Packaging Sector from Investment point of view – Part 1

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This is our second blog covering investment sectors. For the first one on Life Insurance in India, please click here

Hi readers, I hope you are doing well in life. In our quest to understand more business and sectors of Indian Economy from investment point of view , We will know more about packaging sector of Indian Economy in today’s blog.  I hope you will like this blog and at the end of it you will be more enriched in terms of knowledge from packaging sector.

This is a two part blog. Click here for part two

Industry at 2020-25 :

The India Packaging Market was valued at USD 50.5 billion in 2019, and it is expected to reach USD 204.81 billion by 2025, registering a CAGR of 26.7% during the period of 2020-2025.

Owing to the rising population, increasing income levels, changing lifestyles, increased media penetration through internet, and television and growing economy, the demand for packaging is growing. Moreover, it is one of the strongest growing sectors in the country.

According to Care Ratings, a prominent credit rating company in India, more than 49% of the paper produced in the country is used for packaging purposes . Read more here

Also Read on FinMedium:  Balaji Amines Ltd and Alkyl Amines Chemicals Ltd- Q4FY20 Analysis

Business: Packaging is basically classified on the basis of type of material being used for it. It mainly classified as below

  1. Plastic
  2. Paper
  3. Glass
  4. Metal

Each and every product we use in our daily routine come with a packaging along with it. So this is never ending business and will grow on the scale of demand and consumption by consumers.

While doing Fundamental analysis of companies we need to use top down approach in order to find out companies working specific sector. Now that we are discussing Packaging as sector in this blog.

I have given brief of the some of the listed players based on the type of material they use to manufacture the packaging products listed above. There are many more listed companies in this sector. I am looking at top 2/3 from each type based on their market Cap as of 29th Aug.

Leading Listed Players manufacturing packaging material with Plastic and Paper 

Essel Propack

Essel Propack is a global tube-packaging company owned by The Blackstone Group headquartered in Mumbai, India. It is a specialty packaging manufacturer of laminated plastic tubes for the FMCG and Pharma space.

Also Read on FinMedium:  This is More Important than Stock Picking!

Shareholding pattern as of June QTR 20:

Fundamental details via Screener.in

Uflex

UFlex is the largest global manufacturer of flexible packaging materials and films used in packaging of essential commodities related to food (including rice, flour, salt, sugar, spices, milk and milk powder), soaps & detergents, pharmaceuticals products, hygiene & oral care products. Read more at ; https://www.uflexltd.com/

Shareholding Pattern :

Fundamental Analysis via screener.in

Key Customers :

Source: Company Presentation on Uflex.com

Jindal Poly films

Jindal Poly Films Limited is a part of the $ 2 billion B.C. Jindal group, which has been offering a wide range of products and solutions for more than 6 decades. The group is involved in diverse businesses including Polyester & Polypropylene films, Steel pipes, Thermal Power Generation and Photographic products.

Read more at : https://www.jindalpoly.com/

  • JPFL is the largest manufacturer of BOPET and BOPP films in India.
  • The manufacturing plant at Nasik, Maharashtra is the world’s largest facility for the production of BOPET and BOPP films.

Shareholding Pattern :

Fundamental Analysis via Screener.in

Last 5 year Analysis on  Sales , Operating Profit and Net Profit for 4 players by Anup Lamb:

Metric Numbers In Cr FY14 FY15 FY16 FY17 FY18 FY19 Total last 6 Years
Essel Polyplex
Sales 2,321 2,128 2,302 2,424 2,707 2,760 14,642
Oprating Profit 391 401 422 463 498 546 2,721
Net Profit 141 170 190 172 193 207 1,073
Uflex
Sales 6,130 6,366 6,505 6,802 7,957 7,405 41,165
Oprating Profit 735 805 874 881 988 1,081 5,364
Net Profit 314 348 310 314 370 476 2,132
Polyplex Corpration
Sales 3,204 3,202 3,201 3,572 4,570 4,487 22,236
Oprating Profit 284 419 443 494 732 781 3,153
Net Profit 38 29 232 159 330 282 1,070
Jindal Poly Films Ltd
Sales 7,557 7,225 7,005 6,448 3,726 3,545 35,506
Oprating Profit 662 980 689 468 444 667 3,910
Net Profit 172 338 187 85 -409 489 862
Total last 6 yrs Essel PolyPlex Uflex Polyplex Corp Jindal Poly Films
Sales 14642 41165 22236 35506
Oprating Profit 2721 5364 3153 3910
Net Profit 1073 2132 1070 862
Net Profit % over OP 39.43 39.74 33.93 22.04
Net Profit % over Sales 7.3 5.1 4.81 2.24

Observations :

  • Uflex is having leading sales among them. Uflex has very impressive Customer portfolio with all leading FMCG players among them
  • Uflex is having highest Operating profit but net profit conversion of sales is less as compared to Essel Polyplex
  • Essel Polyplex despite having less sales is leading in net profit conversion on the other hand Jindal Poly having 2nd highest sales is still struggling with profits.
  • Polyplex Corp is playing with stable numbers.
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Closing remarks :

These are top 4 leading paper –plastic packaging players listed in index. I have collected this information to give our readers a brief of leading players in this sector. Investment in these stocks comes with risk as these are not traditional Index stocks or bluechip stocks. I urge everyone to do their own due diligence before taking any investment decision on these stocks. In our upcoming blogs as part of this sector , we will cover metal and glass material packaging players. Till then take care. I hope you enjoyed reading these.



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Prateek Goel
Co-founder of Investeek, Prateek has been investing in the stock markets since 2006 and has beaten the NSE/BSE on a consistent basis. At the age of 24, he was also featured in India Today for his expert insight on gold trading.
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