We have released 6th Jun’20 – Mar’20 earnings update on Kanpur Plastipack. The same has been produced below. For other updates, please refer the following link – https://katalystwealth.com/category/latest-updates/
Date: 6th Jun’20
Kanpur Plastipack (BSE – 507779) – Nov’18 Alpha stock
CMP – 50.55 (BSE)
Rating – Positive – 4% weightage; this is not an investment advice (refer rating interpretation)
Kanpur Plastipack recently announced its Q4 FY 20 results and considering various factors at play, the company has reported decent performance.
As per the details shared by the company, in FY 20, in volume terms the production increased by 15%, export sales increased by 18% and domestic sales increased by 16%.
For Q4 FY 20 the company has reported 13% YOY growth in sales, ~10% growth in gross profits and 180% growth in EBITDA. However, the PBT is almost zero on account of currency related losses.
Some important updates with respect to Covid-19:
- Considering essential nature of the business operations, the company could resume partial operations from 3rd Apr’20.
- The company could achieve 50% capacity utilization in the month of Apr’20 and 70% in May’20. Also, the manpower is back to normal numbers for the company and therefore they don’t foresee any hurdle in future operations.
- Despite loss of sales in the Mar’20 quarter, the company paid full salaries; however, since then it has introduced some cost cutting measures including salary cuts and prudent inventory management.
- With the dramatic fall in crude prices and consequent decline in raw material prices, the company has built-up low-cost inventory and expects improved performance on the back of the same.
- The company hasn’t availed moratorium on any of its payments.
- Further, as per the management the export order book has remained robust and the demand has not slackened.
- On the negative side, on account of major depreciation of rupee, the company has booked MTM loss of Rs 3.05 crore on its foreign currency term loans and around Rs 0.52 crore on forward hedged contracts.
Another negative is that since 1st Aug’19 the Govt. has stopped accepting applications against the claim of incentives under Merchandise Exports from India Scheme (MEIS) on FIBCs. As a result, there’s an impact of around Rs 5 crore on the bottom-line.
It is believed that MEIS will be reinstated in some other form to give fillip to the exports; however, till the time it happens, there will be a drag on the profitability.
On the front of working capital management, the company has done well with reduction in receivables and inventory and has generated very good cash flows from operations. It has also reduced its borrowings by more than Rs 25 crore during the year.
Overall, in comparison to when we had shared risk categorization of stocks and had kept Kanpur Plastipack in the high-risk category, the company seems much better placed now and poised for gradual recovery in earnings.
If the export benefits get restored, that will be a good positive for the company.
As mentioned last time and assuming export benefits are resumed, at full capacity utilization, we believe the company can report PAT in the range of 21-26 crore; however, it may take 2-3 years to reach optimum capacity utilization.
Disclosure: I have personal investment in Kanpur Plastipack.
Ph.: +91-727-5050062, Mob: +91-9818866676
Positive – Expected return of ~15% + on annualized basis in medium to long term for investment recommendations and in short term for Special situations
Neutral – Expected Absolute return in the range of +/- 15%
Negative – Expected Absolute return of over -15%
Coverage closure – No further update on the stock
% weightage – allocation in the subject stock with respect to equity investments
Short term – Less than 1 year
Medium term – Greater than 1 year and less than 3 years
Long term – Greater than 3 years
Research Analyst Details
Name: Ekansh Mittal Email Id: firstname.lastname@example.org Ph: +91 727 5050062
Analyst ownership of the stock: In Kanpur Plastipack
Details of Associates: Not Applicable
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Disclosure (SEBI RA Regulations)
Whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company/companies and the nature of such financial interest – Yes, investment in Kanpur Plastipack
Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership of 1% or more securities of the subject company (at the end of the month immediately preceding the date of publication of the research report or date of the public appearance) – No
Whether the research analyst or research entity or his associate or his relative has any other material conflict of interest at the time of publication of the research report or at the time of public appearance – No
Whether it or its associates have received any compensation from the subject company in the past twelve months – No
Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past 12 months – No
Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided – No
Whether the research analyst has served as an officer, director or employee of the subject company – No
Whether the research analyst or research entity has been engaged in market making activity for the subject company – No