This is my personal rant and accountability note for my future self, to unclutter my thought process and biases, especially the sunk cost fallacy
Simple Introduction:
- This is a rigid plastic packaging company.
Raw Material: Crude derivatives - (Reliance Industries for procurement)
End-user Industries:
- Paints
- Lubes
- FMCG
- Pharma
Mental Model
Value Added Business - Converter type, taking a commodity raw material and convert into something more valuable
Buy Rationale
45,000MTA to70,000MTA new capacity addition in 2 years
Bottom line margin expansion due to product mix change
Moat:
- Plants near by to customer, which reduces their freight cost and makes it sticky
- Low-cost producer, inhouse robots, adopting latest tech and new product development capability
- Successfully pushed to adopt new products - IML on paint industry
- Having Stable margin 18-20% indicates they are able to pass on the raw material fluctuations
Current State:
Lubes is a saturated industry so not much of volume growth: Low ebita per/kg (25-30 rs)
Paints industry facing headwinds and uncertainty (Birla , JSW) - However this is somewhat mitigated by supplying to all three big players - Asian, Berger and Birla . Still not much of growth expected for another 6-8 quarters ebita per/kg (30-40 rs)
Qpacks: Ebidta between lubes and paints , we can conclude it is in similar range (30rs)
FMCG slow down, economic slowdown - Higher Ebita per/kg (60-80rs)
Pharma expected to be around Ebita per kg 150rs
Most of the customers are currently facing headwinds, which I believe are transient in nature, However, currently almost 90% of the business cater to lower ebita per kg so overall avg ebita per kg as company is 36-38 now
Source: Q2 Fy 25 concall
Last year it was 50.8% and it is now 50% paint. Last year lubes was 24.6%, it has now come
down to 21.9%. Food and FMCG 11.85% to 11.77% and Qpack from 12.72% to 16.12%, pharma
is 0.26% this year.
Mistake on my side
- Taking the guidance on the face value from the promoter and loading up.
- Over allocation and averaging down (overpaid), opportunity cost
- I bought this stock due to Marcellus’ addition (This was before VP, couple of years back and I needed them for forensic account fraud detection (still need others help) )
- This business had to utilise around 39000 out of 45000 , so until new capacity come to online which may take few quarters to a couple of years
- This is the business which was facing similar kind of situation in top line earlier too, however bottom line was aided by IML adoption
Here no volume growth

But this may be attributed to end user slowdown still I should have been more prudent
Personal Commentary on Management
I genuinely don’t think Promoter is an ill intensioned person, however so far past 3 years he has been over promising and under achieving or at least missing it barely.
He is quite optimistic guy of future
Still I should have to take 70-80% of what he guides
But has extensive experience in this industry and is tech-savvy in their domain, always pushing for innovation and winning new business
Future Prospects
Apart from the obvious utilising the newly added capacity and recovery of end-user industries , their growth solely hinges on pharma and FMCG adoption, Pharma takes typically 12-18 months after the initial audit to commercial production - Currently, IML is not needed in Pharma companies its for decoration only, however their moat here is that their quality and adoption & development of new products quickly then anyone else in the industry
Example:
In the canisters, ours is single piece canisters whereas the others are
majority of them are in two piece. So, this will give them lot of benefits in not only cost but also
in safety and non-breakage of the canisters during usage. So, these two benefits will go a long
way in being able to penetrate into the market. Already in EV tubes we are seeing that. In
canisters our supplies are being tested in what you call trial runs and hopefully bulk orders will
start coming in from December.
Refer q2Fy25 concall, I would suggest to read the whole transcript which is quite informative on pharma section
So far 100 crore invested in pharma - which may bring 80 -100 crore on pharma segment, from January they may have 15-25 crore top-line (Proabably)
so next financial year they may do somewhere between 25-50crore in pharma (conservative as per me)
Currently, they claim already they have 8-10 pharma companies are on the line and always in constant talks with all the players for the adoption
Managment claims pharma is 5000 crore industry both domestic and export, if they are able to be major player in the pharma then they can be one of best long term wealth creator
Anti thesis:
- Not able to scale up pharma-section and FMCG section
- Not able to win new customers - should be tracked every quarter
- Having some sort of quality issue their molds and packages which spoils the reputation in the pharma section
Sell Rationale
-
This is exactly the type of business should be accumulated through the mutated volume growth and sold near highest capacity utilisation
-
There is no scope for further PE expansion for this type of business at least not in the long term, best time to buy this stock would be around 200 levels (PE expansion) (right after covid )
-
Since their margins are stable and given the accreditve product mix, I think they should be able maintain this current band of PE
-
So unless they find a way to produce/ accommodate for pharma in existing capacities i.e: replacing dud lubes packaging to pharma and FMCG, (low ebita to high ebita products), I should sell it in the next up cycle once they reach the peak utilisation regardless of the overall market condition and look to re-enter again once they fell 25-35%
Disclaimer: Invested with 21% loss currently second highest allocation in my PF. and sell side rationale is for my reminder, reflects my current thought process, views are welcomed.