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Thursday, October 23, 2014


Scrip Code: 522249 MAYURUNIQ

CMP:  Rs. 418.80; Buy at current levels and at every dipps. Medium to Long Term Target: Rs. 600 and can go to Rs. 800 in two years time; STOP LOSS – Rs. 385.30; Market Cap: Rs. 1,813.39 Cr; 52 Week High/Low: Rs. 485.00 / Rs. 125.00. Total Shares: 4,33,05,600 shares; Promoters : 3,06,61,904 shares –70.80 %; Total Public holding : 1,26,43,696 shares – 29.19 %; Book Value: Rs. 27.36; Face Value: Rs. 5.00; EPS: Rs. 13.92; Dividend: 95.00 %; P/E: 30.56 times; Ind. P/E: 30.08; EV/EBITDA: 18.40.
Total Debt: Rs. 21.00 Cr; Enterprise Value: Rs. 1,828.84 Cr.

MAYUR UNIQUOTERS LIMITED: Mayur Uniquoters Limited was founded in 1992 and is based in Jaipur, India. Mayur Uniquoters Limited manufactures and sells coated textile fabrics in India. The company’s products include artificial leather, synthetic leather, and PVC vinyl. Its products are used in footwear, furnishings, automotive OEM, automotive replacement, and automotive exports markets. The company sells products directly to OEMs, as well as to other manufacturers and wholesalers. It also exports its products to the Middle East, Cyprus, the United Kingdom, Russia, Sri Lanka, Nepal, the United Arab Emirates, Mexico, Italy, and the United States. The company had declared splits in face value of its shares from Rs. 10 to Rs. 5 in July 2013 and gave bonus of 1:1 in June 2012 and again 1:1 bonus in February 2014. Mayur Uniquoters Ltd has an installed capacity of 400,000 Linear Meters per month & it has a full range of machinery to full-fill Printing, Embossing, Lacquering, Sue ding and laminating needs. The company possesses fully equipped Physical, Chemical and Product Development Laboratories capable of testing nearly all the properties of Artificial Leather for different segments and applications. Company also manufactures and exports PVC Vinyl also referred to as Artificial Leather or Synthetic Leather; they are also termed as PVC Leather Cloth, PU/PVC Leather Cloth. The company has its own inline testing lab, physical testing lab, raw material testing lab, Colour testing lab and product development lab. Company carters to major automobile brands in India to name the few are BMW, General Motors, Daimler, Maruti Suzuki, Tata Motors, Honda, Ford, Hyundai, Nissan, LML. Mayur Uniquoters Ltd is locally compared with Superhouse Ltd, Lawreshwar Polymers Ltd, Super Tannery ltd, Super House Ltd, Crew BOS products Ltd, Mideast India Ltd, Mirza International Ltd, Fenoplast ltd, Zenith Exports Ltd, Mayur Leather Products Ltd, Relaxo Footware ltd globally compared with Daiichi Kasei Company Ltd of Japan, Chanco International Group Ltd of Hong Kong.

Investment Rationale:
Mayur Uniquoters Ltd is the largest manufacturer of artificial leather and PVC Vinyl in India and was established by Mr. Poddar in 1994. Mayur Uniquoters is a market leader with installed capacity of 2.5 million linear meters per month. The company is operating at 100 % capacity utilisation, and has planned to expand its capacity further to 3.05 million linear meters per month by 2015. Company’s nearest competitor is just 50 % of the company’s current capacity. The company derives more than 50 % of its revenues through organised footwear industry and some of its prestigious clients include all top names such as Bata, Action, Liberty, Relaxo, etc. and the Automobile industry contributes 35 % of revenue and some of its prestigious clients include all top names such as BMW, General Motors, Daimler, Maruti Suzuki, Tata Motors, Honda, Ford, Hyundai, Nissan, LML. This list further indicates the consistent superior quality provided by Mayur Uniquoters. On the export front, the company has managed to get entry into Ford Motors and Chrysler. In addition, orders from clients like GM, Mercedes and BMW are also in the pipeline. Due to inherent negatives of natural leather such as being derived from animal sources, tanneries causing pollution and most importantly due to its high cost, Synthetic Leather has become a better economical alternate to natural leather and Mayur Uniquoters sees an increasing trend of replacing natural leather with synthetic leather in various industries. As per the management of Mayur Uniquoters Ltd, the addressable market size is in the range of Rs. 4,000- Rs. 5,000 crores. The Indian textile industry is one of the major sectors of Indian economy largely contributing towards the growth of the country’s industrial sector. The textile sector contributes 14 % to industrial production, 4 % to National GDP, and 10.63 % to country’s export earnings. Textile sector in India provides direct employment to over 35 million people and holds the second position after the agriculture sector in providing employment. Growing at a rapid pace, the Indian Market is being flocked by foreign investors exploring investment purposes and with an increasing trend in the demand for textile products in the country, a number of new companies and joint ventures are being set up in the country to capture new opportunities in the market The most significant change in the Indian textile industry has been the advent of man-made fibres (MMF). The country has successfully placed its innovative range of Man Made Fibres textiles in almost all the countries across the globe. Lower realisations and margins in the domestic market have prompted Mayur Uniquoters to shift focus towards exports and replacement markets. Mayur Uniquoters has successfully acquired clientele in the global Auto OEM markets such as Ford (USA) and Chrysler (USA). The company is expecting to supply to other global OEM players such as BMW, Mercedes and GM. In future, the company can insulate itself from any recessionary trends in the auto industry by targeting the replacement market. Supplying to the dealers of the aftermarket segment of USA is also under consideration. Indian synthetic leather manufacturers supply mainly to the Footwear industry and to the Automotive OEMs. The market size of synthetic leather industry in India is estimated to be Rs. 4500 crores. The unorganised sector accounts for 50 % of this market, whereas the remaining 50 % is serviced by the organised sector which comprises 10-15 players including 5-6 big players. These organized players include Jasch Industries, Fenoplast, Manish Vinyl, V.K. Polycoats, HR Polycoats and Polynova Industries, among others. Synthetic leather is also used to make accessories such as bags, home furnishings etc. Synthetic leather has found acceptance in the western markets which have been traditionally natural leather markets. As cost efficiency gains importance in the global auto markets, synthetic leather, which is 4-5 times cheaper than natural leather, has become a preferred choice for Auto OEMs. Apart from the cost differential, synthetic leather has found favour over natural leather due to a variety of reasons such as reduced pollution, animal cruelty concerns etc usually associated with leather tanning. The market size of India's synthetic leather industry is expected to double in the next five years to Rs. 9,000 crore on account of improved technology, improved product quality, increasing consumption and purchasing power.

Outlook and Valuation: 
Mayur Uniquoters Limited manufactures and sells coated textile fabrics in India. The company’s products include artificial leather, synthetic leather, and PVC vinyl. Its products are used in footwear, furnishings, automotive OEM, automotive replacement, and automotive exports markets. The company sells products directly to OEMs, as well as to other manufacturers and wholesalers. The company is in the process of installing a 5th coating line, which will be dedicated mainly to the exports market. This will take the coating line production from 1.85 mn linear meters per month to 2.5 mn linear meters per month. In addition, the company is planning to increase this capacity to 3.1 mn linear meters per month going forward. The capacity addition will lead to increase in volume and the export focus will lead to margin expansion. In addition, the company is doing backward integration in manufacturing synthetic knitted fabric, a key raw material post chemicals with investment of Rs. 25 crores. This will lead to quality control and reduce rejection which will also help in margin expansion. Company has its Economic Moat (A competitive advantage that one company has over the other companies in the same industry – by Warren Buffett) expanding moats which is a very strong sign of a future Multi-bagger stock. Footwear segment contributes 54 % to Mayur Uniquoters Ltd’s total revenues on the back of big clientele. The company’s clientele include Bata, Paragon, Liberty, Action, VKC group and Relaxo. The current market size of Indian footwear industry is estimated at Rs. 30,000 Cr to Rs. 35,000 Cr. The industry witnessed a CAGR of 18 % over FY08-12, which in turn led to growth in Mayur Uniquoters Ltd’s footwear segment. India’s average per capita footwear consumption is at 2.5 footwear pair’s p.a, which is much lower than the average per capita consumption of 5.0 pair’s in the developed countries. Thus, there is scope for improvement, which in turn offers big opportunity for players such as Mayur Uniquoters Ltd to cater to this growing market. The Auto OEM segment is the second largest segment for Mayur Uniquoters Ltd. This segment contributes 35 % to the company’s total revenues. Mayur Uniquoters Ltd caters to both domestic as well as global OEMs and replacement markets. OEM exports realisations can be as high as US$ 7 to $ 9 per metre (Rs. 427 to Rs. 550 per metre) over domestic OEM realisation of Rs. 120-135 per metre. The realisation from sale to Global OEMs with Indian presence stands at Rs. 200 per metre. Synthetic leather is produced by a process known as calendaring where PVC sheet and two distinct layers of knitted fabrics are fused together. Mayur commands 7 % to 8 % market share in Indian PVC market and has steadily increased its exposure to big Auto OEM players. Mayur Uniquoters has already received approvals and featured in the supplier list of Auto OEMs such as Ford India, GM India & Mahindra SUV500 etc. It is also part of the approval list of suppliers to Ford Worldwide along with Chrysler (USA). Mayur intends to expand its presence in the global market as a key synthetic leather supplier. Mayur Uniquoters Ltd has achieved backward integration linkage by investing Rs. 25 crores in a unit producing knitted fabrics. This could bring down the raw material costs by 5-10 % and in turn improve margins. By controlling the quality of raw material, the company would also target a lower rejection rate, thus improving quality. Also, this backward integration would significantly reduce the product development cycle from 2-3 months to 3-4 weeks. The company has consistently improved its realisation per meter from Rs. 188 per meter in FY11 to Rs. 225 per meter in FY13. The growth in high margin exports business and the backward integration in manufacturing knitted fabric will lead to further improvement in margins. The comapny has been reporting strong return ratios for the last 4 years with ROE in excess of 40 %. Due to strong cost control and better working capital management, the debt equity ratio is negligible. There has also been consistency in dividend payout. On Financial side, Mayur Uniquoters Ltd.’s has consistently grown over the last decade. Its Sales are expected to grow at a CAGR of 23 % over FY13-FY16E. The company has revenue growth of 24 % CAGR over FY11-FY13.  It is expected that Mayur Uniquoters to continue recording such a strong revenue growth going ahead with its renewed focus on the Auto OEM segment and its emphasis on an exports led revenue growth. EBITDA is expected to record a growth of 17 % CAGR over FY13-16E. Company’s PAT grew at a CAGR of 31 % over FY11 to FY13 and is expected to grow at a healthy rate. Mayur Uniquoters offers a superior ROCE and ROE. It has reported an average of 61 % of RoCE since FY11 and will continue to generate healthy ROE, making it an attractive business to look at. Going forward, it is expected that the quality of ROE to remain in excess of 30 % with stable operating margins and minimal addition in leverage. Company will witness strong operating cash flows with no incremental capex; the Debt to Equity ratio is expected to be reduced further and company’s Operating cash flows are expected to remain strong on the back of robust sales and efficient working capital management. At the current market price of Rs. 418.80, the stock P/E ratio is at 13.29 x FY15E and 11.16 x FY16E respectively. Company can post Earning per share (EPS) of Rs. 31.50 for FY15E and Rs. 37.50. One can buy this stock with a target price of Rs. 600.00 for Medium to Long term investment. 

SALES ( Crs)381.00487.00600.00709.00
NET PROFIT (₹ Cr)44.0054.0068.0081.00
EPS ()20.1025.0031.5037.50
PE (x)48.2019.4015.4012.90
P/BV (x)8.906.605.003.80
EV/EBITDA (x)15.4012.209.407.70
ROE (%)42.7039.1036.8033.30
ROCE (%)55.6048.2045.8042.70

I would buy MAYUR UNIQUOTERS LTD for Medium to Long term for target of Rs. 600.00 and stock can see Rs. 800 and for the shorter term the target would be Rs. 500.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 385.30 on every purchase(Why Strict stop loss of 8 % ?) - Click Here

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Here's Wishing You n Your Family

We meditate on the Glory of the Creator ; 
   Who has created the Universe ; 
  Who is worthy of Worship ;
         Who is the embodiment of Knowledge and Light ; 
            Who is the remover of all Sin and Ignorance;
  May He enlighten our Intellect.
Gayatri Mantra....

There's always something warm and bright, about this time of the year, when everything has a special glow, and hearts are full of Cheer, that's why this special greetings comes your way, to wish you all a life's best on Diwali and in the coming New Year too.....
Bhavikk Shah

I Wish you all and your loved ones a Very Happy Diwali and A Prosperous New Year and Thank you all for being there as a backbone of the Blog for 7 long years..

From the last Samvat to this, markets has definately made every one happy this year. From last years Muhurat trading of 6,317.35 Nifty to current Nifty of 7,995 (22 oct 2014), its a fantastic 1,677.65 points run a excellent return of 26.55 % and if we take the peak of our markets then its around 2,247 points of run up from nifty low of 5,933. Whatever the case may be (elections, majority to new government, expectations of reforms etc) but the investors are happy as of now. But still I am concerned, 

Yeah am concerned, dont get me wrong I still hold my bullish view for Indian Economy & markets. We all know that there is a wave of change in Indian Economy and changes does not occur in sudden, it takes its own course of time and Stock markets tends to react faster than we expect and when the sanity of the markets returns, we see down trend in markets which are nothing but a reflection of true fundamentals of our economy.. 

Give a look at our IIP - struggling at 0.40 % our GDP at 5.7 %, and adding on to it our corporates are not enthusiastic enough to do major investments, remember I have repetitively kept on saying again and again that our corporates still holds huge chunk of cash of around Rs. 5,70,000 Cr. Secondly, this rally has come at a time when there were depressed earnings and if we see at the previous market peak, which was of Jan 2008, the earnings growth trajectory was Upwards at that point of time and currently the earnings growth is muted, this means that a lot of the anticipated improvement in earnings is already priced in. 

Looking at the way the earning season is going I feel that there could be downfall in markets which can wipe off entire gains, anyways the 10 years average historical PE of Indian markets is around 17.8x but below its peak of 25x. I see Nifty levels to cool off around 7,400 - 7,600 and then the new wave of bull market should start which I hope will be on back of the strong investments by the corporates, double digit IIP, lower inflation, strong earnings growth and hopefully GDP number of 8.5%.. So friends just be cautious and start booking your profits because we can see a sell off within 3-4 months.. Buy fundamentally strong stocks and keep a strict stoploss of 8 % ..Till then happy Investing !!!



Best Regards,
 Twitter Handle -  @bhavikkrshah 


Monday, October 13, 2014


Scrip Code: 538635 SNOWMAN
CMP:  Rs.  85.75; Buy at current levels. Short Term Taget : Rs. 100.00;
Medium to Long Term Target: Rs. 125; 
STOP LOSS – Rs. 78.89; Market Cap: Rs. 1,427.30 Cr; 52 Week High/Low: Rs. 103.80 / Rs. 47.00.
Total Shares: 16,64,49,395 shares; Promoters : 6,72,54,119 shares – 40.41 %; Total Public holding : 9,91,95,276 shares – 59.59 %; Book Value: Rs. 17.83; Face Value: Rs. 10.00; EPS: Rs. 1.81; Dividend: 00.00 %; P/E: 47.37 times; Ind. P/E: 55.21; EV/EBITDA: 24.18.
Total Debt: Rs. 90.64 Cr; Enterprise Value: Rs. 1,534.03 Cr.

SNOWMAN LOGISTICS LIMITED: Snowman Logistics Limited was founded in 1993 and is based in Bengaluru, India. The company was formerly known as Snowman Frozen Foods Limited and changed its name to Snowman Logistics Limited in March 17, 2011. Snowman Logistics Limited is a subsidiary of Gateway Distriparks Limited. The company came out with an IPO on August 2014 offering 4.20 Cr equity shares of Rs. 10 each for Rs. 47 per share raising Rs. 197.40 Cr. The object of offer for sale was to set up a new temperature controlled and ambient warehouse, to provide long term working capital and for other general corporate purposes. The shares got listed on Indian bourses on September 12, 2014 with a staggering at Rs. 79.80. Snowman Logistics Limited is an integrated temperature controlled logistics service provider with 23 temperature controlled warehouses across 14 locations in India. It has a storage capacity of 58,543 warehousing pallets and 3,000 ambient pallets. The company also owns and leases reefer and ambient vehicles. As of March 31, 2014, it operated 370 reefer vehicles consisting of 307 leased and 63 owned vehicles. In addition, the company offers primary and secondary distribution services; consignment agency services; and value added services, such as kitting, labelling, sorting, stuffing, and de-stuffing of containers, repacking, and bulk breaking. It serves corporate customers in dairy, ice-creams, chocolates, and poultry and meat industry sectors. It also offers services to Confectioneries including chocolate and baked products; Fruits and vegetables; Healthcare and pharmaceutical products; and Industrial products such as x-ray, and photo-imaging, films. It operates in two segments, Temperature Controlled Services and Ambient Distribution. The company offers warehousing solutions that cover ambient, chilled, frozen, and blast freezing facilities. Snowman Logistics Limited is locally compared with Allcargo Logistics Ltd, Blue Dart Express Ltd, Container Corporation of India Ltd, Gati Ltd, Gateway Distriparks Ltd, Sical Logistics Ltd, Kesar Terminals & Infrastructure Ltd, North Eastern Carrying Corporation Ltd, Shreyas Shipping & Logistics Ltd, Patel Integrated Logistics Ltd, Global Vectra Helicorp Ltd globally compared with Kawanishi Warehouse Co, Ltd of Japan, Sugimura Warehouse Co Ltd of Japan, Royal Mail Plc of London, Postal Services mail Plc of London, Deutsche Post AG of Germany, PostNL N.V. of Netherlands, Hanjin Transportation Co., Ltd of South Korea, Pos Malaysia Berhad of Malaysia, Singapore Post Ltd of Singapore, Yusen Logistics Co Ltd, Hyundai Glovis Co Ltd of Korea, Atlas Air Worldwide Holdings of USA, Bpost NV-SA Brussels, Belgium, Kintetsu World Express Inc of Japan, UPS – United parcel Service Inc of USA, Fedex Corp of USA, Air transport Services Group of Ohio, Hub Group Inc of Illinois, Xpo Logistics Inc of USA, Echo Global Logistics Inc of Illinois, Uti Worldwide Inc of British Virgin Islands,  Chichibu Railway Co., Ltd of Japan, Kobe Electric Railway Co., Ltd of Japan, Keifuku Electric Railroad Co., Ltd.

Investment Rationale:
Snowman Logistics Ltd is the most preferred integrated temperature controlled warehouse and transport logistics company in the organized sector enjoying lion market share. The company has been also providing additional services like repacking of products for direct marketing in retail market to the manufacturers, exporters and adding value addition of services to its clients that include Hindustan Unilever, Cadbury, McCain, Baskin Robbins, Ferrero Rocher, Taj Hotels, etc. and has PAN India presence at 14 locations with 23 warehouses and fleet of 370. Currently 242 cities are covered and plans more cities to be added to the network each year. During FY14, Snowman Logistics Ltd.’s warehouses were running at 82 % utilization while the trucking business was running at 100 % utilization. Gateway Distriparks Limited is the promoter and the largest shareholder of the company. Snowman Logistics offers blast freezing facilities at its temperature controlled warehouses in Bengaluru, Mevalurkuppam, (near Chennai), Visakhapatnam, Serampore (near Kolkata), Taloja (near Mumbai), Ahmedabad, Palwal (near Delhi), and Mubarakpur (near Chandigarh). Its integrated ‘Source to Stores’ operations comprise warehousing, primary distribution and secondary distribution and value-added services including kitting, labeling, sorting and bulk breaking. India falls under the category of low cold chain adoption countries i.e. countries with less than 10 % of produce passing through a cold chain, reflecting a significant potential for growth in Cold Chains. Temperature Controlled Logistics (TCL) provider in India is largely fragmented and generally focuses on a single region or focuses on any one aspect of the logistics chain such as storage or transportation. Consequently, there are very few integrated temperature controlled logistics service providers who have the ability to service customers on a pan-India basis. It is estimated that the current market share of organized players is only around 6 % to 7 % in the temperature controlled warehousing segment and about 15 % to 20 % in the temperature controlled transportation. So, the potential for growth in organized services in this sector is immense. It is expected that the organized outsourced temperature controlled services to grow at around 20 % p.a as against an overall market growth of around 15 % and in terms of volume, the existing capacity is estimated to be around 30 million MT of temperature controlled warehousing and around 7,000 – 8,000 in Reefer Vehicles. From the existing cold warehousing capacity, 75 % is dedicated to potatoes while 23 % is classified as ‘Multipurpose’ i.e. catering to multiple commodities across dairy products, frozen foods, fruits and vegetables and the balance 2 % is used across meat and seafood. 

Temperature Controlled Logistics (TCL) is responsible for preserving the quality to enable their availability during an off – season or making them available at locations far from the production/ processing locations. The temperature sensitive products like dairy & perishable products is stored & preserved in a custom built temperature controlled warehouses. These temperature controlled warehouse generally consists of temperature zones which are capable of warehousing goods in the range of –25ºC to +20ºC. Similarly, temperature controlled distribution entails primary and secondary transportation of temperature sensitive products from source to stores using temperature controlled containerized trucks and cargo trains. Certain containerized trucks are also modified to enable installation of temperature controlled zones. Businesses which utilize cold chains in India include dairy, poultry and meat, seafood, ready – to eat, chocolates, healthcare and pharmaceuticals, industrial products and fruit and vegetables. India’s temperature controlled logistics industry is estimated to be around Rs. 12,000 Cr to Rs. 15,000 Cr and is expected to grow at 15 % to 20 %, year on year, for the next 3 to 4 years to Rs. 22,000 Cr to Rs. 25,000 Cr. The growth is expected to be driven by an increase in the consumption of temperature sensitive perishables; Greater use of temperature controlled logistics in categories such as pharmaceuticals and fruits and vegetables and from the increase in the consumption of a gamut of niche and high end products that need to be maintained in temperature controlled environment. Since FY12, Cold Storage business in India has been given the "Infrastructure status", which makes bank financing easier. Also, Snowman Logistics is eligible for 100 % deduction under section 35AD for all capex made till AY13. This investment deduction allowance rate has increased from 100 % to 150 % in AY14. The tax benefits given to warehousing income under section 80 (I) (B) along with subsidy schemes will also be helpful for the company to aggressively pursue capex and growth. Snowman Logistics has asset light business model, given that 83 % of its entire fleet is on lease. Similarly for Warehouse division, company usually leases out the land on a long term basis and constructs its own building used for storage purposes. Snowman Logistics owns, both land and building at 9 of these 23 temperature controlled warehouses. This asset light strategy has helped the company to quickly scale up its businesses, thereby generating quicker pay-back period for investment made and higher Return on Networth. Management has maintained that money raised from issue proceeds would be deployed for capacity expansion, thereby restricting any further RoNW expansion in FY15E.

Outlook and Valuation: 
Snowman Logistics Limited is an integrated temperature controlled logistics service provider, promoted by Gateway Distriparks Ltd which in itself is one of the largest players in the organized temperature controlled logistics. Gateway Distriparks holds 40.4 % (post issue) in Snowman Logistics Ltd. Gateway Distriparks’s expertise as a major logistics player in India augurs well for Snowman Logistics as it instils confidence among Snowman’s customers besides providing leverage in institutional and banking relationship for Snowman’s business operations. A strong promoter and sound investor base reinforces Snowman logistics as a major brand in a largely unorganised temperature controlled logistics industry. Snowman Logistics Ltd caters to numerous customers ranging from HUL to McCain foods and from Suguna Foods to Ferrero India Pvt Ltd to Hotel Taj. Many of Snowman’s customers are competitors in their respective industry and Snowman’s ability to cater to each one of them in an unbiased and professional manner is a testament to the fact that contributions from its top clients have remained largely unchanged in the past three years. Snowman’s top 20 clients contributed nearly 56.75 % in FY11, 49.92 % in FY12, 39.02 % in FY13 and 44.1 % in Fy14, respectively in terms of revenue. The company garnered Rs. 197.40 Cr through its IPO during the month of August 2014. The company intends to use the part of the net IPO proceeds to setup six temperature controlled warehouses and 2 ambient warehouses across six cities. The estimated cost of construction of these warehouses is around Rs. 140 Cr. This will increase the pallet capacity from 61,000 to 85,000 (1 pallet = 1 Tonne) by FY15. The company intends to use the IPO funds of Rs. 197.40 Cr to retire its bridge loan and will meet the remaining capex of Rs. 128.28 Cr. Long term working capital requirements of Rs. 8.41 Cr will also be met from the IPO proceeds. The left over amount will be utilised for general corporate purposes after meeting the issue related expenses. The demand for perishable products is expected to increase in the coming years thus creating the need for larger warehouses and bigger fleet size to carry the products to the end customer. With new capacity coming on stream, Snowman Logistics will be able to garner greater market share from the anticipated pickup in demand. On Financial side, the company enjoys robust EBIDTA margin of 25 % and is likely to post 42.2 % revenue and 45.3 % EBITDA CAGR over FY14-16E. The company has adopted an asset light business model which has helped to keep fixed assets low, resulting in improvement in return ratios. As of FY14, 13 of the 23 warehouse land and 307 out of 370 reefer vehicles are on lease. Return ratios like RoE/RoCE have improved from 8.5 %/3.8 % in FY10 to 13.3 %/8.4 % in FY14. Snowman Logistics has a healthy balance sheet as the business throws up positive operating cash flow. And once these warehouses is fully operational, maintenance capex and overhead expenses would be stable and will increase revenues. This can throw up significant cash flows and will help margin expansion. Snowman Logistics is the only player in the organized segment in India, thus should command a scarcity premium in terms of valuation. Snowman Logistics offers a robust business model with one of the highest temperature controlled warehousing capacity, largest fleet size, national presence and market dominant position. At the CMP of Rs. 85.75, the stock is trading at its all-time high P/E of 61.25 x FY14E, 50.44x FY15E and 35.72x FY16E. The Company can post EPS of Rs. 1.40 for FY15E & Rs. 17.0 of FY16E & for FY17E it can post an EPS of around Rs. 2.40. Given the attractive valuations with the pan India presence, robust growth prospects and with excellent client base, one can buy into this Stock with a target price of Rs. 100 for the short term and for the medium to long term it should be Rs. 125.00.

SALES ( Crs)153.40193.80254.50331.20
NET PROFIT (₹ Cr)22.5022.6027.4040.00
EPS ()1.401.401.702.40
PE (x)34.7034.5028.5019.50
P/BV (x)3.501.801.701.60
EV/EBITDA (x)23.6015.8012.309.50
ROE (%)
ROCE (%)6.506.507.409.40

I would buy SNOWMAN LOGISTICS LTD for Medium to Long term for target of Rs. 125.00 and for the shorter term the target would be Rs. 100.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 78.89 on every purchase(Why Strict stop loss of 8 % ?) - Click Here

*Dear Reader friend, if you enjoyed this article, please do share it with your Friends and Colleagues through Facebook and Twitter, and drop in your valuable thoughts in comment box..



Friday, October 3, 2014


May this Dussehra burn all your worries with Ravana & Bring lots of happiness and full fill all your dreams. !!! 
Here's Wishing You n your Family

Scrip Code: 509820 PAPERPROD

CMP:  Rs. 188.00; Buy at current levels.

Short term Target: Rs. 250; Medium to Long term Target: Rs. 400; STOP LOSS – Rs. 173.00 (for short term players only) ; Market Cap: Rs. 1,178.51 Cr; 52 Week High/Low: Rs. 211.70 / Rs. 59.85
Total Shares: 6,26,87,190 shares; Promoters : 3,99,79,253 shares – 63.78 %; Total Public holding : 2,27,07,937 shares – 36.22 %; Book Value: Rs. 53.79; Face Value: Rs. 2.00; EPS: Rs. 8.19; Dividend: 140.00 % ; P/E: 22.95 times; Ind. P/E: 24.03; EV/EBITDA: 11.41.
Total Debt: Rs. 19.21 Cr; Enterprise Value: Rs. 1,182.29 Cr.

HUHTAMAKI PAPER PRODUCTS LTD: Huhtamaki Paper Products Limited was founded in 1935 and is headquartered in Thane, India. The company was formerly known as The Paper Products Limited and changed its name to Huhtamaki PPL Limited in May 2014. Huhtamaki PPL Limited is a subsidiary of Huhtavefa B.V. from Netherlands. The company have given bonuses in two tranches the first was in September 1987 in the ratio of 1:4 and second in September 1993 in the ratio of 1:2, Company also declared splits in the face value of its shares from Rs. 10 to Rs. 2 in January 2007. Huhtamaki PPL Limited provides packaging solutions in India. Its packaging solutions include flexible packaging products, including film, foil, and paper based laminate structures; labelling technologies, which include shrink sleeves, heat transfer, pressure sensitive, metalized paper, and wrap-around; and specialized cartons for packaging of powders and solids. The company also offers packaging machines comprising sleeve application machinery and shrink tunnels, heat transfer applicators, and support on labelling equipment for wrap around and self-adhesive labels; holographic options; metalized films; co-extruded blown films; extrusion coated materials; gravure cylinders; and polyethylene films. It serves various product groups, such as soaps and detergents, shampoos, noodles, biscuits, baby foods, chocolates, coffee, tea, milk powder, and juices. HPPL also exports its products to 5 continents. In 1999, PPL became a member of the Huhtamaki Packaging Worldwide, a global leader in consumer packaging. Huhtavefa BV is the holding company of Huhtamaki Netherlands BV, Netherlands. Huhtamaki is a global consumer & Speciality packaging company with a wide range of packaging products & other paper forming technology. In February 2014, Huhtamaki group increased its stake from 60.77 % to 63.78 % by acquiring 1,88,48,087 shares or 3.01 % stake from Mr. Suresh Gupta, Chairman of HPPL, at a total consideration of Rs. 169.63 Cr or Rs. 90 per share. Further, 1,00,24,744 equity shares were allotted to Huhtamaki group at Rs. 134.08 on 20th August 2014 totalling to Rs. 134.41 Cr, thereby increasing Huhtamaki’s stake from 63.78 % to 68.8 %. PPL has three state of the art & fully integrated manufacturing facilities at Thane, Silvassa and Hyderabad with highly skilled and experienced staff. HPPL is capable of working with the customer from product inception to the super market and with complete control and confidentiality. HPPL has an impressive client list that includes, Levers, Nestle, Cadbury, Britannia, Glaxo Smithkline, Coca Cola, Perfetti, Dabur, ITC, Marico, P&G. HPPL has presence across 4 continents: South Asia, Africa, Middle East, Europe and Central America & provides service to over 50 customers worldwide. As of March 31, 2014, HPPL has 51 % stake in its subsidiary based in India named Webtech Labels Pvt. Ltd, which was acquired in Nov 2012 for a consideration of Rs. 37.70 Cr, in an all cash deal. Webtech Labels is specialized in manufacturing high-end pressure sensitive labels, especially to pharmaceutical customers. Huhtamaki PPL can be locally compared with Uflex Ltd, Glory Polyfilms Ltd, Xpro India Ltd, Essel Propack Ltd (Packaging India Pvt. Ltd. - part of Essel Propack group), Shree Rama Multi Tech Ltd, Cosmos Films Ltd, Nahar Poly Films Ltd & from some unlisted players like Uma Polymers, Umax Packaging & Parikh Packaging and globally compared with Avery Dennison Corporation of USA, Ball Corporation of USA, Berry Plastics Group Inc of USA, Crown Holdings Inc of USA, Packaging Corporation of America of USA, Seal Air Corporation of USA, British Polythene Industries PLC of UK, Huhtamaki Oyji of Finland, Smurfit Kappa Group Plc of Ireland, Vetropack Holding AG of Switzerland, Polyplex (Thailand) Public Company Ltd of Thailand, The Pack Corporation of Japan, Lock & Lock Co., Ltd of South Korea, Greatview Aseptic Packaging Company Ltd of China, CPMC Holding Ltd of Hong Kong, Mpact Ltd of South Africa, Nampak Ltd of South Africa.

Investment Rationale:
Huhtamaki PPL Ltd. (HPPL) earlier known as The Paper Products Ltd. is India’s leading manufacturer of primary consumer packaging. HPPL supplies packaging materials for many of the top brands in India and commands about 60 % of market share in premium flexible packaging business. HPPL is India's leading Consumer Packaging Company offering a wide range of packaging solutions like Flexible Packaging, Labelling Technologies and Specialised Cartons and all this is supported by the Packaging Machine Division. HPPL provides the customer with Total packaging solutions. HPPL has very long and eminent clients list which includes all major players in FMCG sector. The company mainly caters to the premium segment of packaging and enjoys 60 % of market shares in premium segment. Its major clients include Britannia, Cadbury, Castrol, Coca Cola, Dabur, Emami, Eveready, GSK, Godrej, Hindustan Unilever, ITC, Marico, Nestle, Pepsi, Perfetti, P&G, Tata Tea, TTK-LIG, Wipro etc. The top ten clients only accounts for 60 % of the HPPL’s revenues. Product-wise, Laminates and Converted, Coated & Uncoated Paper and Films category accounts for a major portion of HPPL’s total revenues. HPPL derives around 80 % of its revenues from the domestic market, while exports account for the balance 20 %. HPPL is like a one stop shop for FMCG companies for their packaging needs. HPPL is specialised in flexible packaging and with a growing trend of processed food market and with the penetration of untapped rural markets by personal care companies, there will be the increase in use of flexible packaging. HPPL is amongst selected few companies worldwide having expertise in holographic images in packaging medium. This makes the packaging look attractive, thus enhancing the product visibility for premium positioning. Holograms are also popular as a deterrent against counterfeits for product protection. Flexible Packaging & Labelling is done at all facilities of HPPL, while Cartons are produced only at Hyderabad facility & Tube Laminates are produced only at Silvassa. HPPL derives almost 96 %-98 % of its revenues from the FMCG industry. Hence the company’s growth is largely linked to the growth of FMCG industry. Economic growth and rising personal disposable income are growth drivers for the consumer goods sector, which in turn improves the demand for packaging. The Packaging industry is expected to grow around 10-12 % CAGR in the medium term. With Growing rural demand, retail push, planned investments by large MNCs in the FMCG business and with the strong fundamentals of the Indian economy, will boost the growth in FMCG and this will consequently boost the growth for Flexible Packaging. As per Indian Brand Equity Federation (IBEF), FMCG industry in India is expected to grow at a CAGR of 14.7 % between 2012 and 2020, which will also help the growth of the packaging industry. With the increasing penetration in the rural and semi-urban areas along with the Government initiatives to boost the rural infrastructure is likely to improve the demand for FMCG products, thus in turn would indirectly will benefit the specialized flexible packaging players like HPPL, who offers value addition in the form of both product specific like high speeds on product filling lines, insulation from heat & moisture, high strength for supporting long distance transportation, holographic images & custom designed packaging solutions like brand image protection, protection from counterfeit and cost effectiveness. The management has indicated that certain trends like - use of plastic tubes instead of metal tubes and PET bottles instead of glass bottles would drive its addressable markets. Recent trend of using pouches instead of rigid packs for hair/edible oils would expand its market size further. With its strong parental support, HPPL has been able to introduce new product segments in India like Tube laminates, which is growing at a decent rate. For Huhtamaki group India remains one of the key focus markets, and this is evident from the increase in stake in HPPL over the last few months. Parental support would enable HPPL to widen its product portfolio. The parent or its group companies does not receive any substantial amount from HPPL except for commission expenses Rs. 77 lakhs on sale to South African Group Company. This indicates minimal transfer of profits from the Indian operations to the parent company, which is beneficial for the minority shareholders of HPPL.

Outlook and Valuation:
HPPL is a pioneer and the market leader in flexible packaging in India and has a market share of 60 % in premium flexible packaging business and about 9 % overall in the organized market, which is of about $2 billion by size. It has its manufacturing facilities at Thane, Silvassa, Hyderabad and Rudrapur. The current installed capacity of HPPL for paper & films is 52,000 MT and company’s capacity utilization rate is 75 % to 80 %. HPPL successfully meets the packaging needs of almost entire range of FMCG segments including personal products, personal wash, laundry, foods, sauces, beverages, bakery products, spices, chocolates and confectionery, dairy and also for seeds, specialized chemicals, electronics, healthcare and many other specific specialized uses including anti-spurious packaging. HPPL thus enjoys Competitive advantage due to use of its superior technology & capability. HPPL has an MNC Tag and with diverse products & Strategic acquisition of competitor, adds to its competitive advantage. In July 2014, HPPL acquired 100 % stake in Positive Packaging Industries Ltd. (PPIL was the part of Essel Group) for an enterprise value of Rs. 818 Cr inclusive of debt of Rs. 270 Cr. The transaction is expected to be closed in Q4CY14 and is likely to be funded through a mix of internal accruals, equity allotment. PPIL offers packaging solutions offers same products like HPPL. PPIL has 6 facilities in India: 2 in Bangalore, 2 in Ambarnath, 1 each in Taloja & Khopoli, which has been taken over by HPPL and 3 overseas facilities of PPIL, has been taken over by the parent company Huhtamaki. The current total installed capacity of PPIL in India is 45,000 TPA. With the acquisition of its competitor PPIL, HPPL is all set to become market leader in this space. This acquisition would almost double the HPPL’s turnover and it is likely to be an EPS accretive from the first year of acquisition itself. While the acquisition has increased the debt-equity of HPPL to 0.8x in CY14 from 0.1x in CY13, it is expected that the company will gradually repay its debt out of the strong cash flow generation expected over the next few years. The acquisition of competitor PPIL also enable HPPL gain further bargaining power with its customers, and will help to extend its customer network and would also help synergies in sourcing of inputs and up-gradation in technology. Huhtamaki Group has 100 % stake in almost all of its subsidiaries. The hike in holding by Huhtamaki in PPL since Feb 2014 from 60.8 % to 68.8 %, and with the change in name of the company from Paper Products to Huhtamaki PPL and with the fact that Huhtamaki has now complete control over almost all its subsidiaries signals that, Huhtamaki could probably look to delist HPPL in medium to long term period. Supported by parent company who is one of the world leaders in this sector, HPPL will have fullest support on innovations & technological side. On Financial side, HPPL has shown steady growth in the past and has maintained distributing its profits in form of dividends regularly. At CMP, HPPL is trading at a significant premium to its nearest competitor Uflex. This is despite Uflex having a larger business size & higher operating margins. Even on Market Cap to Sales ratio and Price to Book Value basis, HPPL is relatively expensive than Uflex. This is possibly due to the competitive advantage that HPPL enjoys over Uflex. With the acquisition of PPIL the value for HPPIL stake in PPIL comes at Rs. 87.41 per share and stake in Webtech Labels Pvt. Ltd comes at Rs. 6.01 per share. At the curent market price of Rs. 188.00, HUHTAMAKI PPL Ltd stock trades at P/E ratio of 14.46 x FY15E and 10.00 x FY16E respectively. Company can post Earning per share (EPS) of Rs. 13.00 for FY15E and Rs. 18.80. One can buy this stock with a target price of Rs. 250 for the shorter term and Rs. 400.00 for Medium to Long term investment. 

SALES ( Crs)1,074.801,398.712,650.713,061.03
NET PROFIT (₹ Cr)51.2263.8894.48136.80
EPS ()8.208.8013.0018.80
PE (x)22.4020.9014.109.70
P/BV (x)2.901.501.401.30
EV/EBITDA (x)8.8012.306.705.30
ROE (%)
ROCE (%)19.606.6012.4016.30

I would buy HUHTAMAKI PPL LTD for Medium to Long term for target of Rs. 400.00 and for the shorter term the target would be Rs. 250.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 173.00 (for short term players only) on every purchase(Why Strict stop loss of 8 % ?) - Click Here

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