Manjushree Technopak

Background

Manjushree Technopack Limited is a rigid plastic packaging solution provider which specialises in the packaging of consumer goods. 


Main Products/Segments

Plastic Containers for packaging, PET/PP Jars & bottles, PET Preforms, Multilayer Containers, Hot fillable PET bottles, Injection Moulded Products


Main Markets/Customers

FMCG, Pharma, F&B, AgroChemicals


Bullish Viewpoints

  • Best Margins & Returns in the business – Operating Profit Margin (OPM) stands at 16% vs industry median at~10%; (global majors like Rexam Plc and Amcor operate at less than 9% OPM); both returns and margins have been trending up over the years in a very competitive industry
  • More than tripled its sales in last 5 years while earnings per share (EPS) has gone up 8x (on an adjusted basis) in the same period
  • Top marquee MNC clients in FMCG & Pharma space – Coke, Pepsico, Bisleri, Nestle, P&G, GlaxoSmithkline, Pfizer, Britannia, Kraft
  • Capacity expansion up from ~9000 metric tonnes per annum (MTPA) to ~22000 MTPA in FY09 and further upto ~29000 MTPA in FY10 on the back of strong long term job work contracts
  • Nice clean balance sheet – strengthened progressively over the years with adequate liquidity, very decent inventory and debtors management, and low debt to equity (<0.5). However FY10 D/E is slated to go up (> 1) due to fresh Term Loans for ongoing Capex .

Bearish Viewpoints

  • At 150 Cr Sales Turnover in FY10 Manjushree is still a pretty small company. Execution risks are probably significant as the company tries to attain scale.
  • Highly competitive and fragmented industry – the unorganised sector also plays a significant hand
  • Raw material price volatility – PET resin the key raw material is linked to crude prices
  • Environmental Regulations & Compliance stipulations of Regulatory bodies on Plastics remains a concern
  • Entry of MNC Plastics Packaging companies in the domestic market can be a threat

Barriers to entry

  • While Investments in Capex may seem low; of the order of 5-10 Cr per machine, passing stringent business and quality requirements and forming successful relationships with MNC clients usually takes upwards of 2 years

Interesting Viewpoints

  • Signed long term 3 year contracts with Coke
  • Management is confident of maintaining a 30% YoY growth record for next 5 years
  • Designs and Customer Acceptance trials ongoing for catering to Liquor Industry. Beer Consumption is 50 lakh bottles a day in India!

Disclosure(s)

Donald Francis: No Holdings in the Company;


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