shareholding pattern as on 30 june,2011 products ltd (2).pdf · shareholding pattern of more than 1...

201, Viraj Tower, Near Land mark Building, Western Express Highway, Andheri (E), Mumbai-69

Shareholding Pattern of More than 1 % as on 30th

June, 2011

Sl. No. Name of the Shareholder No. of Shares Shares as % of Total No.

of Shares

1 India Optima Fund 751,591 1.20

2 Shree Capital Services Ltd 896,147 1.43

3 HDFC Trustee Company Ltd -

HDFC

2,688,217 4.29

Total 4,335,955 6.92

63.88%

1.73%

4.85%

29.54%

Shareholding Pattern as on 30th June,2011

Promoter

FII

DII

Others

Stock details

BSE Group B

BSE Code 509820

CMP (Rs.) 80.40

Market Capitalization (Rs. In Cr) 504

Face Value (Rs.) 2.00

Book Value (Rs.) 46.84

52 Wk High (BSE) 93.15 (3rd

August 2011)

52 Wk Low (BSE) 50.00 (9th December 2010)

PAPER PRODUCTS LTD (PPL) 9th

September, 2011

Februar2010


Company Overview:

PPL was incorporated in 1950 & is India’s leading manufacturer of primary consumer packaging.

Since 1999, PPL is majority owned by global packaging major, Huhtamaki Oyj, Finland

(one of the world’s top ten consumer packaging multinationals), which holds about 60.8%

of the equity capital (increased from 58.9% recently).

PPL was originally founded by Sardari Lal Talwar & started as a partnership concern at Lahore

(now in Pakistan) in 1935 and was shifted to Delhi in 1947. Later in 1950 it went public. In order

to scale up its value chain, the company became a part of a global flexible packaging giant

Huhtamaki in 1999, which acquired 51% stake in PPL & subsequently raised it to 58.9%.

Recently, after Talwar group sold off its remaining 1.9% stake in PPL, Huhtamaki’s stake has

increased to 60.8%. The Gupta family holds 3% stake in PPL.

PPL has an employee strength of ~ 1500 employees & is a pioneer and technology and market

leader in flexible packaging in India with manufacturing facilities at Thane, Silvassa, Hyderabad

and Rudrapur (Silvassa is the largest facility, which accounted for around 30% of PPL’s total

turnover in CY10). The company meets the packaging needs of almost the entire range of

FMCG segments including personal products, personal wash, laundry, foods, sauces,

beverages, bakery products, spices, chocolates and confectionery, dairy and also for seeds,

specialized chemicals, automotive lubes, electronics, healthcare and many other specific

specialized uses including anti-spurious packaging.

The Package Protection and Decoration products range includes latest leading edge technologies

(labelling) - shrink sleeves, wrap-rounds, heat transfers, pressure sensitive and metallised paper

labels. Manufacturing of specialized cartons and cartooning systems, manufacture of poly films,

specialized barrier metalizing and high-end application extrusion coating are also part of PPL’s

product offerings. The company’s packaging machines division offers complete packaging

solutions to customers. Further PPL is amongst select few companies worldwide having expertise

in holographic images in packaging medium. This makes the packaging look attractive, thus

enhancing the product visibility for premium positioning. Holograms are also popular as a

deterrent against counterfeits for product protection. Flexible Packaging & Labelling is done at

all facilities of PPL, while Cartons are produced only at Hyderabad facility & Tube Laminates are

produced only at Silvassa.


Installed Capacity, Capacity Utilization & Production in CY 10:

PPL’s parent profile:

Huhtamaki Oyj is a one of the top 10 consumer packaging companies in the world. Being a

market leader in several product categories, the company has a turnover of Euro 2.1 bn with

operations across the globe (in 31 countries). Huhtamaki has 53 manufacturing units & employs over

12000 people. The company has a large presence in Europe Its business is categorized into 5 segments

viz; Flexible Packaging (Strong market position in Tube Laminates & pet food worldwide, Biscuits &

Confectionery in India, Coffee in Thailand & Vietnam, Chocolate in Europe), Films (Global leader in

Release films, North America (shaped containers for frozen desserts, premium branded tableware),

Food Service E-A-O [Europe-Asia-Oceania] (Cups and lids to quick service, vending and catering) &

Moulded Fibre (Recycled fibre packaging - egg packaging, fruit trays). Paper Cups & Containers,

Flexible Packaging & Films and Moulded Fibre based products account for 85% of net sales of

Huhtamaki (Flexible Packaging accounts for 27%). Top 5 customers of Huhtamaki account for 18%

of sales, while top 10 contribute 26%. Top 5 customers include Costco, Kraft, McDonald‘s, Nestle

and Unilever. Citing strong growth opportunities in the Asian markets, particularly in India, Vietnam

& Thailand, the company is in the process of expanding its capacities over there in CY11.

Key Clients:

PPL derives almost 98% of its revenues from the FMCG industry. The company mainly caters to

the premium segment of packaging and its major clients include Britannia, Cadbury, Castrol, Coca

Cola, Dabur, Emami, Eveready, GSK, Godrej, Hindustan Unilever, ITC, Marico, Nestle, Pepsi,

Perfetti, P&G, Tata Tea, TTK-LIG, Wipro etc. The top ten clients of PPL account for ~60% of the

company’s revenues. Product-wise, Laminates and Converted, Coated / Uncoated Paper and Films=

category accounts for a major portion of PPL’s total revenues i.e. 94.4%. Cartons contribute 5.4%,

while Others category contributes a mere 0.2%.

PPL derives around 85% of its revenues from the domestic market, while exports account for

the balance 15%. Consolidating its position as India's most prominent packaging institution, PPL

expanded its business into promising overseas markets with a view to benchmark itself with the global

competition. Overseas, PPL has presence across 4 continents (Middle East, Africa, Europe &

America) & provides service to over 50 customers worldwide.


Products:

FLEXIBLE PACKAGING:

PPL produces a wide range of custom designed film, foil and paper based laminate structures, printed

in up to 10 colours high quality process, for primary packaging of products in solid, powder or liquid

form, in consumer pack sizes.

Labelling Technologies:

The company provides a range of labelling options to support its clients the right package that

constantly advertises their products.


SPECIALISED CARTONS:

PPL manufactures lined cartons and systems for primary packaging of powders and solids in a

variety of consumer pack sizes.

PACKAGING MACHINE DIVISION:

The company focuses on designing equipment solutions and material solutions both optimally suited

to one another. This division plays an active role in providing systems solutions in order to reduce

infrastructure costs and improve logistics.


HOLOGRAPHIC OPTIONS:

Holograms meaning "whole images" are visual reproduction of images in 3D by providing depth to the design.

Embossing of Holograms onto thermo-plastic surfaces is the preferred route for commercial production for

packaging and labelling applications.

Raw Material Analysis:

RAW MATERIALS AND PACKING MATERIALS

CONSUMED

For The Year ended

31-12-2010

For The Year

ended 31-12-2009

Tonnes

(Mn )

Value

(Mn)

Tonnes

(Mn )

Value

(Mn)

Paper 3.89 193.31 3.58 176.04

Paper Board 4.91 143.89 4.13 104.05

Films 18.51 2541.81 15.87 1973.30

Inks, Adhesives and Solvents 9.44 1041.49 8.18 853.49

Polyethylene Granules 9.45 787.89 7.51 583.74

Others * – 263.89 – 113.62

BOPP plays an important role in Flexible Packaging

In 2009 the average price of BOPP Films was around Rs.125/- per kg whereas in

2010 the prices increased to Rs. 137/- per kg


Consumption of Polypropylene (BOPP) Films in Flexible Packaging:

Price Trend of BOPP Films in International Market:

There has been a falling price trend of BOPP Films in global market

which is a positive sign for packaging players like PPL.

As the price trend of BOPP Films in India is quite similar to the

international scenario

BOPP Films was around Rs. 137/- kg in 2010 which has declined to

Rs. 105/- kg in Q2 CY 11

51.00%

17.00%3.00%

29.00%

Packaging

Electrical/Electronic

Imaging

Other Industrial


Industry Prospects:

The global Packaging Industry is worth US$ 424 billion. The domestic packaging

industry is estimated at Rs 160 billion.

The flexible packaging industry in India is currently estimated to be US$ 1

billion and is growing at a high growth rate of approximately 20%.

The packaging sector has been growing at 20% CAGR, mainly driven by growth

in the FMCG sector.

The FMCG packaging demand growth can be attributed to increasing emphasis

on hygiene and quality products, a sharp preference for branded commodities

and shift from conventional packaging.

Growth in consumption of western-style snack products, confectionery, baked

goods combined with increasing hygiene consciousness amongst the population

will result in even traditional food manufacturers using flexible packaging.

However, the consumption per capita of packaging in India is extremely low at

US$ 5 as compared to certain developed economies like Brazil, Mexico & China

the per capita consumption is low.

World demand for converted flexible packaging is likely to grow at more than

4% per year going forward. World’s emerging markets, including Eastern Asia,

Eastern Europe, Africa and Middle East will be the key drivers.

It is observed that a mere 20% of the population in India consumes 80% of the

packaged production whereas the remaining 80% of the population have an

access to only 20% of the packaged production.


Growth Triggers (Investment Rationale):

Market leader: PPL is a market leader in the high-end flexible packaging industry

and commands a market share of around 65%. It has a strong backing from its parent

Huhtamaki

Innovative Player: PPL has come out with its innovation initiative NASP (New

Application, Structure and Products) which had contributed to 27.2% of total 2010

sales would get added thrust in the current year and years to come. Organisational

measures to further accelerate the NASP efforts are in place with the CEO directly

overseeing the company’s innovation programs and strategy. In the long run, moving

more business to value added segments, Innovation and new products, exploring new

markets are seen as critical to profitable growth.

Growth Strategy: Company is planning to grow Organically as well as Inorganically

Company is looking forward to focus more on techniques to expand them into

innovative and value added products The Parent company has identified Rs. 4000

crore business of flexible packaging globally and India has been identified a

significant growth area for the company’s prospects. This is important because as

compared to the West, consumer packaging largely drives growth of the Indian

packaging sector, where packaging for food services is at a very nascent stage. Foods

sector accounts for majority of the parent's revenues. We expect this to be a long-term

growth driver for PPL. Currently, a mere 2% of India’s food production is being

processed, and there are plans in place to increase the food processing level to

10% over a period of ten years thereby increasing the demand for packaging

material manifold. With flexible and convenience packaging replacing the traditional

packaging, new product development is critical to sustain growth.


Opportunities from Food Processing Industries: The Ministry of Food

Processing Industries, Government of India has set a Vision-2015 which opens lot of

opportunities for packaging industries like PPL

1. Become the Food Factory of the World

2. Triple the growth of the Food Processing Industry

3. Increase the value addition from 20% to 35%.

4. Increase contribution to world agriculture business from 1.5% to 3%.

Hi-tech agriculture, horticulture, organic farming, contract farming and agri retailing

are already seen to be receiving a push at various levels. Staples like wheat, maize and

pulses are getting a special thrust.

Capacity expansion to drive the revenues: PPL is the process of expanding its

Laminates & Converted, Coated / Uncoated films & paper facilities at Rudrapur &

Hyderabad. At Rudrapur, the company is likely to add one more full conversion line

that includes printing, lamination, slitting & cylinder making. At its Hyderabad plant,

it is in the process of adding a printer, augmenting the overall print capacity. The total

CAPEX for this expansion plan is estimated to be Rs. 400-450 mn, which is likely to

be funded through internal accruals. Both these facilities are expected to be fully

operational by the end of Q3CY11. Post the ramp up, PPL’s total capacity of

Laminates & Converted, Coated / Uncoated films & paper is likely to increase by

5000 TPA from 35590 TPA to 40590 TPA. This would enable PPL to meet the

increasing demand from the user industries & drive its revenues going forward.


Risks and Concerns:

Inflation – particularly food inflation -- touched all segments of the economy.

Selectively increasing unit prices of packs, reducing pack sizes etc can work up to a

point in an elastic market.

Fuel inflation is worrying and industry faces higher input costs. Prices of a few

other key raw materials – especially dyes and pigments , crude based solvents,

waxes and some speciality grades.

PPL’s exports currently account for 15% of its total net sales and the company

has plans to strengthen its overseas presence further going forward. This exposes the

company to forex fluctuations.

The Rudrapur facility, which accounts for ~23% of PPL’s total output, is

entitled to 100% tax benefits till CY12 and thereafter, the benefit would be partially

withdrawn to 30%. This is likely to increase PPL’s effective tax rate from current

23.7% (in Q1CY11) to 27-28% going forward. This could put pressure on growth in

PPL’s net profits.


Quarterly Financial Performance:

(Rs. mn except EPS)

Particulars 3 months ended 3 months ended

Q2

CY11

Q2

CY10

VAR (%) Q1

CY11

VAR

(%)

1. Net Sales Income from Operations 1974.7 1741.5 13.39 1981.3 -0.33

Other Operating Income 15.8 19.7 -19.80 32.8 -51.83

Total Income 1990.5 1761.2 13.02 2014.1 -1.17

2. Expenditure

a.(Increase)/Decrease in stock trade &

WIP

-34.8 -32 8.75 22.6 -253.98

b. Consumption of Raw & Packing

Materials

1391.3 1259.1 10.50 1395 -0.27

d. Employees cost 159.7 157.2 1.59 140.8 13.42

e. Depreciation & Amortisation 78 81.6 -4.41 77.2 1.04

g. Other Expenditure 219.1 213.2 2.77 202.1 8.41

h. Total 1813.3 1679.1 7.99 1837.7 -1.33

Foreign Exchange (Loss)/Gain 5.9 -0.4 -1575.00 6.9 -14.49

3. Profit from operations before Other

Income, interest & exceptional Items

183.1 81.7 124.11 183.3 -0.11

4. Other Income 9.9 4 147.50 8.4 17.86

5. Profit before Interest & Exceptional

Items

193 85.7 125.20 191.7 0.68

6. Interest 1.4 1.5 -6.67 1.4 0.00

7. Profit after Interest but before

Exceptional Items

191.6 84.2 127.55 190.3 0.68

8. Exceptional Income/(Expense) 0 0 0

9. Profit from ordinary activities before

Tax

191.6 84.2 127.55 190.3 0.68

10. Tax expense 40.1 17.2 133.14 45.1 -11.09

11. Net Profit from ordinary activities

after Tax

151.5 67 126.12 145.2 4.34

12. Paid-up Equity Share Capital 125.4 125.4 125.4

(Face value of 2/· each)

13. Earnings Per Share (EPS) 2.41 1.07 2.32


Profit & Loss A/c (Rs. mn except EPS)

Particulars CY 09 CY 10 CY 11E CY 12E

1. Net Sales Income from Operations 5776.90 7040.10 8244.25 9278.67

Other Operating Income 65.70 65.30 96.00 102.14

Total Income 5842.60 7105.40 8340.25 9380.81

2. Expenditure

a.(Increase)/Decrease in stock trade &

wip

-27.70 -64.20 -68.00 -38.00

b. Consumption of Raw & Packing

Materials

3853.10 5029.70 5943.97 6680.02

d. Employees cost 493.30 591.00 613.00 676.12

e. Depreciation & Amortisation 311.50 324.00 330.00 353.00

g. Other Expenditure 746.10 802.20 890.63 935.38

h. Total 5376.30 6682.70 7709.60 8606.52

Foreign Exchange (Loss)/Gain 15.40 28.00 24.00 35.00

3. Profit from operations before Other

Income, interest & exceptional Items

481.70 450.70 654.65 809.29

4. Other Income 25.40 17.90 39.12 48.89

5. Profit before Interest & Exceptional

Items

507.10 468.60 693.77 858.18

6. Interest 11.40 5.90 7.00 8.00

7. Profit after Interest but before

Exceptional Items

495.70 462.70 686.77 850.18

8. Exceptional Income/(Expense) 0.00 122.80 0.00 0.00

9. Profit from ordinary activities before

Tax

495.70 585.50 686.77 850.18

10. Tax Expense 121.90 134.80 176.71# 229.55#

11. Net profit from ordinary activities

after Tax

373.80 450.70 510.06 620.63

12. Extraordinary Income/(Expense) 0.00 30.50 0.00 0.00

13. Net Profit for the Period 373.80 481.20 510.06 620.63

14. Paid-up Equity Share Capital 125.40 125.40 125.40 125.40

(Face value of 2/· each)

15. Earnings Per Share (EPS) 5.96 7.68 8.13 9.90

# Effective Tax rate is expected to go upto ~ 27%


Balance Sheet: (Rs. mn)

Particulars CY 09 CY 10 CY 11E CY 12E

SHAREHOLDERS FUND

(a) Capital 125.40 125.40 125.40 125.40

(b) Reserves and Surplus 2490.10 2811.20 3101.19 3501.74

LOAN FUNDS 239.40 225.30 235.98 227.00

DEFERRED TAX LIABILITY 67.80 52.60 55.00 58.00

Total 2922.70 3214.50 3517.57 3912.14

FIXED ASSET 2033.50 1786.90 1894.00 1915.38

INVESTMENT 310.40 394.50 408.00 576.00

CURRENT ASSETS, LOANS AND

ADVANCES

(a) Inventories 759.30 892.00 1029.00 1185.00

(b) Sundry Debtors 972.00 1188.30 1384.00 1570.00

(c) Cash and Bank balances 40.80 108.40 130.00 206.00

(d) Loans and Advances 212.10 197.50 257.00 298.00

(e) Other Current Assets 109.90 123.20 137.12 152.00

Sub Total 2094.10 2509.40 2937.12 3411.00

Less: Current Liabilities and

Provisions

(a) Liabilities 1245.20 1249.10 1435.76 1679.44

(b) Provisions 270.10 227.20 285.79 310.80

Sub Total 1515.30 1476.30 1721.55 1990.24

Net Current Assets 578.80 1033.10 1215.57 1420.76

Total 2922.70 3214.50 3517.57 3912.14


Financial Ratios:

Ratios CY 2009 CY 2010 CY 2011E CY 2012E

EPS 5.96 7.68 8.13 9.90

P/E Ratio(x) 13.49 10.47 9.88 8.12

Book Value 41.71 46.84 51.46 57.85

Price/Book value(x) 1.93 1.72 1.56 1.39

ROCE (%) 12.79 14.97 14.50 15.86

ROE (%) 14.29 16.39 15.81 17.11

Debt/Equity(x) 0.09 0.08 0.07 0.06

Asset Turnover Ratio 2.84 2.51 2.96 3.24

Current Ratio 1.38 1.70 1.71 1.71

Price to Sales Ratio(x) 0.87 0.72 0.61 0.54

Dividend per share(Rs) 1.80 2.20 3.00 3.00

Dividend payout Ratio 0.30 0.29 0.37 0.30

EBITDA margin (%) 14.17 11.26 12.42 13.05

EBITA margin (%) 8.78 6.66 8.42 9.25

PAT margin (%) 6.47 6.84 6.19 6.69

Net Sales Growth (%) -5.61 21.87 17.10 12.55

Receivable Days 55.84 51.18 52.92 51.54

Payable Days 50.55 48.69 45.84 46.12

Debtors turnover ratio 5.94 5.92 5.96 5.91

Creditors turnover ratio 4.64 5.64 5.74 5.52

EV/EBITDA 6.61 6.66 5.23 4.36

Market cap/Sales 0.87 0.72 0.61 0.54


Valuation:

PPL’s Q2CY11 results were impressive, which was driven by increasing

demand for packaging from the main user industry FMCG.

This seems to be in line with our full year CY11 net sales estimates.

We expect the demand for packaging to remain robust as we expect the

FMCG industry to do well.

At a current market price of Rs. 80.40, the stock is trading at P/E of 9.88x

CY11 (E) EPS of Rs. 8.13 & at PE of 8.12x CY12 (E) EPS of Rs. 9.90.

In our view the stock is grossly undervalued & deserves a fair valuation of

P/E 12.42x CY12 (E) EPS of Rs. 9.90.

We recommend accumulation of the stock between Rs. 70-80 for a

“potential upside” of Rs.123 within next 18-24 months.


For Any Queries please feel free to contact our Institutional Team

Names Designation E-Mail Id. Contact

Nagji Rita CMD - -

Sales

Ravinder Kasliwal Head Institutional Sales [email protected] 40751565/66

Dealing

Shiv Damani Institutional Dealer [email protected] 22723797

40751565/66

Vinit Rita Institutional Dealer [email protected]

40751565/66

Rashda Ainapore Institutional Dealer [email protected]

Research

Mitesh.shah Research Analyst [email protected] 40751515 *

562

Divya Kant Research Analyst [email protected] 40751515

Akbar Shah Research Analyst [email protected] 40751515

Sheetal Nirmal Research Analyst [email protected] 40751515

Sanjeev Haria Research Analyst [email protected] 40751515

Sibayan Banerjee Technical Analyst [email protected] 22723797

Ashok Patel Technical Analyst [email protected] 22723797

Madhu Patel Technical Analyst [email protected] 22723797

Disclaimer

Inventure Growth & Securities Ltd has prepared this Document. The information, analysis and estimates contained herein are based on

Inventure’s assessment and have been obtained from sources believed to be reliable. Neither Inventure Growth & Securities Ltd nor any of

its employees or associates accepts any liability whatsoever direct or indirect that may arise from the use of information herein and shall not

be responsible for its completeness and accuracy. It is not an offer to sell or a solicitation to buy securities. This document is for circulation

only

Visit us at www.inventuregrowth.com

Please send your Feed Back to [email protected]

Inventure Growth & Securities Ltd

Corporate Office: - Viraj Tower, 2nd

Floor, Near Landmark, Western Express Highway, Andheri East, Mumbai - 400 069

Tel.:- +91-22-40751515, Fax: - +91-22-40751535 6

mailto:[email protected]












http://www.inventuregrowth.com/


shareholding pattern as on 30 june,2011 products ltd (2).pdf · shareholding pattern of more than 1...

Documents