1. Parekh Aluminex
4th December 2009 TECHNO-FUNDA BUY REPORT
Key Data Company Description:
BSE Code 532606
Parekh Aluminex (PAL) is primarily engaged in production and sale of Aluminium
Foil Containers (AFCs), its lids and covers and Aluminium Foil Rolls (AFRs). It
NSE Code PARAL caters to the consumer food service industry and airline industry in India as well as
Reuters Code PARL.BO in other countries, where it exports. The products find application in packaging of
Bloomberg Code PKAL.IN food items in travel industry such as airlines, railways, fast food chains, restaurants,
Sensex 17185 hotels etc and also find their application in household uses.
CMP, Rs 110 Some of its clients include major airlines like Jet Airways, Indian, Air India,
Target Price (Rs) 145 Kingfisher, Indian Railways Catering and Tourism Corporation, Taj Air Caterers
amongst others. Its international clients include B.E. International, U.K. (Danone
Face Value (Rs) 10
Group), SOP International, U.K. (Major in Food packaging industry) and major
Mcap, (Rs. in Cr.) 142 airlines such as Emirates Airlines, Singapore Airlines, Thai Airways, Gulf Air, Etihad
52 week H/L 128/45 Airways, Air Asthana, Srilankan Airlines etc.
2 Wk Avg Qty 8054 PAL also undertakes job work for Hindalco, converting foil into containers (under
‘Freshpakk’ brand) and rolls (under ‘Freshwrapp’ brand) to be marketed directly by
Share holding, Sep'09 % Holding Hindalco.
Promoters 33.9
Investment Rationale:
DIIs 0
The expansion project of Rs 240 crore is progressing steadily. The construction
FIIs 11.9 work is going on in full swing and the project will be completed by March, 2010 as
Foreign Corp. Bodies 1.5 scheduled. After the completion of this mega expansion the installed
Bodies Corporate 12.0 capacities will be increased three times from the existing capacities and will
result in higher turnover & profitability going forward.
Public & Others 40.7
Total 100% The expansion is being financed through internal accruals, debt and issue of
preferential warrants converted at a various price of Rs 260, Rs 225, Rs 115 and Rs
Performance (%) 3M 6M 12M 105 from time to time. With its two manufacturing facilities situated strategically in
the tax haven of the Union Territory of Dadra and Nagar Haveli, India, the tax outgo
Stock (PAL) 0 0 85
is rather minimal.
BSE 200 11 17 99
Packaging accounts for around 11% of aluminium usage in India as compared to a
BSE 500 12 17 101
global share of around 20%. Given the rising middle-class and with an increasing
Key Financial (Rs Crore ) disposable income, health awareness and the preference for eco-friendly packaging
and serving solutions, the demand for AFCs is set to increase at a rapid pace. As
Year End the Indian economy matures, this share is expected to move towards the global
December H1FY10 FY09 FY10E FY11
level of 20%.
Sales 267.2 421 550 825
46.9 72.7 96.3 132.0 With a CAGR of 8% during 2007-11, the consumer food service industry in India is
PBIDT
expected to witness one of the fastest growth rates in the Asia Pacific region.
Interest 10.6 14.1 21.0 25.0
During the same period there is expected to be a quantum jump in the number of
PBDT 36.3 58.6 75.3 107.0 food outlets in India, giving a fillip to the PAL’s business. IATA forecast suggests
Depreciation 10.9 15.1 22.0 35.0 increase in air traffic and load factors, which augur well for PAL.
Tax 4.5 5.4 9.3 15.5 PAL is likely to post an EPS of Rs 34 in FY10, which would further go up to Rs 44 in
PAT 20.6 38.1 44.0 56.5 FY11. At CMP of Rs 110, the share is trading at a P/E of 3.2x on FY10E and 2.5x
Equity 12.9 12.9 12.9 on FY11E. The stock is forming a sideways consolidation triangle price pattern.
252.6 296.6 353.1 The consolidation pattern is forming after a long run-up. The upside breakout from
Reserves
the price pattern is at Rs 120. The target for the stock after the breakout is Rs160.
BV (Rs) 205.8 239.9 283.7
However, we recommend BUY with a target price of Rs 145 in the medium term.
EPS (Rs) 29.5 34.1 43.8
OPM (%) 17.6 17.3 17.5 16.0
NPM (%) 7.7 9.0 8.0 6.8
P/E 3.2 2.5
http://www.parekhaluminex.com
Vijay Dave
vijaydave@sunidhi.com
Ph: 91-22-6636 9669

2. Parekh Aluminex
SUNIDHI SECURITIES & FINANCE LTD
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SEBI Registration Numbers: NSE: INB 230676436 BSE: INB 010676436
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