TCPL Packaging Ltd. -- Statistical Facts & Figures -- Views Invited

(ragsingh0305) #103

Hi all,

Can we compile the list of all relevant questions (apart from what I mentioned in the above post) which others have and then can narrow down by deliberating answering those questions, which our member know.
Once we finalize the list of pertinent questions, then we can ask them with the management.
I am not sure how to reach out to this company’s management team, since I guess they don’t have quarterly earnings call??

Let me know if this sounds okay to you guys?

(Yogesh Sane) #104

Even though I like the business, I never invested in the business because I was not comfortable with the valuation when I first discovered the business about 2-3 years ago.

Between 2014 and 2016, EBITDA margins remained flat at around 16-17%, net margin almost doubled from 3% to 6% and stock price followed.

Source: Capitaline

Most of the change in net margin was simply because of change in depreciation

Source: Capitaline

which has reversed over last 2 years causing net margins to decline. I was actually surprised to see EBITDA margins decline so that’s an additional risk. I think market price does not fully reflect the risks so will stay away for some time.

(Rudra Chowdhury) #105

Most important metrics to focus for this company is cash flows, as due to nature of converter business it would remain depreciation heavy. For the first time in recent years, Capital WIP has moved higher while reducing long term debt (FY18 end), which signals something very positive.

Overall the RM pricing in paperboard remains a cause of concern and might need a few more quarters to stabilize.

(shyamutty) #106


Though there is slight degrowth in revenue QoQ, there is 15% PAT growth QoQ.
60% PAT growth Q1FY17 vs Q1FY18

@Yogesh_s are these the signs of improving margins?

(Deepak Venkatesh) #108


Correct me if I am wrong. The concerning part is that the OPM has been declining for last 5 quarters including this quarter too added to what you have said ie revenues have fallen this Q2 over Q1.
FCF has been negative in all years except 3 in the decade.


(Yogesh Sane) #109

Q1 results is a mixed bag. Sales is holding up but there is a sharp drop in gross profits (y-o-y). Looks like gross margins will remain at 40% going by trend over last 4 quarters. 60% PAT growth is due to low base which in turn was due to impact of GST last year. On absolute basis, net margins of 3% is low.

I agree with @deevee about free cashflow or lack of it. Company is generating healthy operating cashflow but reinvesting all of it plus some more in assets so it has to borrow money every year to keep up with the capex. Trouble is, with all these heavy capex, we should expect sales growth of at least 30% which is not coming in. Sales growth over the last 5 years has averaged 15% which should be self-funded without any additional borrowing. Debt should have gone down instead of going up.

Such companies should be valued at close to book value (or lower) given their heavy debt load and low margins. I will value the company at 250-300 Cr compared to current market cap of 450 cr. Prior to 2015, this company was valued at book value.

(hurrikane27) #110

Did anyone attended their AGM

(zygo23554) #111

From Q2 results there are signs that this is finally turning the corner after a bad set of results over 5-6 Q’s.

What was most likely happening over the past few Q’s -

Their timing of flexible packaging plant was bad, they commissioned the plant and got hit with DeMo. At the same time their packaging board business started seeing higher input costs which they were not able to pass on to customers who were themselves coping with reduced demand. This was followed up by GST related issues in a couple of Q’s

In the meanwhile overheads for the flexible packaging coupled with depreciation ensure that they were EBITDA negative on this since the volumes weren’t taking off. Hence EBITDA tanked from a level of 16%+ to 11% at the lowest point. Logically they must have been positive at gross margin level (management has indicated that flexible line with operate at an OPM of 10-12%), hence it was a question of enough volumes kicking in so that the line turns EBITDA positive. Looks like this has started happening from this Q2 onward. Else paper prices continue to be high and I do not see how the paperboard packaging line could have reverted to the EBITDA of almost 17% that one saw in 2016.

For Q2, top line is 210 Cr at an EBITDA margin of 14.5% and PAT of 11 Cr
Company is sitting on net block of 390 Cr inclusive of WIP, D/E at approx 1.2
Currently trading at 370 Cr (less than net asset value)
Operating cash flow continues to be healthy, their working capital terms will not change too much since the buyers are FMCG companies where terms are more or less standardized

I don’t think this will ever be a low debt company since reinvestment into fixed assets will always be needed to keep the growth engine going.

One more Q of decent results and this should look interesting. Let’s see how the market reacts to this next week

Disclosure: This is one of my larger holdings and has tested my patience a bit over the past 2 years