A Detailed Equity Research Report on Pakka LImited

Summary

A Detailed Equity Research Report on Pakka Limited with a tagline Packaging with a Soul.

PAKKA  LIMITED

Recommendation:  Buy

CMP:  Rs. 217/-                             TARGET: Rs. 328/-

SENSEX:  66079/-                                NIFTY:   19689/-

KEY STOCK STATISTICS:

Market Capitalization (crs):  850/-

Book Value: Rs. 57.80/-

Face Value: Rs.10 /-

52 week High/Low:  197/88

P/E Ratio: 16.50

P/BV: 3.80/-

Dividend Yield: 1.11/-

Company Background:

ü  Incorporated in 1981, Yash Pakka Limited, is engaged in the business of specialty packaging products manufacturing and trading in specialty papers and Moulded (Tableware) products. 

ü  The Company’s product offerings comprise Packaging materials and solutions - low grammage MG industrial bleached and unbleached paper grades ranging between 30-80 GSM and specialised grades for wrapping, packaging and interleaving for food and pharmaceutical uses, etc.

ü  Compostable moulded products made from bagasse, under brand ‘Chuk’, to cater to the food industry - compostable disposables for food services and egg trays for food transportation and storage.

ü  The Company commenced trading activities for creating a platform for upcoming glassine and grease-proof paper grades and launched new plate designs under Chuk for meeting the diverse food portion preferences of customers.

SHAREHOLDING PATTERN(%): 

Source: Company, KFO Research

RETURNS(%):

Source: Company, KFO Research

INDUSTRY OUTLOOK:

As part of the global bio-economy, Yash Pakka is a leading provider of renewable and regenerative products in packaging and paper.

Sustainability and responsible business practices are deeply embedded in our strategy, and our low-carbon, fiber-based products are renewable and recyclable.

They offer solutions to climate change and promote positive impacts on the environment, thus enabling our customers to become more eco-friendly.

We have a sharp and singular focus on the food market through utilising our inherent strengths in sugarcane pulping and utilisation of innovation to build superior quality offerings, thus enabling a shift towards sustainability at scale.

We employ 450+ people and our shares are listed on the Bombay and National stock exchanges.

FUTURE OUTLOOK:

Although uncertainties remain as new challenges continue to surface, including the Russia-Ukraine war, geopolitical issues such as tension between China and the US, the year carried many positives. Externally, India is much better placed to recover from the COVID shock and achieve high GDP growth rates which, together with the government’s focus on Atmanirbhar Bharat, Make in India, PLI scheme, etc., bode well for the future of the industry.

Source: Company, KFO Research

BUSINESS HIGHLIGHT & ANALYSIS:

PROS

• Company is expected to give good quarter
• Company has delivered good profit growth of 32.8% CAGR over last 5 years
• Company has been maintaining a healthy dividend payout of 19.1%

CONS

• Promoters have pledged 85.0% of their holding.

Growth Drivers:

ü  The Company is focusing on the commercial launch of two products during FY22 - Spill-proof containers and meal trays and High-strength bags.

ü  As part of the innovation agenda, the Company is focusing on various domains and products to be introduced in FY22, like - stronger and more effective solutions for grocery bags, compostable flexible packaging solutions for specific applications, delivery solutions for moulded products and value-added products from its by-product streams.

ü  The Company is planning expansion of capacity in moulded products business by about 25% to 14 TPD through the installation of 8 new lines and growth in its integrated pulp mill capacity by about a fifth to 160-TPD to ensure inhouse pulp production for meeting the increased paper and moulded products capacities.

ü  The Company has planned 50 TPD Pulp Drying, 50 TPD Franchised Moulded production and 100 TPD Flexi pack base with an investment of Rs 200 Cr by FY23.
It is also planning to establish an Innovation hub in Bangalore and first moulded products franchise in FY22.

VALUATIONS:

ü  On the basis of EPS Multiple Method, we are recommending ‘Buy’ for the stock. Since the stock offers good opportunity, we initiate a ‘BUY’ signal on the stock with 12-month price target of Rs 238/- share an upside of 9.68 % from current levels.

PEER COMPARISON:

Source: www.sharescart.com 

BALANCE SHEET (RS. IN CRS):

CASHFLOW SHEET (RS. IN CRS)

PROFIT AND LOSS ACCOUNT (RS. IN CRS):

Source: www.sharescart.com