BUY CMP 459.00 Target Price 530.00 TCPL PACKAGING LIMITED Result Update (PARENT BASIS): Q1 FY16 SEPTEMBER 8 th, 2015 ISIN: INE822C01015 Index Details Stock Data Sector Paper & Paper Products BSE Code 523301 Face Value 10.00 52wk. High / Low (Rs.) 648.00/328.10 Volume (2wk. Avg. Q.) 4984 Market Cap (Rs. in mn.) 3993.30 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales 4978.42 5575.83 6133.41 EBITDA 819.97 922.80 1021.21 Net Profit 321.86 370.33 415.24 EPS 37.00 42.57 47.73 P/E 12.41 10.78 9.62 Shareholding Pattern (%) (QUARTERLY) As on Jun-15 As on Mar-15 PROMOTER 58.42 58.42 FIIs 0 0 DIIs 0.04 0.04 OTHERS 41.54 41.54 1 Year Comparative Graph TCPL PACKAGING LTD BSE SENSEX SYNOPSIS TCPL Packaging Ltd is one of India's largest manufacturers of printed folding cartons, & is one of few listed packaging companies in India and exports a variety of packing materials to its customers based in UAE and Europe countries. In Q1 FY16, net profit Jumps to Rs. 79.60 million, an increase of 29.18% y-o-y as against Rs. 61.62 million in the corresponding quarter of the previous year. The company s net sales grew by 15.23% y-o-y to Rs. 1293.82 million in Q1 FY16 from Rs. 1122.81 million in Q1 FY15. Operating profit rose by 16.69% and stood at Rs. 218.93 million in 1 st quarter of FY16 as against Rs. 187.61 million in the corresponding period of the previous year. Profit before tax (PBT) of the company increased by 24.57% y-o-y of Rs. 112.96 million in Q1 FY16 compared to Rs. 90.68 million in Q1 FY15. EPS of Rs. 9.15 for the 1 st quarter of FY16 as against an EPS of Rs. 7.08 for the corresponding quarter of the previous year. Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 32% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) TCPL Packaging Ltd 459.00 3993.30 37.00 12.41 3.51 60.00 Seshasayee Paper & Boards Ltd 200.10 2524.00 14.04 14.25 0.64 40.00 Tamil Nadu Newsprint & Papers Ltd 179.30 12409.50 27.76 6.46 1.03 60.00 Kauntum Papers Ltd 78.00 680.70 26.17 2.98 0.53 10.00
Recommendation & Analysis - BUY For the 1 st quarter of FY16, Net sales of the company registered 15.23% up y-o-y to Rs. 1293.82 million from Rs. 1122.81 million for the 1 st quarter of FY15. In Q1 FY16, net profit Jumps to Rs. 79.60 million, an increase of 29.18% y-o-y as against Rs. 61.62 million in the corresponding quarter of the previous year. Profit before tax (PBT) of the company increased by 24.57% y-o-y of Rs. 112.96 million in Q1 FY16 compared to Rs. 90.68 million in Q1 FY15. The Company s continuous growth in the economy has created a number of opportunities for servicing the packaging requirements of the FMCG, food, tobacco, liquor and other consumer product manufacturers. Due to geographical locations of the plants set-up by Company, it is ideally suited for catering to both the export market as well as domestic market across India. Therefore, with the change in economic condition, lifestyle of people and launch of organised retail etc. the demand for packaged goods are expected to rise substantially. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. Over 2014-2017E, we expect the company to post a CAGR of 13% and 32% in its top-line and bottom-line respectively. Hence, we recommend BUY for TCPL PACKAGING LTD with a target price of Rs. 530.00 on the stock. QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q1 FY16, TCPL Packaging Ltd is one of the largest manufacturers of folding cartons. The company is currently converting approx 3600 tons of paperboard every month, making TCPL one of India s largest converters of paperboard and range of products are printed blanks, Folding cartons, Litho Lamination, Plastic cartons, Blister paper, Shelf ready packaging., has reported its financial results for the quarter ended 30 th June, 2015. Rs. In millions June-15 June-14 % Change Net Sales 1293.82 1122.81 15.23 PAT 79.60 61.62 29.18 EPS 9.15 7.08 29.18 EBITDA 218.93 187.61 16.69 The company has achieved a turnover of Rs. 1293.82 million for the 1 st quarter of the financial year 2016 as against Rs. 1122.81 million in the corresponding quarter of the previous year. EBITDA or Operating profit grew by 16.69% and stood at Rs. 218.93 million in 1 st quarter of FY16 as against Rs. 187.61 million in the 1 st quarter of FY15. In Q1 FY16, net profit Jumps to Rs. 79.60 million, an increase of 29.18% y-o-y as against Rs. 61.62 million in Q1 FY15. The company has reported an EPS of Rs. 9.15 for the 1 st quarter of FY16 as against an EPS of Rs. 7.08 in the corresponding quarter of the previous year.
Break up of Expenditure During the quarter, total Expenditure rose by 14 per cent mainly on account of Consumption of Raw Materials 13%, Other Expenditure by 19% and Employee Cost by 26% are the primary attribute for the growth of expenditure when compared to corresponding quarter of previous year. Total expenditure in Q1 FY16 stood to Rs. 1127.75 million as against Rs. 987.17 million in Q1 FY15. Break up of Expenditure (Value in Millions) Q1 FY16 Q1 FY15 Consumption of Raw Materials 753.50 668.99 Employee Cost 107.11 84.73 Depreciation 52.86 51.97 Other Expenditure 256.07 215.97 COMPANY PROFILE TCPL Packaging Ltd, formerly 21 st Century Printers Ltd was incorporated in August 1987. It is one of leading and largest manufacturers of folding cartons in India. The company began commercial production at its plant at Silvassa, Union Territory of Dadra & Nagar Haveli, in April 1990, with a web-fed printing machine equipped with an in-line die cutter. TCPL Packaging Ltd. operates out of its six manufacturing units ; three in Silvassa, 180 kms from Mumbai in Western India ; two in Haridwar, 200 kms from Delhi in Northern India ; and one in Goa, 600 kms from Mumbai in Western India. All the plants are ISO 9001: 2008, ISO 22000: 2005 certified and are also compliant with BRC/IoP Global Standard-Packaging Issue 3, which is suitable for direct food contact. In addition, plants at Silvassa and Haridwar are also FSC certified & SEDEX Compliant. TCPL is one of the largest exporters of printed cartons from India. It regularly caters to consumers in countries like UK, The Netherlands, UAE, Bangladesh etc. Exports constitute about 22% of TCPL's annual revenues. The first client being Godfrey Phillips India (associates of Phillip Morris International).TCPL had its initial experience in the cigarette industry. The second six color rotogravure machine was commissioned at its plant in 1995. With this, it also started forays in the liquor industry. Business areas
Cigarette CPL Packaging Ltd. is currently catering to the Phillip Morris and BAT associate companies in India and other leading cigarette manufacturers in the region; it can undertake both long and short run jobs either by gravure or offset process. The packs are subject to stringent quality checks such as GC tester and crease stiffness tester which are available at its laboratories. Liquor TCPL is currently one of the largest manufacturers of liquor cartons in India, catering to all liquor majors in the industry. With its versatile printing facility, it can manufacture liquor cartons with inline UV varnish as well as die cutting in a single operation. Food TCPL is a regular and approved vendor to leading food and beverage manufacturing companies in India such as Nestle, General Mills, Ferrero, GSK, Kellogg India, Heinz, Amul, Hindustan Unilever, Tata Global Beverages and many other smaller Indian companies. Besides, TCPL is a regular exporter to the food and bakery industry in UAE, Netherlands and UK. FMCG The company assists its customers in product innovation and design and extensive expertise in providing customers with both structural & graphic design is a big advantage for its customers to offer value added and unique packaging for the market place having many customers Hindustan Unilever, Emami, Anchor, Colgate, Godrej Sara Lee, Godrej Consumer Products, Cavin Kare, Marico, Johnson & Johnson, S.C.Johnson, Cholayil, Hygeinic. Others The company has clients include host of other customers in segments such as automobile, stationery, pharmaceuticals and the airline industry such as Kingfisher and Jet Airways and caters to one of the largest stationery products manufacturer in the country, Hindustan Pencils Ltd. Certifications BRC/IOP certificate, making TCPL one of the few Indian packaging companies to have achieved this certification. TCPL Certified by ISO: 9002 in the first printing and packaging unit in India & re-certified with the latest standard ISO: 9001: 2008. The company Haridwar factory is certified for ISO 22000:2005 (Food Safety Management System) for food & non food paperboard based boxes.
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31, 2014-2017E 2014A 2015A 2016E 2017E I. EQUITY AND LIABILITIES: A. Shareholders Funds a) Share Capital 87.00 87.00 87.00 87.00 b) Reserves and Surplus 792.27 1051.30 1340.41 1675.51 Sub-Total-Net worth 879.27 1138.30 1427.41 1762.51 B. Non-Current Liabilities: a) Long-term borrowings 781.74 974.25 1135.00 1271.20 b) Deferred Tax Liabilities [Net] 120.41 132.91 144.07 154.74 c) Other Long Term Liabilities 6.29 7.61 8.83 10.06 d) Long Term Provisions 15.41 23.29 28.65 33.52 Sub-Total-Long term liabilities 923.85 1138.06 1316.55 1469.52 C. Current Liabilities: a) Short-term borrowings 619.30 589.61 563.67 544.50 b) Trade Payables 354.26 604.10 799.83 959.79 c) Other Current Liabilities 406.33 439.85 483.84 522.54 d) Short Term Provisions 25.45 62.83 79.17 93.42 Sub-Total-Current Liabilities 1405.34 1696.39 1926.50 2120.25 TOTAL-EQUITY AND LIABILITIES (A+B+C) 3208.46 3972.75 4670.45 5352.28 II. ASSETS: D. Non-Current Assets: Fixed Assets i. Tangible Assets 1826.79 2272.84 2681.95 3084.24 ii. Intangible Assets 5.56 6.45 7.38 8.19 iii. Capital work-in-progress 40.05 17.24 11.72 9.14 a) Sub-Total-Fixed Assets 1872.40 2296.53 2701.05 3101.58 b) other non-current assets 26.77 1.33 1.52 1.67 c) Long Term Loans and Advances 21.44 119.83 174.95 227.44 Sub-Total-Non-Current Assets 1920.61 2417.69 2877.52 3330.68 E. Current Assets: a) Inventories 474.37 585.15 692.82 789.82 b) Trade Receivables 738.79 823.36 905.70 987.21 c) Cash and Bank Balances 8.98 62.35 93.11 125.70 d) Short Term Loans and Advances 51.23 61.07 71.70 82.45 e) Other Current Assets 14.48 23.13 29.61 36.42 Sub-Total-Current Assets 1287.85 1555.06 1792.93 2021.60 TOTAL-ASSETS (D+E) 3208.46 3972.75 4670.45 5352.28
Annual Profit & Loss Statement for the period of 2014 to 2017E Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales 3949.21 4978.42 5575.83 6133.41 Other Income 0.00 0.00 0.00 0.00 Total Income 3949.21 4978.42 5575.83 6133.41 Expenditure -3337.41-4158.45-4653.03-5112.20 Operating Profit 611.80 819.97 922.80 1021.21 Interest -176.56-172.88-198.81-218.69 Gross profit 435.24 647.09 723.99 802.52 Depreciation -237.93-216.73-227.57-244.41 Profit Before Tax 197.31 430.36 496.42 558.11 Tax -72.28-108.50-126.09-142.88 Net Profit 125.03 321.86 370.33 415.24 Equity capital 87.00 87.00 87.00 87.00 Reserves 792.27 1051.30 1340.41 1675.51 Face value 10.00 10.00 10.00 10.00 EPS 14.37 37.00 42.57 47.73 Quarterly Profit & Loss Statement for the period of 31 st Dec, 2014 to 30 Sep, 2015E Value(Rs.in.mn) 31-Dec-14 31-Mar-15 30-Jun-15 30-Sep-15E Description 3m 3m 3m 3m Net sales 1325.30 1289.61 1293.82 1402.50 Other income 0.00 0.00 0.00 0.00 Total Income 1325.30 1289.61 1293.82 1402.50 Expenditure -1107.06-1078.05-1074.89-1169.69 Operating profit 218.24 211.56 218.93 232.82 Interest -42.84-41.31-53.11-54.17 Gross profit 175.40 170.25 165.82 178.64 Depreciation -54.74-56.41-52.86-53.92 Profit Before Tax 120.66 113.84 112.96 124.73 Tax -29.40-27.08-33.36-28.81 Net Profit 91.26 86.76 79.60 95.91 Equity capital 87.00 87.00 87.00 87.00 Face value 10.00 10.00 10.00 10.00 EPS 10.49 9.97 9.15 11.02
Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) 14.37 37.00 42.57 47.73 EBITDA Margin (%) 15.49% 16.47% 16.55% 16.65% PBT Margin (%) 5.00% 8.64% 8.90% 9.10% PAT Margin (%) 3.17% 6.47% 6.64% 6.77% P/E Ratio (x) 31.94 12.41 10.78 9.62 ROE (%) 14.22% 28.28% 25.94% 23.56% ROCE (%) 37.26% 38.37% 36.80% 35.37% Debt Equity Ratio 1.59 1.37 1.19 1.03 EV/EBITDA (x) 8.80 6.70 6.07 5.57 Book Value (Rs.) 101.07 130.84 164.07 202.59 P/BV 4.54 3.51 2.80 2.27 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 459.00 the stock P/E ratio is at 10.78 x FY16E and 9.62 x FY17E respectively. Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.42.57 and Rs.47.73 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 32% over 2014 to 2017E respectively. On the basis of EV/EBITDA, the stock trades at 6.07 x for FY16E and 5.57 x for FY17E. Price to Book Value of the stock is expected to be at 2.80 x and 2.27 x respectively for FY16E and FY17E. We recommend BUY in this particular scrip with a target price of Rs.530.00 for Medium to Long term investment.
INDUSTRY OVERVIEW The paper industry in India has become more promising as the domestic demand is on the rise. Increasing population and literacy rate, growth in GDP, improvement in manufacturing sector and lifestyle of individuals are expected to account for the growth in the paper industry of India. BILT and ITC are among the largest producers of paper and paperboard in India. Many of the existing players are increasing their capacity to meet the growing demand. The focus of paper industry is now shifting towards more eco-friendly products and technology. Government of India has established rules and regulations to control the population and degradation of forest. These measures taken by the government has brought the significant changes in the paper industry of India. The paper industry in India is expected to grow at the CAGR of around 9.6% during 2012-2017, which will make the revenues of paper industry of India to reach up to USD 11.83 Billion by 2017. About 70% of the total installed capacity of paper production in India is accounted by Gujarat, West Bengal, Orissa, Andhra Pradesh, Karnataka and Maharashtra. Uttar Pradesh, Tamil Nadu, Haryana, Kerala, Bihar and Assam together account for about 25% of the total paper production in India. The Indian Paper Industry as a whole is witnessing action on quite few fronts. The Printing and Writing (P&W) Paper Industry (on which this report focuses on) is a segment which is slowly showing a shift from a commodity product to branded product and become in true sense a FMCG product. It is in this context, we review the industry looking at the overall dynamics size, growth, key players, product portfolio comparison, sales channel, customers and distribution related aspects of the same. Industry Structure and Developments The year 2014-15 witnessed an improvement in FMCG and other secotors where the Company supplies the packaging material for last so many years. The growth is although marginal but shows specific improvement in the encouraging environment created by the present Government since it has come into power in May 2014. Moreover with the inflation stabilising, it is expected that the country returns to the high growth rates, seen in the past. Thus the companies anticipate higher rates of industry growth for consumption in the future. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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