India’s glass industry has witnessed phenomenal growth in the past decade thanks to growth in infrastructure, automobiles, retail, housing, food and beverages. The organized sector is dominated by a few major players such as Saint Gobain, ASAHI Glass, Borosil, Sezal Glass among others while over 60% of the production takes place in the unorganized sector. Firozabad Glass industry is the nation’s biggest glass cluster. Majority of the glass companies are concentrated in Uttar Pradesh, Maharasthra, Gujarat, Karnataka and Andhra Pradesh.
Just as in other sectors, glass industry is also grappling with environmental issues related to dumping soda ash which is used as a fluxing agent in the production process. In recent years, the domestic market is facing increasing competition from the Asian sub-continent such as China and Malaysia.
Amidst the growth trends, tariff issues and environmental issues, here is a look at the prospects of major players.
#Saint-Gobain Sekurit India Ltd (BSE: 515043) Category: Small Cap
Saint-Gobain Sekurit India Ltd is part of the Saint Gobain group that established business in India in 1996. It is in the business of the automotive glass and manufactures glazings primarily for commercial vehicles and 3-wheeler OEMS and for the replacement market. Saint-Gobain holds 75% of the equity in the firm.
The company reported 256.63% annualized growth in Q4FY17 in net profit at Rs 3.76 cr while sales rose 49.19% to Rs 36.68 cr. The company has reported 153.244 cr revenue for FY18 as against Rs 141.268 cr the previous year. Profits rose form Rs 6.76 cr to Rs 13.77 cr. Total expenses remained steady at Rs 132.22 cr.
Saint Gobain has provided the highest annual return in this industry with 35.98% as against sectoral return of 10.89% and Sensex return of 11.43%. The company hardly has any interest cost but return on capital is lowest at 11.65%. Earnings per share at Rs 0.59 is highest in the last five quarters, half yearly inventory turnover ratio is highest at 16.09 times which signifies faster selling of goods. Sales, efficiency of the company has improved in Q4 while the company’s pace of settling its debtors has slowed. At a Price Earnings Ratio of 42.32, the scrip is quite expensive at this point.
On technical charts, RSI of 37 indicates bearishness, MACD has witnessed a bearish crossing and ADX of 19 indicates range bound trade.
Target :77 Duration : 4 weeks.
Gujarat Borosil Ltd (BSE: 523768) Category: Small Caps
Gujarat Borosil Ltd is the manufacturer of the world’s finest textured solar glass at its plant in Govali District, Bharuch, Gujarat. Formerly known as Borosil Glass Works Ltd- it became popular with its Borosil rang eof laware, scientific ware and consumer ware products, it was set up in 1994 in Gujarat. Presently, the company exports majority of its products.
In Q4, net profit fell 52.65% to Rs 3.07 cr while sales rose 9.49% to Rs 54.80 cr. EPS fell 52.63% to Rs 0.45 cr. Q4 results show return on capital is highest at 28.41%, debtors turnover ratio is highest at 8.17 times and net sales was highest at Rs 54.80 cr. Fall in net profit operating profit to interest and net sales may be a cause for concern. It has underperformed the Sensex at 3.47% on annual return basis and underperformed the sector by -5.47%. After hitting a recent high of 125 it has fallen back to 94 levels. Net profit in FY 18 fell sharply to Rs 6.91 cr as against Rs 14.28 cr the previous year.
Target : Nil
#Haldyn Glass Ltd (BSE: 515147) Category: Micro Cap
Haldyn Glass Ltd formerly known as Haldyn Glass Gujarat Ltd was set up in 1991 in Gujarat. It caters to Food, pharmaceutical, beverages, liquor and beer industries. It has a melting capacity of 320 tons per day comprising of 2 melting furnaces. It has automatic temperature control system for fore-hearths and furnaces are built with high quality refractories. The company is led by T N Shetty, Managing Director, who led the diversification drive to wide-mouthed jars through Press & Blow technology.
The company has underperformed the Sensex by 23.73% on annualized basis and trading at a PE of 27.53 as against industry PE Of 325.82. Net sales was highest in Q4 at Rs 44.57 cr. but net profit on half yearly basis fell 50.56% and operating profit to net sales was lowest in Q4 at 2.80%. Operating profit margin has deteriorated to 2.80%.
On technical charts, RSI of 25 indicates bearishness, MACD has witnessed a bearish crossover and ADX of 27 indicates range bound trading.
Target : NIL
#La Opala RG Ltd (BSE:526947) NSE: LAOPALA Category: Small Cap
La Opala RG Ltd was set up in 1987 as Opala Glass Pvt Ltd by the Jhunjhunwala family. It pioneered the first opal glass technology plant in Madhupur in Bihar in 1988. In 1991 it earned the distinction of being the first exporter of opal glass table ware. In 2007 it set up the first fully automatic state of the art plant in Uttarakhan to produce opal glass table ware. It launched the premium brand Diva in 2008.
The company reported 5% growth in net profit in Q4FY18 at Rs 14.15 cr and sales fell 9.32% to Rs 68.03 cr. It is trading at a PE of 35.6 which makes it a bit expensive. It has underperformed the Sensex by 22.35% Inventory turnover ratio is highest at 8.22 times in Q4 while net profit has fallen 24% and on technical charts RSI of 44 is bearish while ADX of 32 indicates uptrend and MACD has witnessed a bearish crossover.
Target : NIl
India’s glass industry hasn’t performed well in the past few years despite the tremendous growth potential created by growth in real estate, pharmaceutical, automobiles, food and beverages. According to All India Glass Manufacturer’s Federation (AIGMF), the industry faces stiff competition from cheaper imports and hence is looking for protection in the form of tariffs. Indian market is driven by demand for container glasses rather than for windows or doors. Domestic demand for container glasses are growing at a rate of 607% annually. The industry expects ban on plastics to be favorable for glass industry. However, the industry is facing a crisis on higher import duties for soda ash at $38.79 per ton and $39.26 per ton from USA and China respectively. Soda ash is produced naturally and in chemical form. The glass industry expects the environment friendliness of glass to help in the long run along with ban on plastics worldwide. The glass industry has also been part of the Swacch Bharat Abhiyan, the cleanliness drive of India Govt.