Yash Pakka - (Previously Yash Paper) - Rising from ash

Stock Opportunities Untested - but worth a good look
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Yash Papers is a global provider of innovative consumer, industrial and protective packaging solutions.

Business Operations & Plant details:
It produces paper products such as pulp, molded products, paper and bags. which finds applications in FMCG ,Frozen and refrigerated food, QSR (quick service restaurant) ,Confection , Beverages , Personal care , Medical/ pharmaceutical and Health and beauty industries.

Located in Faizabad, Uttar Pradesh, Yash currently with paper production capacity is 39,100 MTPA with pulp mill capacity of 130 TPD. Yash is a self-sustained and scalable business model two power plants have an output of 2.5 MW and 6 MW and both have extraction-cum-condensing turbines and rice husk-based FBC boilers.

Clients:

Financials:


Net profit jumped from 1.2cr(FY 16- 9months) to 4 cr (2017 9months) , even after paying 73 lakhs for CDR package.

Key Growth Driver & Recent Updates:

The foundations of India’s largest bagasse-based tableware unit within existing complex in Faizabad. The 11.5-TPD capacity is expected to be ope-rationalized by 1st April, 2017 and will have the flexibility to be progressively scaled-up to its maximum capacity 23-TPD, which will be operational by 1st April, 2019.
At full capacity operations, the Compostable tableware mfg unit has a revenue potential of ` 130 crore per annum with late double-digit EBIDTA margins potential.

The sheer potential of the Compostable tableware market (the projected size of the disposable packaging food products sector is expected to grow to 3,800 crore by 2020) is big boost and being the first mover will have advantages.
Company products will be marketed under the ‘Chuk!’ brand across India and in the mature markets of the US, Europe and Australia.

  1. Company paid 73 lakhs to banks for exiting CDR (Corporate Debt Restructuring) package in Q3.
  2. Company recorded highest production of 814MT in January from UNIT 2, which should reflect in current quarter results.
  3. Trial run of Poster Release Base (PRB) Paper completed recently.
  4. Management focus on team work in guiding the profitability is one great quality in the company.

Risk:
Promoter had pledged his shares recently is one of the associated risk here.
D/E ratio of 1 is another risk here.

Valuation:
Currently company market capitalization stands @98 crores versus annual sales of 180 crores with stock price trading @31rs.

Investment disclosure:
Starting with tracking position @17rs, subsequently added further at 24 and recently @32 as the things are getting clear by turn around in financials.

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Pulp mill capacity is 130 tpd = 47,450 mtpa. Does this mean that company is selling pulp also? Who buys pulp and what are the margins in this business?

  • Is this power capacity of 8.5 mw sufficient for the company or do they buy power from power corporation?

  • What is extraction-cum-condensing turbine? Does this offer any competitive advantage to the company?

  • What are FBC boiler? Does rick-husk based boiler offer any advantage?

What is the meaning of this sentence?

Grow to 3,800 by 2020, from how much at present?[quote=“Chaitu_1614, post:1, topic:9558”]
being the first mover will have advantages.
[/quote]

No company at present manufacture bagasse-based compostable tableware.

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@Chaitu_1614 Promoters are also allocating warrants to themselves frequently. Do you have any details on this ?

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Their business look interesting. Decent cash flow from operating activity. High debt, but long term borrowings are being reduced consistently. Worth a look.

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Some of the pulp is used by company itself for product manufacturing and the rest is sold outside. The margins are certainly very high in this segment. This conclusion i made from management talk in AR as follows.
“We intend to focus on pulp-based products and will look to provide bagasse pulp for manufacturing tableware grades and also producing egg tray from our sludge for the growing poultry market. With a view to grow our margins, we will focus more on specialised bagasse pulp, which is creating quite a bit of interest in the market”.

Power plant 6 MW is sufficient to meet out the current requirement. Excess 2.5 MW is for power back as well as it will be used in future for tableware project requirement.

Fully condensing power plant generates only electricity while the process plants needs steam as well. Both the purposes are solved by single source using Extraction-cum-condensing turbine.

Fluidized bed combustion Boiler or FBC boiler gives advantage of maximum burning of each fuel particles above conventional Boiler.
Fuel for rice husk boiler are agro based which help to reduce carbon emission.

No matured company with any kind of established brand promotion exist in this business so far.

Internally-produced bagasse as well as the availability of power and other utilities will ensure raw material security and enable yash to sustain production with high levels of cost predictability, thereby strengthening market-place competitive advantage. Once production starts, management intend to emerge yash as the largest bagasse-based disposable tableware manufacturers in the country.

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Most of the indian based company management will do this during turn around phase. This is positive step in my view, particularly for small companies equity dilution is necessary to come out of troubled waters i.e from sick state.

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Why would company go for expansion if it is unable to further process its own pulp into final product like tableware, paper, egg trays etc. and forced to sell it raw?

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Simple…As the company is having abundant raw material hence company is going for expansion through tableware plant. Currently considering high margins this is sold to outsiders rather than inventory pileup, once the tableware plant becomes operational they can make use of the same.

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  1. Do you have some basis for your assumption that current expansion is for consumption of excess pulp?

  1. Can you quote source for your information that 6MW is sufficient to meet the current requirement?

  2. I have not seen any plan for marketing the brand Chuck they are creating for tableware?

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As part of my investment decision gathered all the above info directly from company only.

Chuk Brand promotion refer below url…
http://switch2chuk.com/

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despite of having decent result Yash is being hammered.

http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/55190e96-8963-4b5f-836c-ec7e5a1b9606.pdf

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http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/D4E7DF75_75B3_416B_8537_C0954AEDF8B9_125630.pdf

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I was looking for the date of completion for 1st phase of expansion and 2nd phase of expansion on BSE and Googled for news. Can someone please give me the link where I can read this! Thank you.

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Hi All,

I glanced through this co. a bit. The compostable tableware product Chuk! looks like a commodity at best, a lot of small players already in the game. Ecoware is the pioneer of this product in India, it did lots of PR to gain mileage but doesn’t seems to have helped much since sales were in 7-8cr range for fy16 even after 4-5 years in operations. Ecoware’s processing capacity is 2.6 tpd with investment of roughly 20cr. Yash has put up a 11.5 tpd capacity at 55cr CAPEX which it plans to double going forward, assuming at a small CAPEX.

Retail consumption of eco-friendly disposable tableware in India will probably happen at a very slow rate with many players by the time it becomes mainstream, if at all. B2B, in form of huge QSR industry in India (big and small chains both) could present good potential for such product category. But again, expect many players in industry in future. Can Yash make inroads in this market given it already manufactures food-grade paper and claims to be a vendor to big QSR players in India. Exports could be a good opportunity again as some countries are banning use of plastic big time.

Debt seems to be a concern, no significant reduction has happened even with growth in business.

Looking forward to views/insights from folks invested/tracking it.

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Yash posted very good results
Observations:
Top Line: Existing Plant is operating now @95% level capacity hence not much improvement in top line @47cr.
Net Profit: Increased from 1.2cr to 2.9cr , 2.5x improvement
Employee expenses moved up 30% and paid tax arrears of 65 lakhs as well in the current quarter.

Question needs to be answered, when will the tableware plant will be operational Q2 or Q3? this is much required for top line growth.

anybody attending AGM?

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One of my Friend attended the AGM today , the tableware plant Got operational in last week of july 2017 , and after various trials and testings the first lots of finished goods have been dispatched for Delhi and Western markets.
As company have their own pulp manufacturing and power plants so they are backward integrated which will keep the cost low and give the competitive edge to them .
their pricing is cheaper than the competitors like Ecoware by 15-20% .
The company have appointed 10 distributors in india ,one in singapore and hired a sales consultant for USA and European markets.
The export market will be the major focus for the company as they will get much better pricing and the acceptance and regulation there is in favor of Ecofriendly Packaging products.
presently company has launched 12 products which will be extended soon .
they have a latest technology plant where the capacity can be doubled with just 10% to 15% of the plant cost.
Management claims to do a turnover of 35-40 crore from this plant with 50-60% utilization in fy 18 with 22-25% Ebita margin.
the setup seems interesting.
http://www.chuk.in/distributors.php
disclosure - Invested from lower levels.

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The company is targeting both B2B and B2C consumers , with their exiting relationship where the company provide paper bags and sachets for McDonalds, Barista, KFC, Cafe Coffee Day, Yum, Pizza Hut, Tata, LIC and others getting a foothold for Compostable tableware prodcuts doesnt looks difficult.

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attended AGM…will update abt all the new positive development

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During the month of August, 2017, Unit - 3 has recorded highest ever monthly production of paper.
Also recorded highest ever monthly production in Unit-1, Unit-2 and Unit-3 during the August, 2017.
And highest ever monthly production and sales in August, 2017

Wah, Kya baat !

http://www.bseindia.com/xml-data/corpfiling/AttachLive/6b0bf924-802b-4533-9eb8-e0bb50797867.pdf

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Awaiting your AGM update please. ASAP.