Recommendation From Containers & Packaging Sectors
This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon.
Innovative Tech Pack
PACKING GOOD GROWTH PROSPECTS
HERE IS WHY
Promising sector outlook
Attractive valuations
Expansion in southern India
Innovative Tech Pack Limited is engaged in the business of manufacturing and reselling of plastic bottles, jars and preforms and their caps. ITP’s range of products include packaging for oils, liquor, medicinal syrups, sauces, insect repellents, honey, energy powders, candies, biscuits, dairy-based beverages, etc.
The company has three plants in Rudrapur, Uttaranchal; Baddi, Himachal Pradesh; and Guwahati, Assam. This allows the company a strong base across northern and eastern India for distribution and regional sales support. The company is now looking to tap the potential in southern India with an upcoming manufacturing facility on the eastern coast. This will also help the company to be more cost-competitive in terms of freight and serving the customers.
Last Year, ITP acquired Juniper Polymer Industries LLP having its manufacturing facility at Vadodara, Gujarat. The acquired firm is mainly engaged in the manufacture of rigid bulk packaging for plastic crates, buckets, helmets, furniture, etc and has been dealing in the field of material handling products supplying to one of the largest companies in this segment.
ITP has a strong client base, including all major FMCG majors like HUL, Godrej, Pepsi, Patanjali, ITC, Emami, Dabur, Coca Cola, etc. There is good topline visibility for the company. In FY17, ITP bagged a 5-year contract from Dabur for the supply of PET for Dabur’s plants in India, Bangladesh and Nepal; and a major contract from Bisleri to provide caps for its packaged water and carbonated beverage bottles.
On the financial front, the net sales of the company increased 17.90 per cent to Rs32.87 crore in the third quarter of FY18, as against Rs27.88 crore in the same quarter of the previous year. The company’s PBDT increased 7.3 per cent to Rs4.27 crore in the third quarter of FY18 on a yearly basis. The company’s net profit declined 7.22 per cent in the December quarter to Rs1.8 crore as against Rs1.94 crore in the same period last year.
On an annual basis, the company’s net sales increased 13.11 per cent to Rs102.93 crore in FY17 on a year-on-year basis. The company’s PBDT increased 82.84 per cent to Rs19.18 crore in FY17 as against Rs10.49 crore in the previous fiscal. The net profit of the company soared tremendously by 166.86 per cent to Rs9.1 crore in FY17 as against Rs3.41 crore in the previous fiscal.
On the valuation front, the company is trading at attractive price-to-earnings ratio (PE) of 15.93x as against its peer VIP Industries (45.25x) and Essel Propack (25.03x). The company’s return on equity (RoE) and return on capital employed (RoCE) stood at 24.44 per cent and 25.10 per cent, respectively. The company has a debt-to-equity ratio of 1.1x and has a price-to-book value of 3.7x. The sector has positive and promising outlook, whereas the company has strong business visibility for at least next 5 to 7 years. We recommend our reader-investors to BUY the stock.
