Huhtamaki ppl ltd

Stock Opportunities
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Huhtamaki ppl ltd.
I am novice, please help in improving.

In mid 1999 HPPL became a member of Huhtamaki Packaging Worldwide, the Finnish consumer-packaging major.
Huhtamaki PPL Ltd (HPPL) is India’s leading manufacturer of primary consumer packaging and labelling materials.
HPPL acquired 51% shareholding in India’s leading manufacturer of labels for the Pharmaceuticals sector - Webtech in 2012. In January 2015, HPPL acquired 100% of Positive Packaging India Ltd. .

Market Cap.: ₹ 1,577.28 Cr.

Current Price: ₹ 208.85

Book Value: ₹ 65.42

Stock P/E: 29.26

Dividend Yield: 1.38%
Debt: ₹ 436.28 Cr.

Debt to equity: 0.93

Price to book value: 3.19

PEG Ratio: 2.37

Clients - Surf excel, Vanish, Colgate, Pantene, Strepsils, Nescafe, Paper Boat, Pedigree, Palmolive, Johnson, Pepsi, Eno, Kingfisher, Coca Cola, Thumbs up, Amul, Horlicks, ITC, Chokos, Kellogg’s, Cornetto, Britania, Cadbury, Kit-Kat , Mentos, Kinder Joy, Kissan, Knorr, Wiekifield, Ching’s, Godrej, Pitsberry,

Positives -
• Available at 52 week low
• ‎huhtamaki is global player
• ‎good management.
• ‎Good expected growth in packaging sector.
• ‎company helds regular call conference.
• ‎Many branded consumer.

Negatives -
• Since merger company not showing good growth.
• ‎GST and Demonetization resulted in decrease in profit by 50 %
• ‎Hdfc mutual fund sold 5% stake.
• ‎B2B model

Merger, Demonetization, GST have created problem for Huhtamaki, which expected to end in coming period.

I have searched and waited one year, that someone will start thread about it. Invested 2-3 years ago, holding with -15% returns.

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The expansions of the company is as taken from Annual Report

New factory at Guwahati:

The east and north-east of India are showing good economic growth and many FMCG and durable products players –
Bajaj, Dabur, ITC, Emami, Godrej, HUL, Pidilite, amongst many others – have set up manufacturing plants there. Government
is also offering fiscal benefits to encourage industry and job creation.
Our Guwahati plant is spread across 145,000 square feet area in an industrial hub near the main city. We completed the
initial phase of this project in record time and started operations in March 2017. This plant is set up to be a fully integrated
plant manufacturing flexible packaging materials with gravure cylinder and allied support infrastructure. This plant will help
us to complete our pan-India presence for supporting our customers with flexible packaging materials.

New factory in Sikkim:

Webtech, an HPPL subsidiary (which merged with HPPL on 1st April 2017), is India’s leading pressure sensitive (PS) label
producer of specialised, high end pharma labels. Most of our pharma customers have set up manufacturing facilities in
Sikkim because of the beneficial environment created by the State Government.
We have set up a PS label manufacturing plant in Sikkim to support our existing customers and also focus on market
expansion. This plant was also built in record time and started operations in March 2017.

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Its a good company with good business model
But its not cheap both in PE and CMP/BV terms
Quarterly topline seems stagnated. reasons should be found.

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Gst, Demonetization and merger.

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50% decline in profit, it is also reason for high pe

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Global Huhtamaki is leader in food packaging. Based on Indian food processing thrust might see some good business opportunities…

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I came across this company while reading a fineprint on Nestle packets; Maggi & Dairy Milk chocolates.

  • There is youtube video channel for Huhtamaki.
  • The company claims multiple MNCs are their customers.
  • The CEO mentioned that India is a major center for manufacturing flexible packaging,
    • Query: Does the India unit export as well? For Huhtamaki’s global clientele?
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Yes, There have been some headwinds in this regard last year as mentioned in the Management Discussion of the latest AR.

“adverse geo-political developments and non availability of foreign exchange in some of the Middle East and African countries made Exports more complex and uncertain. Growing protectionism among some developed and some developing economies also impacted Exports growth.”
Huhtamaki PPL-Annual-Report-FY-2017.pdf (1.3 MB)
FYI, It follows Jan - Dec FY, which is perhaps why this company remains out-of-radar of some.

HDFC AMC used to own a chunk of shares of the company until last year which they gradually offloaded afterwards.

There have been concerns regarding the pollution control tactics of the company, and their Thane plant has received closure directions from MPCB last week.

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Anyone know why there was big increase in borrowings between 20’14 -18 of this company?

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The answer iz there in the initial post in this thread…its due to the aquisition of positive Packaging industries. The intrest cost die to this debt is hitting the bottomline margin post 2015

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Does anyone have the 2019 annual report for this? Can’t find it on the website either

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Company follows calendar year as fiscal year,as far as I could see the annual report for CY19 is not out yet,usually it should be out by now,maybe it has been delayed a few weeks due to Covid.

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Thanks for the info.

The P&L data from screener of FY 18 vs TTM P&L does seem to indicate that Paperprod could break out.

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Any views on synergies of between the entities acquired Mohan Mutha Polytex Pvt Ltd. in January 2020 and Ajanta Packaging in May 2018.

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It’s available now on website.

Had some points related to this company.

Innovation - They have created some of the customised packaging options for their customers like “ID do it yourself vada pouch” and RAW juice. These might have lacked volumes because their customer had limited reach in terms of volume but in future their ability to innovate can get them advantage over their competitors.

Geographical presence : They have now manufacturing plants across country which are very well spread out and that should help them in servicing their customers in shorter tunaround time.

Diverse product offering - They have a presence across packaging solutions like packaging for food, beverages, tube laminates, labelling etc

In spite of various positives that the company has why is it trading at such a low p/e. Anyone who has been following or invested in this stock for some if you can share your thoughts.

Disc : Invested

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I’m a shareholder and perplexed at the lack of institutional interest in the Company. Huhtamaki, on the face of it, seems to have everything in its favour - strong parent, excellent business prospects, good dividend history, debt reduction, benign raw material costs etc. You’ve listed many positives for the company - reasons why I bought the stock as well. Yet, the stock is out of favour. There’s a strong sector rally going on in Uflex, Polyplex etc but this one isn’t budging. Now wondering if there are any red flags that I’m missing.

Would be great if anyone has any further insight.

p.s. Would you happen to have the management presentation at the recent AGM? It isn’t updated on the website as yet.

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Company AGM presentation on company website is very interesting
https://www.huhtamaki.com/en-in/flexible-packaging/investors/

A forgotten MNC packaging company servicing the best names in the industry. Company mainly caters to the premium segment of packaging. Its major clients include Britannia,
Cadbury, Castrol, Coca Cola, Dabur, Emami, Eveready, GSK, Godrej, HUL, ITC, Marico,
Nestle, Pepsi, Perfetti, P&G, Tata Tea, TTK-LIG, Wipro etc

CY19 revenues grew by 9% YoY to Rs 25.5bn while EBITDA growth was 32% YoY to Rs 2.9bn mainly due to a better product mix. PAT improved by 161% YoY to Rs 1.7bn, led by interest/tax reversal taken on account of favourable Supreme Court (SC) verdict in the Rudrapur plant tax dispute.
Adjusting for these reversals PAT grew by 34% YoY to 818mn.

During CY19, redeemed non-convertible debentures (NCDs) aggregating to Rs 3.85bn along with the interest thereon amounting to Rs 110mn; hence long-term debt reduced by Rs 3bn to Rs 1bn. Net debt stood at Rs 2bn vs. Rs 3.5bn in CY18.
The capital outlay for CY19 was Rs 600mn. Despite the NCD repayment and capex,
it generated OCF/FCF of Rs 2.4bn/Rs 1.8bn.

1HCY20 EPS 7.16. Extrapolating for full year 14.32 EPS in CY20. Stock at Rs246 trading at 17x trailing which seems quite cheap compared to where the market is trading.

With the objective to expand footprint in Southern India, HPPL acquired the flexible
packaging business of Mohan Mutha Polytech (MMPPL) in Jan-2020 at an enterprise
value of Rs 741mn. MMPPL’s manufacturing plant is located in Sri City (Andhra Pradesh)
and has a capacity of 5,400tpa with the capability to produce Multi-layer laminates, Biodegradable
films, Bio-compostable films, BOPP (Biaxially-Oriented Polypropylene) wraps
and Shrink Sleeve labels. With total sales of Rs 762mn, debt-free balance sheet and an
innovative product portfolio, MMPPL will support HPPL’s goal to penetrate further in
Southern India.

During the year, HPPL launched Huhtamaki blueloop® - protective recyclable packaging
solutions that are manufactured by using coated paper or polymers (polyethylene and
polypropylene). These solutions offer the same machine-run ability and barrier
performance as multi-material structures. In 2019, HPPL commercialised these recyclable
solutions for shampoo, confectionery, industrial bulk packaging and snacking
applications; it is now prepared to expand the applications to more segments. This is
expected to help HPPL grow its revenue share from NASP (New Applications, Structures,
Products and Processes) from 23-25% of total sales currently.

Export growth was 17% YoY (revenue share 24%) led by the increase in share with key accounts and further penetration across SEA and LATAM. HPPL faced intense competition from the local suppliers in Middle East and West Africa.

HPPL paid royalty of Rs 86mn to parent as “Cost for Centralised Services” towards the use of trademark and centralised services. As per the agreement (with parent w.e.f. 1st Oct’19), there is no royalty payable during CY20.

HPPL has 18 manufacturing plants across India. Its parent company Huhtamäki Oyj (Finland) has 81 manufacturing units across 35 countries.

On the industry
Online portals are expected to play a key role for the companies that are trying to enter the hinterlands. The Internet has facilitated cheaper and more convenient means to increase the reach. It is estimated that 40% of all FMCG consumption in India will be online by 2020.

The food processing industry, part of the food and beverages segment of the sector, accounts for >50% of the total demand for flexible packaging.

The size of the global flexible industry is estimated at US$ 228bn in 2019. The global industry is expected to grow at a CAGR of 3.3% to reach US$ 269bn in 2024.

India’s flexible packaging industry is expected to grow at a CAGR of 10% to reach a size of US$ 8.5bn by 2022-23, up from US$ 5bn in 2017-18.

Disclosure: Invested

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I have few question in my mind -

  1. Company has shown very poor growth in sales of 5.79% in last 3 year. Looks like company is growth challenged. Also management has not laid any plan to take it to at-least 10%.

  2. Management has stopped doing concalls. The last one I found was for Jun-19 on researchbytes.com. Why would management not answer the question of analyst?

  3. 3-years return on equity is 14.96% which is again mediocre type of RoE and thus market has rightly pushed the stock with downward revision on PE ratio. I think till the time management can show clear pathway to investors in relation to growth the stock will languish at these price level.

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I was looking for some bottom-up picks of this stock and come across this company. I have a close contact in Idli Dosa company ID special and this company provides fulfills their packing needs. I don’t know how many of you watch this video Vada , these guys designed this patented packaging for the client. Other than the taste of the vada the important thing is texture which is hole at the center without that vada is not perfect. I see this as a strength of the company to understand customer unique needs and come up with a solution.

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Reported 3QCY20 results today. 5% YoY sales growth and 16% YoY EPS and PAT growth. https://www.bseindia.com/xml-data/corpfiling/AttachHis/bc489f57-973f-4ea3-b83e-a5f433b380a5.pdf

Disclosure Invested

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