Published On: Tue, Oct 11th, 2011

Plastic consumption may grow at healthy rate in India

Dolat Capital has come out with its report on Plastic Industry. As per research firm  Supreme Industries , Sintex Industries , Time

Technoplast and Astral Poly Technik are having ability to generate consistent returns.

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.

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.

Plastic consumption in India to grow at a CAGR of 15%
With India�s GDP growing at 8% annually and plastic products increasingly finding applications across various sectors of the economy replacing other
competiting products like steel, aluminium, etc, demand is expected to remain robust. According to AIPMA, India�s plastic consumption in 2010 stood at 9mn tonnes and has been growing at an annual average rate of 12%. With its true potential, consumption is all set to reach 12.5mn tonnes in 2012, which will make India the 3rd largest consumer of plastics by 2012 after US and China (expected consumption by then � USA: 39mn tonnes and China: 31mn tonnes). Further, the consumption is expected to reach 18.9mn tonnes by 2015. To match this figure, we estimate India will require 42,000 new machines and USD 10bn of projected investment by 2015.

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