Packaging Sector

Laminations/Processors Industry

INDUSTRY STRUCTURE
Packaging industry is a multi-technology, multiproduct, multi process industry encompassing various materials like polymers, chemicals, metals, paper etc. The packaging industry can be classified into rigid packaging (comprises of tins, metal boxes, glass packing, wooden boxes corrugated boxes etc) and flexible packaging (BOPP films, BOPET, polyester films and laminated tubes). Apart from these two there also exists Jute, which finds major usage in food grains packaging.

Over the years flexible packaging has become the preferred choice for packaging consumer articles including food and clothing as flexible packaging offers more eco-friendly and innovative packaging solutions.

WHAT AFFECTS THE INDUSTRY.??

Demand In India, increasing penetration of organized retail (including foreign players who are large consumers of flexible packaging solutions) and increasing preference for branded products is expected to fuel the demand for flexible packaging solutions. The large growing middle class, increasing liberalization of the organized retail sector are the catalysts to growth in packaging products/materials. Fast changing food habits are also likely to give boost to the flexible packaging market, especially the pouch and microwave friendly products. Supply Demand exceeds supply in flexible packaging segment. The polyester films (BOPP & BOPET) segment cycle is on an uptrend and is witnessing strong demand due to improved economic condition globally and also due to shortage of additional capacities.

WHAT AFFECTS THE INDUSTRY.??

Expenses Packaging is a raw material intensive industry. Raw materials cost as a percentage to sales is approximately 55% in packaging industry. Hence any adverse movement in raw material prices impact profitability of the packaging industry.

HOW TO VALUE PACKAGING SECTOR

One can value packaging companies same as FMCG companies due to same nature of demand & supply constituents.

SECTOR CONSTITUENTS
Company
Uflex Bilcare Glory Polyfilms Orient Press JMDE Packaging Paper Products Jalpac India Ras Extrusions

Market Cap ( ` in Cr.)

986 555 21 66 4 438 5 5

Only Uflex Ltd, Bilcare Ltd and Paper Products Ltd have a reasonable/quantifiable market cap from the given industry constituents. Hence we have considered only these 3 companies for our analysis.

FUNDAMENTALS COMPARISON
Values are based on consolidated data as on December 2011

VALUATION
UFLLTD
PE (x) Price to Book Value (x) EV to Sales (x) EV to EBITDA (x) Dividend Yield (%) 2.56 0.54 0.62 1.87 5.49

BILCAR
3.70 0.52 0.70 4.23 1.27

PAPPRO
8.81 1.34 0.62 4.76 3.15

Valuations are the most important element of arriving at the decision of whether the shares of a particular company should be purchased or not. Higher growth companies deserve higher valuations.
Values denoted in green depict the best stock within the peer set for a particular ratio. Similarly, the worst stock for that particular ratio is shown in red.

GROWTH POSITION
UFLLTD
3 Yr CAGR Sales (%) 3 Yr CAGR Profit (%) 1 Yr Sales Growth % 1 Yr EBITDA Growth (%) 1 Yr Net Profit Growth (%) 28.35 83.01 51.26 139.54 274.50

BILCAR
52.03 21.63 118.22 45.01 25.75

PAPPRO
10.59 6.93 21.96 15.55 -2.60

Growth figures of companies, viz. Sales, Operating Profits and Profits after Tax are very important numbers reflecting the quality of a company's business. Growing businesses deserve better valuations and are often sought by investors.

MANAGEMENT EFFECTIVENESS
UFLLTD
Return on Capital Employed (%) Return on Equity (%) Asset Turnover Ratio (x) 34.79

BILCAR
15.50

PAPPRO
15.69

47.62 1.19

15.04 1.20

12.97 2.41

Inventory Turnover Ratio(x)

13.30

7.56

9.33

Debtor Turnover Ratio (x)

5.34

3.89

7.13

The management effectiveness as suggested by the ROCE and ROE reflect the return the company makes on every Rs. 100 invested. Higher return ratios reflect higher strength in the company's business model.

SOLVENCY & MARGINS

UFLLTD
Debt to Equity Ratio (x) Interest Coverage(x) Current Ratio (x) EBITDA Margin (%) Net Profit Margin (%) 0.98 6.14 1.55 32.98 20.14

BILCAR
0.92 3.17 2.22 16.48 6.45

PAPPRO
0.08 77.93 1.46 13.04 6.63

Solvency ratios are extremely important metrics for analyzing the risk involved in investing in the company's shares. Higher debt to equity and low interest coverage are reflective of pressure in the company's business and hence investment should be avoided in such companies.

SHAREHOLDING PATTERN
UFLLTD
Promoter Shareholding (%) 43.47

BILCAR
32.61

PAPPRO
63.70

FII Shareholding (%) DII Shareholding (%) Public Shareholding (%) Promoter Shg. Pledged (%)

9.71 0.44 24.19 75.67

7.55 6.57 28.49 95.30

1.34 5.71 19.73 0.00

Shareholding Pattern reflects the pattern of ownership in the company. A higher shareholding by promoters, FIIs signifies greater confidence in the company.

MARKET PERFORMANCE
UFLLTD
1 M Price performance (%) 6.62

BILCAR
17.46

PAPPRO
3.71

6 M Price performance (%)

-23.23

-34.74

-16.48

1 Yr Price performance (%)

-12.87

-52.07

27.53

3 Yr Price performance (%)

151.59

-37.89

118.94

Market performance gives the recent price performance of the stock at the markets.

BALANCE SHEET STATUS

UFLLTD
Total Assets (Rs. in Cr) Net Worth (Rs.in Cr.) Total Debt (Rs. in Cr.) Enterprise Value (Rs. in Cr) Book Value Per Share (Rs.) 3,300.49 1,888.51 1,411.25 2,133.08 251.20

BILCAR
2,334.27 1,065.87 1,219.60 1,593.72 452.79

PAPPRO
316.19 293.66 22.53 450.28 52.00

Balance Sheet Status shows the financial status of the company at the financial year end . These cannot be analyzed in isolation and are basically useful to gauge size of companies.

INCOME STATEMENT STATUS

UFLLTD
Sales (Rs. in Cr.) EBITDA (Rs.in Cr.) Net Profit (Rs. in Cr.) Revenue / Employee (Lacs) Profit / Employee (Lacs) 3,465.41 1,142.91 693.95 103.88 20.80

BILCAR
2,286.58 376.91 146.77 0.00 0.00

PAPPRO
725.34 94.60 35.65 49.24 2.42

Income Statement Status shows the financial performance of the company during the financial year. These cannot be analyzed in isolation and are basically useful to gauge size of companies and profitability through margins.

STOCK SELECTED
Analysis of the above fundamental parameters suggests us that Uflex Ltd is the best buy in this industry at this point of time as compared to its peers. It has out beaten its peers on valuation, growth, management effectiveness, revenue and profitability.

UFLEX LTD

STOCK SNAPSHOT

STOCK SNAPSHOT

STOCK SNAPSHOT

STOCK SNAPSHOT
DIVIDEND PAYOUT
Date
Aug 30, 2011 Aug 26, 2010 Sep 03, 2009 Aug 13, 2008 Sep 04, 2007

Corporate Action
Dividend Dividend Dividend Dividend Dividend

Description
Dividend 75% - FV:10 Dividend 50% - FV:10 Dividend 40% - FV:10 Dividend 40% - FV:10 Dividend 20% - FV:10

DATA SOURCED FROM