Paper Products Ltd. - Zen Money

Company Profile: Paper Products Ltd (PPL), part of the Finland based Huhtamaki Packaging, is a leading manufacturer of flexible packaging materials in India. Company's wide range of packaging solutions include flexible packaging, labeling technologies, specialized cartons, packaging machines, specialized pouches, holographic options and various other such products. PPL mainly caters to the premium segment and meets the packaging needs of almost the entire range of FMCG products. PPL has its International Business Division (IBD) set up as a separate business group servicing large Multinational accounts across 4 continents and over 50 customers worldwide. Its New capacity at Rudrapur came on stream in the first quarter of CY2012. PPL has 51% share in the equity of Webtech Labels Pvt. Ltd, a leader in the Indian Pressure Sensitive Label sector.

Strengths:

- PPL is one of the leading player in flexible packaging with a strong market share in Biscuits, confectionary and labels.

- PPL is a preferred supplier to all major brands like HUL, Britannia, Cadbury, Dabur etc., due to it's superior quality and innovative packaging solutions at competitive prices.

- PPL has low debt on books and has Dividend Pay out ratio policy of 40%. It doesn't pay any royalty to the parent company.

Concerns:

- Limited pricing power due to strong bargaining power of buyers and highly fragmented nature of the industry.

- Rising cost of inputs; mainly power and raw materials like specialty resins, solvents, pigments, adhesives etc., and excess capacity in the flexible packaging industry can affect the margins.

Outlook: Packaging industry is facing margin pressure because of slow growth in the economy and increase in input costs (mainly power costs). However, recent move by the Government to allow FDI into multi brand retail along with growth in consumer spend, growing rural demand and demand for quality products are expected to boost the demand for flexible packaging. PPL through its its strong market share with wide product portfolio is well placed to benefit from the growth in the retail and FMCG space. Consistent growth, strong balance sheet with low debt, recent acquisition of Wabtec labels are expected to boost the topline and bottom-line in the coming quarters.

Source : Equity Bulls

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