Detailed analysis report on yash pakka
https://drive.google.com/file/d/1Z_gTmiPVQbNRsEYz5-TwrAcid4_3wi66/view?usp=drivesdk
Reply if you like that or if I made any mistake in analysing.
Thank you
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Yash Pakka Q3FY23 earnings call notes.
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3 products
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food packaging materials. multi layered substrates.
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food carry. traditional business.
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food service division, which is the Compostable division.
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Finalizing Global site in Central America. At final stages, about to sign MOUs with 3 sugar mills & 2 at later stage to make it a 400 tpd site.
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Started producing moulded fibre. we have been struggling in this domain in terms of capacity. finalized 2 sites. One is up an going i.e. Bengaluru site. Next site will start in next month catering to east side of the country - Kolkata site. New site in Kolkata under trials: Slated to produce Chuk products in March.
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Increasing raw material prices is the only challenge we see today.
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Project Jagriti
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Going to invest 550 cr.
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existing PM3 to expand by 12-15%.
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Grease proof paper will be base for flexible packaging.
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New Power plant
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Commercialize in next 2 years.
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Compostable:
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should sell 100% of our capacity by April onwards.
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Pricing pressure is there as a lot of capacity has come up.
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Increasing volume, we are not increasing prices.
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Monthly we are doing 2x revenue of same month last year.
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Demand is closer to 1000 tones a month and in March we will be at 300-330 tones a month.
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Our capacity utilization is under 50%.
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Biggest focus is flexible packaging. Patents has been filed for this. Hopefully in next 1-1.5 years see major changes in this segment. It will be used in Biscuits and Chocolate packaging.
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There is an upswing in paper segment. Our products are not generic in nature. Most of our contracts are long term in nature. Our order book is solid.
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Will get NSE listing approval by end of February month.
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Most of our products cater to food packing and food carry.
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Our products go to B2B customers mostly. It will go to converters that are converting to large scale organizations.
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Paper segment cyclicality effects us very less as compared to commodity paper companies.
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we will end up around at 400 cr in sales and 90 cr in PBT in FY23.
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Pulp: Supplying our own Pulp to Indian domestic outsourcing partners. With overseas partners we are using their pulp with our formulation. Can’t transport wet pulp to long distances.
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Mineral pellets: Genesis of Mineral Pellets is that we end up with lime sludge, we were unable to make use of it. What team has done is to blend it with bio plastics. We are the first company in the world to do it and filed patent for it. Bio plastics are more expensive then petroleum based plastics. We mix minerals to it around 50-60%, then the cost is more comparable to petroleum plastics. We are converting a waste into a product.
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USA is 2-2.5 years away because sale there will be from Central America facility and not from India.
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US business will be through a subsidiary of Yash Pakka and fund raise for US business will be in that subsidiary and hopefully not more than 30% equity of subsidiary is diluted.
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We are working closely with Zomato. Relationship with HyperPure is becoming better. Orders have started to flow from Zomato side.
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Close to sign agreement with Central American sugarcane companies, may be within next 1 month.
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Exactly highligted the grey areas - also in recently company has mentioned about NSE listing , that also not yet happened
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recent interview
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The Company had performed decently in FY 2022-23
Revenue growth : 40%
PBT growth : 35%
Operating Margins above 20%
Debtor Days improved from 28 to 22 days.
Inventory days reduced from 447 to 222 days
ROCE 28%
Borrowings at same level as compared to 31.03.2022
If the Company continues its performance like this for 2 to 3 years then there can be a rerating of this stock.
Valuations are at comfortable level.
Disclosure : Invested from levels of 80 and holding period more than 1 year.
5 Likes
While results are good, CHUK continues to bleed with high intensity !
What is very perplexing is that with increasing turnover CHUK even bleeds more !
The demand for CHUK should be high on given green focused world but results of CHUK continue to disappoint which is a mystery!
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I think due to the paper upcycle, results are good. If you zoom out and take an objective look, majority of the revenues and profits are from Paper Pulp which as you all know is a deep cyclical sector.
The main question and hopes ride on the Molded product segment (Chuck). Now despite the impressive 50% ish revenue growth YOY, growth has slowed QoQ. Plus the losses. Lastly, the hard fact is that Chuck is 12-13% of the revenues and it has grown on a small base.
It looks to be seen what happens with the revenue growth and profitability of Chuck. With zomato deal in place and other tractions. upcoming quarters should show some clarity. Until then it remains a “waste ka best” story and a commodity paper stock, which is technically trading above the current industry average PE of 6.5ish.
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They just released an Investor presentation. All is not bad but there seem to be multiple bumps on the road. Pledge process is still in progress. I dont understand how it takes so long to unpledge shares but theek hai.
On the positive front, guatemala deal and zomato tie up will give good traction to Chuck. Let’s see what happens.
If they can manufacture here and export. To USA markets in the future, margins might be healthy and sustainable leading to a good PE re rating. But that is too much in the future. Let’s see what happens in the coming quarters and the new FY.
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To a participant’s question on removal of pledge on shares, company responded that due to transfer of branch officials at SBI, there was some further delay.
I feel these people are making fool of investors in broad daylight.
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Live streaming of Listing / Opening Bell Events of Equity Share Capital of the
Company on National Stock Exchange of India Limited (“NSE”) pursuant to Regulation
30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
https://www.bseindia.com/xml-data/corpfiling/AttachLive/77ed1c3c-8f34-4265-a266-b90fb4fe32e1.pdf
https://www.bseindia.com/xml-data/corpfiling/AttachLive/77ed1c3c-8f34-4265-a266-b90fb4fe32e1.pdf
Finally it’s happening!
Expect the pledge thing to get sorted at the.max by August end.
In investor meet happened yesterday they said. It expected to happen within a month.
The management seems confident.
Infact I find ved Krishna to be brutally honest.
Camera are switched On during zoom meets, he even said we failed to deliver desired product to customer.
In their plants in Ayodhya, they have large display screens. Which mention daily production i.e number of plates, profits being generated by particular product. Even the workers know what impact they are making.
There are appox 450 workers in their plant in Ayodhya.
I personally find management to be very transparent
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Any idea why this is priced more in terms of PE or cashflows compared to JK Paper or Satia industries?
Because they produced specialised value added products
I feel company has all the right intentions with molded products business buteven after 5 yrs, product quality remains sub-par. Major reason behind low offtake from customers so far.
I’ve been invested in Yash paper for 3-4 yrs, purely based on hopes of exponential growth from CHUK.
Was quite happy to see their products in few restaurant joints in Bangalore. But had a disappointing experience. The plate became soggy with Sambhar in under 15 minutes! How will the product fare with Zomato, where it should atleast have moisture resistance capacity for atleast 90 minutes.
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Carry container must have a different grade Vs the instant consumption.
Ofcourse more it gets diluted(water)… lesser time the plate can survive…
There must be a deep thought given before manufacturing the product and at the same time acceptability by these big chains , Haldiram , chai point etc.
What I am trying to say is as a end user , Yes I would want a very high grade in terms of no leakage…no soggy but then such things were easily available in plastics!
Which is why the promoter Ved Krishna often says… Plastics are great product!
What I Feel is that their product must be superior to their competitors… thats why they are acceptable at such big chains where they are vary of their reputation.
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Pakka is trying to manufacture bio-degradable Maggi wrappers / chocolate wrappers / shampoo wrappers / etc other bio degradable packaging.
In their analyst meet at Mumbai they even confirmed that Chocolate wrapper is in advance stages of beta testing/launch.
To one of the question that if there is demand for such thing…Ved replied that they went to Unilever for shampoo wrappers , their first question was Can you manufacture it on large scale?
Unilever needs 16000 tonnes of shampoo wrappers annually… Thats the scale they operate.
Ved also mentioned that they are in process of getting patents…
Imagine even one revolutionary product kicks in and you will see the magic on PnL.
Other thing… they are expanding in Guatemala…
Manufacture in Guatemala and sell in America!! margins margins margins…
They are diluting the stake in Guatemala subsidiary… That subsidiary will be valued around 300-400 million dollars…
They are diluting stakes and infusing technology for manufacturing in return they are getting 100-200 million dollars.(assume 50% dilution)
Just calculate if subsidiary is valued so much atleast it should also show in parent companies valuation.
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Any link for latest concal …
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Why the Company is not able to ramp up capacity utilisation for its CHUK product is really baffling… Company admits that there is good demand also but still for the last several years the utilisation is still around 50% which is really pathetic…
Disclosure: Invested
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