EMMBI Polyarns Ltd - Review + Rating

[sunil]

EMMBI Polyarns Ltd is engaged in manufacture and sale of FIBC (Jumbo Bags) and Woven Sacks and various woven polymer based products like Container Liners, Protective irrigation system, Canal Liners, Flexi Tanks, Car covers etc

Competitive Strengths - Multiple & New Products, Selling and Distribution network, Relationship with established players in industry.

Valuation & Outlook.
Looking at post issue valuation, the company is trading at a P/E of28.54x times on the lower side and 32.103x times on the higher side of its post issue annualised FY10 EPS of Rs1.40.

The sector in which the company operates is highly dynamic & requires lot of innovation As the company does not have a large array of products in its portfolio for packaging, a sudden change in style & preference of the consumer may pose a serious challenge to the company.

The company is asking close to 30x post issue multiple which looks a bit expensive considering the growth of the industry.

[chetan]

HSBC Analysts  Avinash Nahata and Dipti Devdas have recommended an AVOID on the IPO of Emmbi Polyarns Limited with the following note,

EPL has reported an earning of Rs 1.5 per share for the half year ended September 2009 on pre–issue capital. Extrapolating the half year profits gives us an annualised earning of Rs 3.1 on pre-issue capital. On post issue, the offering is at 32x its consolidated annualised earnings for FY10.

There are concerns regarding the timely completion of capacity expansion and whether it will get absorbed by the market. Thus, any earnings based valuation on this is too premature. Also, the risk-reward dynamics are unfavourable at this juncture.

[chetan]

Unicon Wealth Research as the following View on this Public Issue,

At the issue price of INR 40-45, the company is priced at 28-32x its FY10 annualised EPS of INR 1.4 on a post issue basis. This is slightly expensive considering the fact that the company operates on 3-5% net
margins. Considering its small size we do not think such a premium is justified for the stock. We think investors can avoid this issue.