Dear Readers,

CPL i.e. Control Print Ltd is amongst the few companies with in-house manufacturing of coding and marking solutions in India.

Control Print has partnered with the leading global players technologically while they use their local manufacturing infrastructure for providing the coding and marking products and solutions for the entire range of manufacturing industries which include Automotive, Agro-Chemicals, Metals, FMCG, Pharmaceutical, Food & Beverage, Wire, Cable, & Pipe, Construction Materials, and Commercial Printing.

If we consider the Coding and Marking Industry there are several demand drivers especially increases in regulatory, inventory control, and traceability requirements being the key contributing factors. Overall the industry growth is closely co-related to packaging industry growth and the manufacturing sector growth as a whole. We believe the Indian Coding & Marking industry has reached a level of maturity and acceptance across applications and is dominated value-wise by four players with Control Print Limited being amongst them. It seems as though industries growth will remain consistent for atleast next year or two.

Coming back to CPL, the past 2-3 years were the years of consolidation for the company with the focus being on streamlining sales and manufacturing activities. The performance had gone down drastically during the period and the company was unable to keep control on inventory build up. The company is now done with the establishment of a manufacturing setup and a new product line which shall help bring in operational efficiency as the management will now  be able to focus on the same.

As per our interactions with the management, for FY 12 the company will be launching new models and shall also be working on the manufacturing and operational costs front in order to improve margins.

The effects of the same were already visible in Q1 FY 12 results of the company where both the sales and operating profit margins for the company improved in comparison to last year.

The downside risk to the stock from current levels is very low considering the fact that stock is currenly trading at 0.58 times book value and the performance of the company is only set to improve from here on.

However one should watch out for equity dilution as the Promoters have been alloting warrants to themselves at regular intervals though we don’t see any requirement of fund infusion (the company is holding liquid investments worth 8-10 crores).

Ekansh Mittal [ekansh@katalystwealth.com]