Sunday, September 15, 2013

PAPER PRODUCTS LIMITED - BUY









FMCG Companies are evergreen favourites of Investors .It is mainly because of their ever growing business backed by strong brands ,wide market reach and good cash flow ..etc.But in many cases FMCG companies always commanding premium valuations and ruling at high P/E multiples .Proxies of FMCG companies are another better option to benefit from the growth of FMCG companies .Paper products is one such company  which supplying packaging materials for many of the top brands in India.PPL is a subsidiary of Finland based Huhtamaki Packaging Worldwide which is operating in more than 30 countries and one of the largest 10 packaging solution providors in the globe.Huhtamaki holding about 61 % stake in PPL through its holding company Huhtavefa BV.In India ,company commanding about 60 % of market share in premium flexible packaging  business and its client list includes all major players in FMCG sector like Britannia, Cadbury, Castrol, Coca-Cola, Dabur, Emami, Eveready, GSK, Godrej, Hindustan Unilever, ITC, Marico, Nestle, Pepsi, Perfetti, P&G, Tata Tea, TTK-LIG and Wipro..etc  In fact ,It is a one stop shop for FMCG companies for packaging needs and its products includes  Flexible Packaging, Specialized Cartons, Packaging Machines, Holographic Options, Gravure Cylinders, Polyethylene Films and Coated Materials, Shrink Sleeves, Heat Transfer Labels, Pressure Sensitive Labels, Metalized Paper and Wrap Around Labels ..etc.  In many sub sectors of FMCG , flexible packaging is  replacing conventional rigid or glass based packaging.Growing trend of processed food market and penetration of un tapped rural markets by personal care companies are expected to increase the use of flexible packaging going forward. Supported by one of the world leader as its parent, PPl will be the biggest beneficiary of this changing trend in India. Company  showing steady growth in the past and  distributing dividend in every year. In FY 2012-13 PPL reported a top line of Rs.900 Cr ,net profit of Rs.45 Cr and an EPS of Rs.7.20 . Company’s stock price is now trading around its 52 week low price .For the past few weeks PPL’s Indian promoter is continuously buying shares from open market.I think,this MNC stock is a good proxy to participate in  the  Indian consumption story without taking higher level of risk @ CMP Rs.61.

Link to Parent Company's website HERE  

Link to PPL website HERE

17 comments :

  1. Dear VPji one also needs to keep in mind that flexible packaging companies lag crude oil price indicators. Crude being at high point these companies tend to underperform in such situations.

    I wonder if the stock selection has to do with MNC flavor and some acquisition plans not known to public currently?

    Also wonder why Uflex was not a preferred bet in this sector, where its the undisputed leader and valuations are very attractive....

    Anyway thanks for the call
    Regards
    Ravi

    ReplyDelete
    Replies
    1. Ravi,
      Good points raised for discussion. But for Uflex, the promoters are involved scam and even before that the promoter reputation is not good. The stock is speculative in nature.

      Delete
  2. Yes its raw material price is sensitive to the price of crude derivatives.But I feels ,if there is no political tensions crude price will consolidate around the current level.Syria related issues are expected to soften in the days to come.

    Regarding Flex industries - if the promoter of any company is involved in scams and jailed for that reason,market will always take such companies with a pinch of salt .That is the case in the matter of Flex

    You can read more info about this subject in the below link

    http://www.indianexpress.com/news/the-great-land-scam/721780/

    ReplyDelete
  3. Also Uflex haveing huge debt also , from 2009 every year payment towards Interest is more than 100 cr & from last 3 year its above 200 cr .

    Am I Correct VP Ji ?

    ReplyDelete
  4. Dear Sir,
    What is your take on de-nora? Is it right time to buy it???

    ReplyDelete
    Replies
    1. Stock is in PCA and a Cyclical business

      Delete
  5. Even after recommended by VP, these days stocks are ending in red and are available below the recommended price. Earlier they used to close 20 percent up on Monday after VP recommends them on Saturday. This shows how weak the sentiment is for small and midcaps. I believe we should not buy aggresively and add only small quantity or wait for some correction.

    ReplyDelete
    Replies
    1. This comment has been removed by a blog administrator.

      Delete
  6. Hi Valupickr,
    I have been silent follower of ur blog. What makes u different is u recom stocks not discussed anywhere aND they are not fraud but are hidden gems.

    Can u please list few small companies which have monopoly because nobody wants to go in that sector due to its boring nature with no growth and small sector size like bottle_cap, screw, etc

    Regards
    Sameer

    ReplyDelete
  7. Sir, what is your view on Essel Propck? This company also in packing sector of FMCG. Is good to invest in Essel Propack also at 35/36?

    you views will greatly help me in investment. I bought paper products at 60.

    ReplyDelete
    Replies
    1. Product diversification is more in case of PPL.Essel is mainly in laminated tubes.

      Delete
  8. hi,

    AVT Natural product is ready to issue Bonus share, can we buy now? Can you please update Pros & Cons if it issues Bonus share?

    Thanks,
    Sankar

    ReplyDelete
    Replies
    1. Not tracking theis stock post FV split .One director seems selling regularly in open market.

      Delete
    2. hi Valuepick,

      Thanks for the update.

      Thanks,
      Sankar.

      Delete
  9. VP sirji, ashapura is hovering in the range 37-42 for a long time. Bauxite output for month of July is higher by 38.3%. So Q2 will be superb. Still y such rangebound movement ? When will the shipping co cases be settled ?
    Anytime soon ?

    Thanks sirji

    ReplyDelete
  10. Can you provide your valuable comments on 'Confidence Petroleum'. please

    ReplyDelete

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