Ester Breakout after Rating Updates

2022년 4월 11일

1. Buy or Sell at your own risk
2. Don't risk more than 1%-2% of your capital as stop loss
3. Position Size formula:- Stop Loss Amount/(Buy Price-Initial Stop Loss Price)
4. Sell on initial stop loss hit or daily RSI closing below 40
5. Some other ways to sell stocks can be
a. 25% or 50% up in three weeks or less
b. Weekly tailing tops with high volume
c. Exhaustion gaps
d. Heavy daily volume without further upside
e. Largest one day price drop

After a consolidation since May 2021, ESTER has given a high volume breakout today. Buy with a stop at Rs.151.

Other fundamentals:
1. In the first nine months of fiscal 2022, the company generated revenue of Rs 1,018 crore with operating margin of 17.7%, against Rs 696 crore and 25.3%, respectively, in the corresponding period of the previous fiscal. High operating margins during last fiscal has now been normalized in current fiscal. Improvement in operating performance is driven by continuation of favourable demand-supply dynamics in the packaging films business and maturing of products.

2. The engineering plastics and specialty polymers segments have also seen healthy improvement in demand over the past nine months. Therefore, despite the expected decline of margin in packaging films business, the overall operating profit before depreciation, interest and tax (OPBDIT) margin of EIL is expected to sustain around 15% over the medium term, benefitting from a diverse product portfolio.

3. Product mix and diversification should improve as the company is adding capacities of value-added products, specialty polymers and engineering plastics for capital expenditure (capex) of Rs 225 crore, which is likely to be completed in fiscal 2023. Furthermore, revenue of the packaging films business is expected to improve with the new greenfield BOPET (biaxially-oriented polyethylene terephthalate) line (48,000 tonne per annum [tpa] in Telangana) expected to be commissioned by October 2022. The progress of the project will remain a monitorable.

4. Average Roe for last three and five years above 15%.

5. Five year CAGR sales growth at 5% and profit growth at 93%.

6. Company has been maintaining a healthy dividend payout of 18.11%.

7. Debt to equity at 0.39 (less than 1 is good), Interest Coverage at 9.54 (greater than 3 is good), Current ratio at 2.05 (greater than 1.5 is good), FCF to CFO at 59%.