,37,000
72,000
6,000
93,600
8,600
41,000
69,000
1,570

(Source: Company, HDFC sec)

Packaging Films business

Uflex is Indias largest end to end flexible packaging solutions company serving as a one stop shop for all flexible packaging
needs across varied industry sectors spanning USA, Canada, South America, UK, Europe, Russia, CIS countries, South Africa
and other African countries, Middle East and the South Asian Countries. It has cumulative capacity of 337000 TPA and is the
worlds largest supplier of polyester films for flexible packaging applications. Its production facilities are spread across four
continents. Uflex is the only global packaging film manufacturer with global outreach that together accounts for over 90%
of the global packaging market.
Flexible Packaging business
Uflex is Indias largest Flexible Packaging Company headquartered in Noida, in the National Capital Region of Delhi. Uflex
with its three manufacturing facilities supplies to all major multinationals and Indian customers. Uflex is also the largest
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Flexible Packaging exporter with major presence in North America, Europe, Africa, South East Asia and the Middle East. It
has a manufacturing capacity of over 80000 TPA with plants located in Noida and Jammu. Uflex is the pioneer in India in
introducing various innovative products that deliver consumer convenience and extended shelf life. Uflex has the unique
advantage to deliver customized solutions due to its full backward integration into Films (BOPET, BOPP, CPP, Metalized
Films), Chemicals (Inks, Coatings, Adhesives), Engineering (Converting & Packing Equipments), Holography (Films, Labels)
and Cylinders (Electronic, Laser and Flexographic Plates).
Revenue breakup (Rs Cr)

(Source: Company, HDFC sec)

Investment Rationale
Foray into Aseptic packaging to aid revenue growth
Uflex is also setting up a facility at Sanand in the state of Gujarat for manufacture and sale of Aseptic Packaging Materials
for liquid products with an annual capacity of 3.5 bn packs in the 1st phase (7 bn packs eventually in 2020) at an estimated
capital outlay of ~Rs 580 cr. This new facility will cater primarily to the domestic customers as well as international market
for packaging of liquid products such as non-aerated drinks, dairy products, liquor and juices. The project would commence
the production from April 2017. With this new plant for aseptic packaging for liquids, the company will have the entire
bouquet of product offerings, which at present span across solids, semi-solids, pastes, gels, viscous fluids, powders and
granular materials.

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On full capacity utilization the aseptic packaging facility shall be adding ~Rs 500-600 cr to the topline. Operating margins in
aseptic packaging are estimated to be in the range of 20-22% which is higher than current margins (13.1% in FY16) earned
by Uflex. As a result Uflex will witness sharper margin expansion from FY18. We expect average capacity utilization of 40%
in the first year of operations (FY18) and revenues of ~Rs 230-250 cr from the facility in FY18 as the company taps the
market for customers and gradually ramps up capacity.
At present, India has a market of ~8 bn packs in liquid packaging of which 90% is being supplied by Tetra Pak and 10% is
imported. After the commissioning of Uflexs facility FMCG companies who are main consumers of aseptic liquid packaging
will have an additional option and are likely to reduce their dependence on Tetra Pak which has a virtual monopoly in in
Indian market.
Innovative and value added product will lead to margin expansion
Uflex has the technical ability and innovative skills to design structures and barrier properties. The Company is one of the
world leaders producing bespoke world class flexible packaging solutions that:
Enhance market performance of the product through enhanced packaging aesthetics, barrier properties, pack
functionalities and anti-counterfeiting properties;
Improve utility for the end user through innovation to create value added differentiation;
Replace outmoded options with versatile, sustainable and cost-effective solutions.
The company constantly develop innovative customized solutions by upgrading the processes and products being
manufactured which are either unique or offer affordable import substitution. It has a strong in-house R&D capability with
a fully equipped research laboratory. Some of the recent innovative development by the company includes
Anti-slip bag for packaging premium rice
Hermetically sealed block bottom and block top recyclable bag for packing white cement based putty
Flexfresh technology to offer shelf life extension solutions to the fresh produce industry.
Anti-counterfeiting and brand protection solutions such as Thermal Holography film, Cold foil, Unigram,
Latentogram and Fresnel lens to keep look-alikes from eroding the brand equity of clients
Indigenously produced the new generation cost effective polyester base solvent less adhesive system for flexi pack,
new ink system for PVC profile and special coating for producing matt effect in laminates
Set-up fully automatic Robotic Laser Engraving line at Noida for manufacturing rotogravure cylinders
Low per capita packaging consumption in India
Historically, the Indian supply chain has been selling goods mostly in loose form or in conventional packing of paper
bags/wrap etc. A very small fraction of the retail consumption of goods is sold as packaged goods. In India, the packaging
penetration has been very low or insignificant compared to the developed countries where anything and everything is sold
in packed form whether it is raw, semi-finished or finished forms. With the change in economic condition, lifestyle of
people & launch of organized retail etc., the demand for packaged goods is expected to rise dramatically.
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Per capita packaging consumption (kgs)

(Source: Indian Institute of Packaging, HDFC sec)

Marquee clients with long standing relations

Uflexs has always been deploying latest technologies to offer innovative and compatible packaging products to customers
and attain high degree of operational excellence. Its emphasis on product innovations, quality enhancement together with
competitive price and quick deliveries makes it preferred vendor. Key customers of Uflex include some of the biggest
companies in India as well as MNC companies with global operations.
Key customers include some of the well-known MNC brands

(Source: Company, HDFC sec)

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Focus on increasing export revenues
Uflex is targeting to achieve 30% of its packaging segment's revenue (~15% of consolidated revenues) from markets abroad
in the next three years. At present, exports account for 18-20 per cent of revenues of its packaging business, which in turn
accounts for 44% of the total revenues (i.e. exports account for ~9% of consolidated revenues). It exports products to over
140 countries from its manufacturing units in India, Poland, the US, Mexico, Dubai and Egypt. According to a report by
Smithers-Pira global packaging market is projected to grow 3.5% per year to 2020, with sales to reach $997 billion by 2020.
While exports from India have remained flat over the last few years, Uflex is trying to increase this proportion going
forward by targeting the above markets.
Share of exports in total revenues

(Source: Company, HDFC sec)

Higher focus on packaging products to lead to higher margins

Uflex is focusing more on flexible packaging products where the margins are higher as compared to packaging film. Many of
its competitors have announced/completed capacity expansion in the packaging films segment which has resulted in films
becoming more of a commoditized business and margins getting squeezed. Uflex is continuously adopting technologies and
bringing innovative products in packaging which would lead to better margins for the company.

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Margin trend in Flexible Packaging and Packaging Films segment

(Source: Company, HDFC sec)

Industry Background
Packaging is one of the fastest growing industries and stands at USD 700 billion globally. It has grown higher than GDP in
most of the countries. In developing country like India, it grew at a CAGR of 16% in the last five years and touched ~USD
32Bn in FY15. The Indian packaging industry constitutes ~4% of the global packaging industry. The per capita packaging
consumption in India is low at 4.3 kgs, compared to developed countries like Germany and Taiwan where it is 42 kgs and 19
kgs respectively. However in the coming years Indian packaging industry is expected to grow at 18% p.a. wherein, the
flexible packaging is expected to grow at 25 % p.a. and rigid packaging to grow at 15 % p.a.
Flexible packaging expected to grow at 25% pa

(Source: FICCI, HDFC sec)

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The packaging segment in India is an amalgamation of both organized and unorganized players ranging from very small
players with limited presence to big players with large market share. Demand for this segment is anticipated to grow rapidly
across all the players. Also there is an increasing focus on innovative and cost effective packaging materials. Thus, the
industry players are keeping in track with the changing trends in packaging and making efforts to capture the market with
higher technology orientation. Further with a viewpoint of health and environment friendliness, the growth is packaging
industry has been leading to greater specialization and sophistication amongst the market players.
Over the years, BOPET film and BOPP films have become the preferred choice to pack consumer articles, including food,
personal products and clothing. Besides such films, there is also a range of metallised and coated film products for
customers for increased barrier properties and higher shelf life of products. Some of the leading packaging players include:
Leading players in packaging industry
Flexible Packaging
Uflex
Huhtamaki
Amcor
Paharpur
Multiflex
Uma Polymers
NB Polyfilms

Uflex
Garware
SRF
Chiripal

BOPET Films
Jindal Poly
Polyplex
Ester
Sumilon

Uflex
Cosmo
Polyplex
Chiripal

BOPP Films
Jindal
Max
SRF
Nahar Polyfilms
(Source: HDFC sec)

Key growth drivers for packaging industry

Indian packaging industry is fragmented with unorganised players having a larger share of the segment. However, with
increasing awareness, better products and shrinking cost advantages, the industry is expected to tilt towards organized
players. According to the Indian Institute of Packaging (IIP), the packaging sector in 2015 was valued at US$32bn and is
expected to reach US$73bn by 2020. Indias per capita packaging consumption is a mere 4.3kg, while other developing
countries like China/ Taiwan/ Germany have ~6/19/42kg per capita consumption respectively.
The Indian packaging industry which witnessed a CAGR growth of ~16% over FY10-FY15 is expected to grow at 18% over
FY15-FY20 due to the following factors:
Rise of organized retail
Growth in smaller packages due to nuclear family and increasing rural penetration
Demand for better packaging resulting from E-commerce boom
Growing trend of packed foods to increase shelf life of food products
Packaging being used as a branding tool
Plastic packaging becoming the material of choice
Packaging encompasses a wide range of material types across paper board, metals, plastic, wood, glass and other materials.
However amongst all the substitutes available, 'Plastic Packaging' is the fastest emerging trend in the packaging industry.
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Plastics today form the foundation of our convenience consumer culture. The traditional materials like paper boards,
metals, wood, glass etc. have been replaced by plastics in many applications due to their cost to performance ratio. The
features of plastics make them an ideal packaging material for all industrial or commercial users. Globally, Plastics comprise
of 42% of packaging with the combination of rigid and flexible plastics in packaging.
Plastics comprise of 42% of packaging, globally

(Source: FICCI, HDFC sec)

Applications and Benefits of different plastic products

Plastic
Application
PET

HDPE

PVC
LDPE

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Food jars for jelly, jam and pickles

Plastic bottles for soft drinks, water, juice
Ovenable film and microwavable food trays
Cereal box liners
Reusable shipping containers
Bottles for non-food items, such as shampoo, liquid
laundry detergent, household cleaners, motor oil etc.
Rigid packaging applications include blister packs and clamshells.
Packaging, film and sheet, and loose-leaf binders.
Flexible packaging uses include bags for bedding and medical
Container lids
Shrink wrap and stretch film.

Benefits
Excellent resistance to most solvents
High impact capability and shatter resistance
Clear and optically smooth surfaces
Relatively stiff material with useful temperature
capabilities
Higher tensile strength
High impact strength
Brilliant clarity
Excellent processing performance
Excellent resistance to acids, bases and vegetable
oils

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PP

PS

Squeezable bottles (e.g., honey and mustard).

Medicine bottles
Bottle caps and closures
Bottles for catsup and syrup.
Protective foam packaging for furniture, electronics and other
delicate items.
Packing compact disc cases and aspirin bottles

Toughness, flexibility and relative transparency

Low moisture vapor transmission
Inertness toward acids, alkalis and most solvents
Low thermal conductivity and excellent insulation
properties
Excellent moisture barrier for short shelf life
products
(Source: FICCI, HDFC sec)

Concerns
Highly fragmented and competitive industry
Packaging film markets tend to by highly competitive at both the national and regional levels, often with narrow margin.
This could impact profitability in times of slowdown as margins get further squeezed due to high fixed costs. In India
packaging films capacity is expected to rise to 1.6 mn tons from the current 1.1 mn tons (led by Cosmo and SRF). The
current capacity utilization for the industry is ~68%. The rise in capacity could bring more pressure on the realizations and
margins. However globally the capacity in other countries is likely to rise by only 9% over next two years. Hence companies
having global presence like Uflex will be are less hit than pure India players.
Slowdown in FMCG sector
FMCG sector is the largest consumer for packaging. An economic slowdown leading to lower disposable income/higher
inflation would cause a slowdown in the FMCG industry resulting in lower demand for packaging products.
Currency fluctuation
Uflex has manufacturing facilities India, Dubai, Mexico, Poland, Egypt and USA. Overseas revenues account for ~50% of the
total revenues and any adverse currency movement in the multiple currencies might lead to lower consolidated profits.
Regulatory threat on use of plastic products
There is an increasing concern among consumers for environmentally sustainable packaging solutions. Any move towards
legalizing it by the government would increase costs for the manufacturers. Although plastic packaging has many benefits,
increasing environment concerns could result in government policies limiting its use which would slowdown entire
industrys growth.
Low entry barriers; especially in polyester film business
Packaging films is a low entry barrier business. As a result players have limited pricing power due to highly fragmented
nature of the industry.
Teething problems in new project of aseptic packaging and delay in approval from customers
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Uflex will commence operations of the new aseptic plant by the end of FY17. Since it is a new segment for the company it
could face some problems in the initial stage. Also approvals from customers could get delayed and impact revenues.
Poor return ratios due to regular greenfield and brownfield expansions (especially those set up abroad) not yielding
profits soon and sufficiently.
FY11 was a bumper year for Uflex due to sudden shortage of PET films in the global market resulting in substantial increase
in PET films margins. Post that it undertook regular capex on brownfield and Greenfield expansions. However the
profitability has not recovered to FY11 levels despite the gross block doubling. Part of this is due to many players expanding
capacities, crude oil prices seeing lot of volatility and demand growth being less than expected. FY16 showed the first signs
of revival in profitability for Uflex and hence even the return ratios have also started to improve.
Capital expenditure and Return ratios trend

(Source: Company, HDFC sec)

Packaging companies are typically squeezed between large sized buyers and large sized sellers and hence their bargaining
power is limited. Further whenever customers are squeezed for profitability, they resort to downgauging and downtrading.
However R&D and innovation can offset these negatives to some extent. Uflex has followed this path and hence the trend
of margins of Uflex has always been smoother than that of its peers. The venture into Aseptic packaging is also one more
step to insulate itself to some extent against these negatives. Uflex pays lower tax due to benefits it derives from setting up
a unit in Jammu & Kashmir and its profits in Middle East and Poland being tax free.

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Q1FY17 Review
Consolidated revenues of the company in Q1FY17 declined by 4.7% yoy to Rs 1506.6 cr on account of lower realization
resulting from fall in crude prices. Total volumes increased by ~4% to 102000 MT as compared to 98200 MT in Q1FY16.
EBITDA increased by 1.8% yoy to Rs 218.7 cr while EBITDA margins improved 92 bps to 14.5% as raw material costs and
other operating expenses as a percentage of sales were lower. Employee costs increased significantly due to addition in
workforce and regular increments given to employees. Net profits went up by 11.2% yoy to Rs 86.2 cr and PAT margins
improved 84 bps to 5.7% as increase in depreciation expenses was offset by lower tax rate.
Particulars
Operating Income
Material consumesd
Employee expenses
Power & Fuel expenses
Other expenses
Total expenses
EBITDA
Depreciation
Other Income
Interest
PBT
Tax expenses
PAT
Share of Profit/(Loss) of Asso.
Minority Interest
Reported PAT
EPS
EBITDA (%)
PAT (%)

Q1FY17
1506.6
857.3
140.4
69.5
220.7
1287.9
218.7
76.8
8.4
45.0
105.3
19.9
85.4
1.3
0.5
86.2
11.9

Q1FY16
1581.2
935.8
116.4
76.8
237.3
1366.3
214.9
70.8
3.6
46.6
101.2
24.7
76.5
0.9
0.2
77.2
10.5

YoY (%)
-4.7
-8.4
20.6
-9.6
-7.0
-5.7
1.8
8.5
132.0
-3.5
4.1
-19.3
11.6
45.3
145.0
11.6
13.1

Q4FY16
1482.3
826.4
121.9
71.0
272.5
1291.8
190.5
71.7
9.9
38.5
90.2
10.7
79.5
1.4
0.6
80.2
11.1

QoQ (%)
1.6
3.7
15.2
-2.2
-19.0
-0.3
14.8
7.2
-14.9
16.9
16.7
86.2
7.4
-7.4
-22.2
7.4
7.4

FY16
6105.8
3543.4
492.4
284.3
983.6
5303.6
802.3
285.5
35.3
177.0
375.1
62.8
312.3
3.6
3.1
312.8
43.3

FY15
6180.3
3819.9
432.8
304.8
891.3
5448.7
731.6
279.4
16.6
186.9
281.9
30.9
251.0
4.5
0.7
254.8
35.3

YoY (%)
-1.2
-7.2
13.8
-6.7
10.4
-2.7
9.7
2.2
112.6
-5.3
33.1
103.5
24.4
-18.2
318.9
22.8
22.8

14.5%
5.7%

13.6%
4.9%

92 bps
84 bps

12.9%
5.4%

167 bps
31 bps

13.1%
5.1%

11.8%
4.1%

130 bps
100 bps

Peer Comparison
There are no direct comparable peers of Uflex as most of the players are either present in Flexible Packaging or Packaging
Films segment. Huhtamaki PPL is mainly into packaging while Jindal Polyfilms, Polyplex and Cosmo are mainly into films. In
January 2015 Huhtamaki acquired Positive Packaging Industries Ltd. In September 2015 Essel Propack sold its flexible
packaging subsidiary Packaging India to Amcor.

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Company
(FY16)
Uflex
Huhtamaki PPL
Jindal Polyfilms
Polyplex
Cosmo

CMP
(Rs)
232.6
283.9
414.5
286.7
355.5

Mkt Cap
(Rs Cr)
1679.6
2063.9
1743.0
916.7
691.0

Oper Inc
(Rs Cr)
6105.8
2037.4
7225.6
3180.2
1620.6

EBITDA
(Rs Cr)
802.3
249.0
1008.9
321.2
189.9

PAT
(Rs Cr)
315.9
77.1
371.1
29.0
98.6

EBITDA
(%)
13.1
12.2
14.0
10.1
11.7

PAT
(%)
5.2
3.8
5.1
0.9
6.1

EPS
(Rs)
43.3
10.0
84.8
9.1
47.5

BV
(Rs)
463.1
84.7
547.0
712.9
234.7

P/E
(x)
5.4
28.4
4.9
31.6
7.5

P/B
(x)
0.5
3.4
0.8
0.4
1.5

EV/EBITDA
(x)
4.3
9.1
3.3
3.1
5.0

Debt/Eq
(x)
0.6
0.5
0.7
0.5
1.1

View and Valuation

Uflex has an established position in the global and domestic BOPET films industry and top position in Indias organised
flexible packaging industry. Its profitability and cost structure are strengthened by its backward integration into
polyethylene terephthalate chips, inks, adhesives, printing cylinders, holography, metallisation and packaging machines. It
is among the lowest cost producer of packaging films in India and its integrated nature makes it more resilient to turmoil in
packaging industry. The company has an in-house R&D facility which offers better and innovative products resulting in
higher margins. Foray into aseptic packaging for liquid products would drive the future revenue growth and margin
expansion for Uflex.
The company has realised the need to improve the return on invested capital and has started the process of weeding out
non profitable customers/products. Uflex is consolidating its holding structure by bringing in the entire overseas film
business under one subsidiary Flex Middle East Dubai. The restructuring aims at monetising the same for expansion/debt
prepayment. Although the return ratios have been low due to industry specific issues (which Uflex has been fighting in its
own way), the scrip deserves better valuation than that at which it currently trades. Further we have not estimated FY19
numbers which could be better than FY18 as the Aseptic packaging unit (which is expected to earn higher margins) could
operate at ~70% utilisation vs 40% in FY18.
We feel investors could buy the stock at the CMP and add on declines to Rs 197-207 band for sequential targets of Rs 280
(4.5x FY18E EPS) and Rs 342 (5.5x FY18E EPS) in 2-3 quarters.

Financial Statements
Income Statement
Particulars
Income from operations
Material Cost
Employee Cost
Other expenses
Total expenses

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FY14
5863.3
3687.8
390.3
771.1
5179.6

FY15
6180.3
3826.4
437.3
875.7
5448.7

FY16
6105.8
3549.1
498.4
967.3
5303.6

FY17E
6372.4
3584.5
553.2
995.7
5419.7

FY18E
7028.0
3925.8
608.6
1084.4
5927.6

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RETAIL RESEARCH
EBITDA
Depreciation
EBIT
Other Income
Interest
PBT
Tax Expenses
PAT
Minority Int/Share in Asso.
Adj. PAT
EPS

683.6
267.1
416.6
33.5
233.3
216.8
15.1
201.6
0.0
201.6
27.9

731.6
279.4
452.2
21.1
186.9
286.3
30.9
255.5
-0.7
254.7
35.3

802.3
285.5
516.7
39.0
177.0
378.7
62.8
315.9
-3.1
312.8
43.3

952.7
325.2
627.6
32.2
197.4
462.3
78.6
383.7
-2.0
381.7
52.9

1100.4
348.6
751.8
34.2
224.0
562.0
112.4
449.6
-1.0
448.6
62.1

(Source: Company, HDFC Sec)

Balance Sheet
Particulars
EQUITY AND LIABILITIES
Share Capital
Reserves and Surplus
Shareholders' Funds
Minority interest
Long Term borrowings
Deferred Tax Liabilities (Net)
Other Long Term Liabilities
Long Term Provisions
Non-current Liabilities
Short Term Borrowings
Trade Payables
Other Current Liabilities
Short Term Provisions
Current. Liabilities
TOTAL
ASSETS
Fixed Assets
Gross Block
Less: Acc. Depreciation
Net Block
Capital work-in-progress
Non current Investments

RETAIL RESEARCH

FY14

FY15

FY16

FY17E

FY18E

72.2
2750.7
2822.9
0.0
1821.1
141.2
4.0
9.0
1975.3
595.1
870.0
263.2
68.2
1796.4
6594.6

72.2
2935.5
3007.7
0.8
1403.8
120.1
3.3
10.7
1537.8
806.2
759.8
293.2
62.5
1921.7
6467.9

72.2
3271.5
3343.7
3.9
1429.6
136.7
6.1
9.3
1581.6
714.3
782.4
323.0
67.6
1887.2
6816.4

72.2
3616.6
3688.8
5.9
1629.6
136.7
4.7
9.7
1780.6
764.3
849.4
308.7
70.3
1992.7
7467.9

72.2
4022.1
4094.3
6.9
1479.6
136.7
5.3
10.5
1632.0
794.3
900.5
348.6
76.2
2119.5
7852.6

4875.9
1497.7
3378.1
74.1
125.9

4978.2
1738.3
3239.8
32.4
138.0

5268.2
1977.9
3290.4
229.2
140.4

6078.2
2303.1
3775.2
149.2
140.4

6338.2
2651.7
3686.6
59.2
140.4

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RETAIL RESEARCH
Long-Term Loans and Advances
Other Non-current Assets
Non-current Assets
Current Investments
Inventories
Trade Receivables
Cash and Bank Balances
Short-Term Loans and Advances
Other Current Assets
Current Assets
TOTAL

164.9
7.0
297.7
0.0
610.7
1505.2
207.4
505.7
15.6
2844.7
6594.6

160.4
3.3
301.7
0.0
661.0
1508.7
192.2
525.6
6.5
2894.0
6467.9

251.4
3.2
395.0
0.0
620.8
1480.2
389.3
400.8
10.7
2901.8
6816.4

248.9
4.8
394.1
0.0
665.0
1580.3
388.6
503.8
11.6
3149.4
7467.9

274.5
4.3
419.1
250.0
733.3
1720.9
434.5
538.3
10.8
3687.7
7852.7

(Source: Company, HDFC Sec)

Cash Flow Statement

Particulars
Profit Before Tax
Depreciation
Others
Change in working capital
Tax expenses
Cash flow from Operating activities
Net Capex
Other investing activities
Cash flow from Investing activities
Proceeds from Eq Cap
Borrowings / (Repayments)
Dividends paid
Interest paid
Cash flow from financing activities
Net Cash Flow

FY14
216.8
267.1
190.0
-297.2
-45.9
330.7
-193.5
12.7
-142.9
0.0
111.0
-17.3
-233.3
-142.5
45.2

FY15
286.4
279.4
246.6
-271.6
-39.4
501.4
-223.8
13.7
-197.3
0.0
-111.2
-18.1
-186.9
-319.3
-15.2

FY16
378.7
285.5
135.6
144.9
-46.2
898.6
-503.8
31.2
-461.2
0.0
-39.8
-19.5
-177.0
-240.3
197.1

FY17E
462.3
325.2
196.9
-192.5
-78.6
713.3
-730.0
0.0
-730.0
0.0
250.0
-36.6
-197.4
16.0
-0.7

FY18E
562.0
348.6
199.6
-144.8
-112.4
852.9
-170.0
-250.0
-420.0
0.0
-120.0
-43.1
-224.0
-387.1
45.8

(Source: Company, HDFC Sec)

Financial Ratios
Particulars
EPS
Cash EPS (PAT + Depreciation)
Book Value Per Share(Rs.)

RETAIL RESEARCH

FY14
27.9
64.9
390.9

FY15
35.3
74.0
416.5

FY16
43.3
82.9
463.1

FY17E
52.9
97.9
510.8

FY18E
62.1
110.4
567.0

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RETAIL RESEARCH
PE(x)
P/BV (x)
Mcap/Sales(x)
EV/EBITDA

8.4
0.6
0.3
5.0

6.6
0.6
0.3
4.7

5.4
0.5
0.3
4.3

4.4
0.5
0.3
3.6

3.8
0.4
0.2
3.1

EBITDAM (%)
EBITM (%)
PATM (%)

11.7
7.1
3.4

11.8
7.3
4.1

13.1
8.5
5.1

15.0
9.8
6.0

15.7
10.7
6.4

ROCE (%)
RONW (%)

9.0
7.6

9.1
8.7

10.4
9.9

11.4
10.9

12.6
11.5

Current Ratio
Quick Ratio
Debt-Equity

1.6
1.2
0.9

1.5
1.2
0.7

1.5
1.2
0.6

1.6
1.2
0.6

1.7
1.4
0.6

(Source: Company, HDFC Sec)

1 year price movement comparison with BSE Midcap

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RETAIL RESEARCH

Fundamental Research Analyst: Atul Karwa, [Link]@[Link]

RETAIL RESEARCH Tel: (022) 3075 3400 Fax: (022) 2496 5066 Corporate Office
HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066
Website: [Link] Email: hdfcsecretailresearch@[Link].
"HDFC Securities Ltd. is a SEBI Registered Research Analyst having registration no. INH000002475."
Disclosure:
I Atul Karwa, MMS authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no
part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of
1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any
material conflict of interest.
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RETAIL RESEARCH

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