Hold Paper Products - Q1CY13 Result Update - Way2Wealth

Paper Products Ltd. reported its Q1CY13 results recently. Net sales rose by 13.2% and operating margins remaining stable.

- Net sales increased by13. 2 % YOY to Rs. 235.2 crs. in Q1. Volumes growth for the quarter was at 9.5% YOY & 7.8% QOQ. On a consolidated basis (including its newly acquired Webtech Lables Pvt. Ltd.) grew by 12% sequentially Rs. 254.7 crs. Consolidated topline stood at Rs. 254.7 crs. The topline growth was supported by healthy demand from clients as well as the phased expansion coming on stream. PPL's topline growth strategy is two pronged - growing business from existing clients as while as adding new clients. The company is witnessing strong demand growth for packaging coming in from beverages, food processing & personal care manufacturers. Operating profit was up from Rs. 24 crs. to Rs. 27.3 crs.

- EBIDTA margins were flat YOY at 11.6%. Raw material prices continued to move up. RM cost was up by 19% vs. a 13% topline growth in implying inability to pass on full cost escalation. Margins were maintained as new capacities supported topline growth and kicking in of operating leverage. On a consolidated basis operating profit was at Rs. 31.4 crs. Margins for the subsidiary improve by 100 bps QOQ to 20.8%. Consolidated OPMs were at 12.3%.

- Net profit for the quarter was up by 16.8% YOY at Rs. 15.1crs. in Q1. PAT margins expanded by 50 bps YOY to 6.4%. Consolidated PAT after minority interest was at Rs. 15.6 crs in Q1 with margins at 6.1%.

Valuation:

We believe PPL's business model provides a steady growth & business visibility for investment in such times. At the CMP of Rs. 62.8/- the stock trades at 7.2x its estimated EPS of Rs. 8.8 for CY13E. With overall GDP growth for the economy slowing down, we believe PPL to be a good value buy in such times and hence recommend investors to HOLD the stock. A high cash generating business will enable the company to fund its future growth plans.

Source : Equity Bulls

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