Huhtamaki PPL -- A Good Buy.

About Huhtamaki PPL

Huhtamaki PPL offers a wide portfolio of packaging solutions that include Flexible Packaging,Labelling Technologies and Specialised Cartons. And all this supported by the Packaging Machine Division to provide the customer with Total packaging solutions. With Three state of the art, fully integrated manufacturing facilities at Thane, Silvassa and Hyderabad; highly skilled and experienced staff, PPL is capable of working with the customer from product inception to the super market and with complete control and confidentiality.

Huhtamaki PPL is in the Packaging sector. The current market capitalisation stands at Rs 1,345.17 crore.The company has reported a consolidated sales of Rs 306.63 crore and a Net Profit of Rs 19.25 crore for the quarter ended Jun 2014.

The company management includes Suresh Gupta - Chairman, A Venkatrangan - Executive Director, Arunkumar Gandhi - Director, P V Narayanan - Director, Jukka Moisio - Director, R K Dhir - Director, S K Palekar - Director, Nripjit Singh Chawla - Director, Shashank Sinha - Non Executive Director.

It is listed on the BSE with a BSE Code of 509820 and the NSE with an NSE Code of PAPERPROD.

Its Registered office is at Unit No-12A-06, 13th Floor, Parinee Crescenzo, Plot No C-38/C-39,,G-Block, Behind MCA, Mumbai,Maharashtra - 400051.

Their Registrars are Sharepro Services (India) Pvt.Ltd.

Why Huhtamaki PPL 

HPPL is a pioneer and the market leader in flexible packaging in India and has a market share of 60% in premium flexible packaging business and about 9% overall in the organized market, which is of about $2billion by size. It has its manufacturing facilities at Thane, Silvassa, Hyderabad and Rudrapur. The current installed capacity of HPPL for paper & films in 52,000 MT and company’s capacity utilization rate is 75% to 80%. HPPL successfully meets the packaging needs of almost entire range of FMCG segments. Huhtamaki PPL Client list that includes Levers, Nestle, Cadbury, Britannia, Glaxo Smithkline, Coca Cola, Perfetti, Dabur, Marico and P&G. HPPL thus enjoys Competittive advantage due to use of its superior technology & capability. 

Huhtamaki PPL has the unique privilege of being backed by both of these super-savvy investors. While Dolly Khanna holds 949,887 shares (she is the single largest individual shareholder), HDFC Mutual Fund holds 33,30,525 shares.

Now, to our good fortune, Mehernosh Panthaki of HDFC Sec has put the spotlight on Huhtamaki PPL (HPPL). In a crisp analysis, Mehernosh Panthaki has explained that a lot of great things are going on at HPPL.

Firstly, Huhtamaki’s consolidated net sales are expected to grow by 41.8% on CAGR basis over CY13-16 on account of the consolidation of PPIL, capacity expansion & improving demand for flexible packaging (due to revival in FMCG industry). The capacity expansion, NASP initiatives would enable HPPL to improve its volume growth and boost its revenues & profits.

Secondly, the acquisition of PPIL (Positive Packaging) would almost double HPPL’s turnover and is likely to be EPS accretive. It would enable HPPL gain further bargaining power with its customers, to extend its customer network and would also help synergies in sourcing of inputs and up-gradation in technology.

Thirdly, the structure of the deal seems to be positive for the minority shareholders of HPPL and that the acquisition reflects the parent company’s increasing interest in Indian operations.

Fourthly, HPPL could be a delisting candidate given that Huhtamaki has hiked its holding in HPPL since Feb 2014 from 60.8% to 68.8% (till date) and changed the name of the company from Paper Products to Huhtamaki PPL. The fact that Huhtamaki has complete control over almost all its other subsidiaries point towards HPPL being a probable candidate for de-listing over the medium to long term, Mehernosh adds.

At the end, Mehernosh advises a buy on the basis that HPPL is capable of trading at 13xCY16E EPS, which gives a price target of Rs. 245. Given, the CMP is Rs. 184, we are talking about a 30% upside.

Of course, if Dolly Khanna’s magic wand gets to work, then only the sky is the target for Huhtamaki PPL!!