Tinplate - Blasting through volumes, cyclically

Hey everyone,
I feel like this Tata Steel subsidiary needs to be studied, separately.
(Fetched info from Screener.in, researched a bit about tinplate market)

ABOUT

Tinplate Company of India Limited (TCIL) is a producer of tin-coated and tin-free steel sheets in India. It is a subsidiary of Tata Steel Limited. [2]

KEY POINTS

Products
The tinplate manufactured by the co is used for packaging of edible oil, paints & chemicals, processed foods, battery etc. It has categorised its products into:
Electrolytic Tinplate (ETP), Double Reduced Tinplate, Soft Double Reduced Electrolytic Tinplate.
Tin Free Steel (TFS)/Electrolytic Chromium Coated Steel (ECCS) - Single and Double Reduced Tin Free Steel
Value-added/downstream products - Lacquered/Coated ETP, Printed ETP, PAXEL cans etc. [3]

Geographical Split
Exports: 14% in FY21 vs 24% in FY18
Domestic: 86% in FY21 vs 76% in FY18[4][5]

Market Share
The company is the largest producer of tinplate in India. It has 39% of the domestic tinplate market share and 52% of the prime tinplate market share. [6]

Manufacturing Capacity
The Co is the largest manufacturer of tinplate in India with a capacity to produce 0.38 MTPA at its plant in Jamshedpur, Jharkhand. TCIL had doubled its tinplate manufacturing capacity to 0.38 MTPA in 2008-09 and had also implemented a 0.2 MTPA cold rolling mill project in December 2011. [7]
Currently, the tinplate capacity is being expanded by 300,000 tonnes at a capital expenditure of Rs 2,254 crore. After the completion of a three-year project starting this FY23, TCIL’s capacity in Jamshedpur will go up to 0.68 MTPA from the present level of 0.38 MTPA.
Tata Steel has set a target of 1 million tonnes tinplate capacity by 2030. [8]

Strong Parentage
The Co is supported by the strong parentage of Tata Steel Ltd (TSL) along with presence of top executives of TSL on the board of TCIL. Moreover, the company has access to the research base, technology and global best practices of Tata Steel Europe Limited (erstwhile Corus), a leading tinplate producer in Europe. [9]
Also, the promoter holding is at the max allowed, 75%

Product Innovation
The company developed India’s first branded 15 kg edible oil can, PAXEL, which has made way for opportunities to directly engage with edible oils brands as Service and Solution Partners (SSPs). As pioneers of PAXEL, the firm offers several benefits, including on-time deliveries, maintaining product stocks for peak demand periods and servicing at competitive prices. [10]

Downstream Products
The Co has launched several new stock keeping units under its downstream products division through extensive trials of printed and lacquered products at its Solution Centre. It has also been able to onboard new customers. [11]

Focus
The Co is working with regulatory bodies to develop packaging standards and increase demand of prime tinplate in the country. The Co is advocating the implementation of Steel & Steel Products’ Quality Control Order which will significantly reduce imports of cheaper quality tinplate. [12]

Growth triggers

  • Demand for tinplate and tin-free steel from the domestic industry itself is about 700,000 tonnes annually. Only two domestic companies manufacture the material(TCIL and JSW Steel).
  • Recent Bureau of India Standards(BIS) order mandates use of certified tinplate and tin-free steel for cans, easy-open ends and peel-off ends for packaging. [14]. TCIL has been an advocate of high-quality tinplate and this may also help them grab market share from unorganized sector.
  • India imports 35-40% of its requirement of tinplate, much of it of low quality finds its way into food packaging. Nearly 70% of tinplates used in India are for packing foods and 80% of imports by India are non-prime and low quality. Again, TCIL manufactures only high-grade tinplate.[15]
  • China announced tax rebate cancellation on tinplate.[16] This may lead to stronger positioning of this Indian company.
  • According to reports, 57% of the market’s growth will originate from APAC(Asia Pacific) region during the forecast period. China and India are the key markets for tinplate in APAC. [17] TCIL is already well-positioned in the domestic markets.

Risks

  1. The biggest risk here is cyclicality due to raw material prices(Steel mostly). The material costs as a % of expenses keep fluctuating, making the OPM range from 5% to 20%.
  2. The government of India had sought to prevent the use of low-grade tinplate in food cans through the Steel and Steel Product Quality Control Order (SSPQCO) dated 17 July 2020. The implementation has, however, been deferred twice.[18] This may slow down the expected growth.

Market outlook


Source:Technavio

Good articles/summaries I found:

Views may be biased/personal. Also, this is my first topic, feel free to add to or correct my points. I know this lacks much of promoter info and concalls
Disc- Invested ~6% allocation, looking to add more(~370 avg.)

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The title is so because I noticed in P&L that every new cycle starts with a higher net profit, this time a much higher one.
2012-2014: 28cr
2015-2016 is lumpy
2017-2018: 41cr
2019-Present 2022: 92cr

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Do you happen to know where the tin itself is being sourced? Local mines or imported? That would add colour to pricing strengths as compared to imports of tin for plating.

Hi, I guess I forgot to mention the main part about what tinplate is.
It’s a steel sheet, coated with tin with the help of electrolysis. Tin accounts for >1% in this composition, where steel is dipped in tin. So steel is the main raw material
Check this article, it says “In case of electrolytically coated tinplates, the tinplates are produced in coil form. The tin coating mass varies from 0.5 gsm to 34 gsm, representing less than 1 % of the steel weight”(gsm=Grams per sq. metre)

Since this is a Tata Steel subsidiary, I found out that Tata Steel does indeed import a lot of coal(~70% of the 8.3+4= 12.3 Mn Tonnes supply). 70% of steel produced uses coal. So yes, the colour for pricing strength here is red for the company, it is a risk. I’ll add it.


Source: Tata Steel supply chain website

However, if steel is the raw material and steel prices are cooling off(like now), I believe it would be beneficial to the company as the margins may get better. Correct me if I’m wrong.
To prove this, I noticed that when steel futures prices hit lows, material cost as a % of expenses decreases, like in 2016-2017. With the increase in those prices, material cost % also increased significantly.


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  1. Very interesting that their manufacturing costs has come down from 35% to 4% and employee cost has come down from a peak of 15% to 3% . Any details on how they have done this.

  2. Any thoughts on the market size and how the market size has changed over the years

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Hi,

  1. In 2013-17, the co. focussed on consolidating production, enhancing capacity utilisation and improving the health of existing mills(here). I think the operating leverage kicked in. The same MAY happen after the 300,000 tonnes Capex goes live this FY and contributes to the production.
  2. Global Tinplate Packaging Market is estimated to be US$ 201.06 billion by 2030 with a CAGR of 4.1% during the forecast period.
    Tinplate Packaging to Witness Heightened Demand, on Back of Suitable Replacements, Market to Register CAGR of 4.2%
    These may help for the future but I couldn’t find past data, everything is behind a paywall :slight_smile: Hoping somebody else can help.

Notes from FY22 AR:

// TCIL pioneered Tinplate manufacturing in India since the 1920s and completed 100 years on January 20, 2020. Manufacturing facility at Jamshedpur with an installed capacity of 3,79,000 MTPA per annum. In FY 2020-21 the total apparent domestic consumption of tinplate in India was around 630 KT. ~47% of this demand was serviced by TCIL, while domestic competition serviced ~31% and ~22% was met through imports. Company sells ~ 80% of volumes in the domestic market and the rest is exported. The Company exported 92KT (~24%) of its production. Exports were 33% higher as compared to the previous year (69 KT) achieving the highest ever exports in a year. The tinplate demand is expected to increase by 4-6% and reach around 770KT-800KT by 2024 due to its green credentials. However, Tinplate continues to face challenges from other packaging mediums in terms of design, consumer convenience & cost.

// Sole supplier of Tin free steel in India à Could serve the rise in demand for crowns as beer demand picks up.

// Operating at close to 100% capacity → Plan to increase our capacity by additional 3,00,000 MTPA at our existing location in the next few years → To meet the growing market requirements both in terms of volume and enhanced product range. → Est. capital expenditure of ~ ₹ 2,254 crore, plan to use internal accruals and debt

// During FY 2021-22, demand for Tinplate in domestic market increased by 4% whereas imports reduced by 33% compared to previous financial year owing to Steel & Steel Products’ Quality Control Order (SSPQCO).

// Recent imposition of a 15% tax on exports from May 22, 2022, by the Government of India, will significantly impact price conditions in India given the fact that India is now a net exporter of tinplate. In addition, imports are expected to increase in H2 FY 2022-23 as more Bureau of Indian Standards (BIS) certifications are awarded to overseas suppliers.

// Over the long-term, however, we continue to be bullish on future demand in our primary market. → per capital consumption of Tinplate in India at 0.55 kg/ capita is substantially lower when compared with the other countries like China (4.75 kg/ capita), Thailand (7.25 kg/ capita) and Malaysia (9 kg/ capita).

// The Company sustained its efforts to move closer to Edible Oil brand owners by way of supplying the superior quality branded 15kg/lit oil can – PAXEL, through its Service &Solution Partners (‘SSPs’) and further improved its footprint in competitively intense Western markets with the supply of PAXEL manufactured in Nagpur. PAXEL sales reached highest ever levels of ~ 117 lakh cans (76 lakh cans in FY2020-21 vs 89 lakh cans in FY 2019-20) despite lower demand for bulk packs (15 kg/lit) in certain months due to lower Out-of-Home (OOH) consumption which includes hotels, restaurants, caterers, canteens, bakeries, roadside dhabas and fast-food joints.

// Reduction in cheaper non-prime tinplate imports by 33% (138 KT in FY 2021-22 vs 205 KT in FY 2020-21) opened prospects for your Company to consolidate its market share and improve margins, through significant growth in tinplate sales to Paints, Aerosol and Processed food end use.

Product Details:

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