HDFC Securities
Huhtamaki PPL (Buy)
CMP: ₹222.60
Target: ₹234-251
Huhtamaki PPL (earlier known as Paper Products) incorporated in 1935, is India’s leading manufacturer of primary consumer packaging. Since 1999, Huhtamaki PPL (HPPL) is majority owned by global packaging major, Huhtamaki Oyj, Finland (owns 68.77 per cent). HPPL is a pioneer in technology and market leader in flexible packaging in India with market share of 9 per cent in the organised market.
HPPL has reacted over the last 8-10 months due to flat sales and PAT growth partly due to fall in raw material prices (on account of crude oil price fall) and slowdown in FMCG industry. With crude oil price now seeming to stabilise, the leader in domestic flexible packaging industry could see resurgence in growth as the FMCG industry also could be on revival path. Its debt-to-equity ratio is likely to fall sharply in the next 2-3 years. To further strengthen its presence in the established markets, HPPL acquired Positive Packaging in 2015 and is now among top two players in flexible packaging industry. Strong support of the parent is another advantage.
We expect HPPL to report healthy sales growth over CY15-CY17. This is without considering incremental sales growth because of capacity expansion going forward (to be funded out of land sale expected over the next few quarters).