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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We believe plastic consumption in India is expected to grow at a healthy rate
on the back of growing substitution, expanding middle income group and
new applications. Despite being an industry dominated by unorganised players
(70% of the industry size), the organised players over the last few years have
outpaced them in terms of growth through constant innovation and regular
introduction of niche products and thereby gradually eating into their share
Having created a niche market for themselves, they have the wherewithal to
deliver consistently, leading to value proposition for investors. In this space
we like Supreme Industries, Sintex Industries, Time Technoplast and Astral
Poly Technik — purely based on their business models and ability to generate
consistent returns.
Key Investment Rationale
Plastic consumption in India to grow at 15% CAGR
With India’s GDP growing at 8% annually and plastic products increasingly
finding application in all sectors of the economy, replacing other competing
products such as steel and aluminium, we expect demand to remain robust.
The application of plastic is increasingly evident across sectors including
packaging, agriculture, healthcare, aerospace, electronics and infrastructure.
According to the All India Plastics Manufacturers’ Association (AIPMA), the
domestic consumption has been growing at 10-12% CAGR over the last decade
and is all set to reach the 12.5mn tonnes in 2012 from 9mn tonnes in 2010
which will make India the third largest plastic consumer after US and China.
Innovation & introduction of value-added products: Key to growth & margins
The key USP in any industry that is largely unorganised is to regularly innovate
and come out with niche products at regular intervals. Sintex, Supreme, Astral
Time have consistently followed this thumb rule and thus have been able to
grow at a pace which is way above the industry average.
Plastic composites: Niche high growth engine
Plastic composites are new age products and are ideal replacement for
conventional materials such as steel, aluminium and wood on account of their
durability, corrosion and maintenance free character. The Indian composites
industry has grown at healthy 16-18% CAGR over the last five years, more than
twice the GDP growth rate. The burgeoning manufacturing sector and heavy
investments in infrastructure is expected to provide an impetus to the Rs 63-
bn Indian composite industry, which is expected to grow at 16-17% CAGR.
From our coverage universe, Sintex and Time Technoplast have a presence in
the composites segment while Supreme Industries is currently putting up a
facility to make composite cylinders. These companies will not only benefit
from high growth in these segments but will also enjoy better margins as
compared to their bouquet of conventional plastic products.
Except for FY09 where the impact of economic slowdown was clearly visible,
the plastic consumption in India has been consistently growing at a rate higher
than that of overall GDP. Going forward, the industry experts believe that the
consumption is likely to grow by nearly 2x the GDP growth.
Overall turnover of the plastic processing industry – which currently stands at
Rs 850bn – is expected to touch Rs 1 trillion (demand potential from 9mn
tonnes in 2010 to 12.5mn tonnes in 2012) and further Rs to 1.3 trillion by 2015
(equivalent demand pegged at 18.9mn tonnes). The industry’s growth resulted
in the number of processing units growing from 25,000 in 2010 to 30,000 units
in 2011. The exponential growth anticipated over the next three years will see
this number go up to 40,000 units. The industry, which currently employs over
3.5mn people, directly and indirectly, is expected to employ close to 4mn in
2012 and 7mn by 2015.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We believe plastic consumption in India is expected to grow at a healthy rate
on the back of growing substitution, expanding middle income group and
new applications. Despite being an industry dominated by unorganised players
(70% of the industry size), the organised players over the last few years have
outpaced them in terms of growth through constant innovation and regular
introduction of niche products and thereby gradually eating into their share
Having created a niche market for themselves, they have the wherewithal to
deliver consistently, leading to value proposition for investors. In this space
we like Supreme Industries, Sintex Industries, Time Technoplast and Astral
Poly Technik — purely based on their business models and ability to generate
consistent returns.
Key Investment Rationale
Plastic consumption in India to grow at 15% CAGR
With India’s GDP growing at 8% annually and plastic products increasingly
finding application in all sectors of the economy, replacing other competing
products such as steel and aluminium, we expect demand to remain robust.
The application of plastic is increasingly evident across sectors including
packaging, agriculture, healthcare, aerospace, electronics and infrastructure.
According to the All India Plastics Manufacturers’ Association (AIPMA), the
domestic consumption has been growing at 10-12% CAGR over the last decade
and is all set to reach the 12.5mn tonnes in 2012 from 9mn tonnes in 2010
which will make India the third largest plastic consumer after US and China.
Innovation & introduction of value-added products: Key to growth & margins
The key USP in any industry that is largely unorganised is to regularly innovate
and come out with niche products at regular intervals. Sintex, Supreme, Astral
Time have consistently followed this thumb rule and thus have been able to
grow at a pace which is way above the industry average.
Plastic composites: Niche high growth engine
Plastic composites are new age products and are ideal replacement for
conventional materials such as steel, aluminium and wood on account of their
durability, corrosion and maintenance free character. The Indian composites
industry has grown at healthy 16-18% CAGR over the last five years, more than
twice the GDP growth rate. The burgeoning manufacturing sector and heavy
investments in infrastructure is expected to provide an impetus to the Rs 63-
bn Indian composite industry, which is expected to grow at 16-17% CAGR.
From our coverage universe, Sintex and Time Technoplast have a presence in
the composites segment while Supreme Industries is currently putting up a
facility to make composite cylinders. These companies will not only benefit
from high growth in these segments but will also enjoy better margins as
compared to their bouquet of conventional plastic products.
Except for FY09 where the impact of economic slowdown was clearly visible,
the plastic consumption in India has been consistently growing at a rate higher
than that of overall GDP. Going forward, the industry experts believe that the
consumption is likely to grow by nearly 2x the GDP growth.
Overall turnover of the plastic processing industry – which currently stands at
Rs 850bn – is expected to touch Rs 1 trillion (demand potential from 9mn
tonnes in 2010 to 12.5mn tonnes in 2012) and further Rs to 1.3 trillion by 2015
(equivalent demand pegged at 18.9mn tonnes). The industry’s growth resulted
in the number of processing units growing from 25,000 in 2010 to 30,000 units
in 2011. The exponential growth anticipated over the next three years will see
this number go up to 40,000 units. The industry, which currently employs over
3.5mn people, directly and indirectly, is expected to employ close to 4mn in
2012 and 7mn by 2015.
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