Bhansali Engineering Polymers (BEPL) Research Report By PL

Management Meeting Update

We met with Mr Jayesh Bhansali – Executive Director of Bhansali Engineering Polymers Limited (BEPL). Following are the key takeaways of the meeting:

BEPL is a vertically integrated petrochemical company that manufactures ABS (Acrylonitrile Butadiene Styrene) which acts as a raw material for companies dealing in automobiles, home appliances, telecommunications, luggage, bus body and various other industries.

The company manufactures over 1200 colours and 200 different grades of engineering plastic. It supplies in lots as small as 500kgs and also up to 5 tons. Margins vary across different orders depending on the size of the order as well as delivery time lines.

BEPL has a plant in Satnoor and Abu Road each. Recently it completed expansion from 51,000 MTPA to 80,000 MTPA. In its next phase of expansion this will increase to 137,000 MTPA by mid FY18E.

We expect the company to grow revenues to ~Rs 10bn and profits to ~Rs 650m in FY18E versus Rs 6.3bn and Rs 348m in FY17. Thereafter we feel that it can achieve 20% CAGR on topline and bottom line given that both auto and electrical appliances industry is growing at a strong pace and there are only 2 players in the industry.

Currently the company is debt free. Going forward the management has maintained that it will not borrow for capex or for working capital requirements. They have also indicated that they do not plan to dilute equity.

Although the stock price has moved up recently, keeping in mind the growth prospects of the end user industry as well as management confidence in execution, it does appear to be an attractive bet for the long term. The company has also rewarded shareholders through dividends & their aversion to unnecessary borrowings provides additional comfort. At the CMP it is trading at PER of 14.1X FY18E & 11.8x FY19E rough cut EPS estimates of Rs 3.6 & Rs 4.3 respectively.