Manjushree Technopack - Packing The FMCG, Food & Pharma World

One Of The Better Company In One Of The Worse Sector!!!!!!

Founded in 1977 by Vimal Kedia, Manjushree started as a small umbrella manufacturing unit in Guwahati, Assam and thereafter in 1984 forayed into manufacturing of flexible plastic packaging. Manjushree came up with its first IPO in 1995 in order to raise funds for establishing its PET bottle manufacturing unit in Bangalore.  Today, Manjushree is the largest converter of PET and Preforms in India with an installed capacity of 80,000 MTPA and caters to the packaging needs of a large section of the FMCG fraternity. Besides PET, Manjushree also manufactures Oxygen Barrier Retortable Multilayer and Stretch Blow Moulded bottles - both of which were brought into India for the first time by Manjushree.

Manjushree has built expertise in all kinds of rigid plastic packaging solutions, including – PET, PP, Multilayer-
barrier containers and PET preforms that utilize European, Japanese and Canadian technologies. In the last year,
it has commissioned two more state of the art Husky System for PET Preforms and four ASB blows moulding machines to manufacture PET bottles for the beverage and bottled water industry.

Products:
1) PET - Jars and Bottles
2) PP (Poly Propelene) - Jars and Bottles
3) Multilayer Barrier Containers
4) Hot Fill PET Bottles
5) Other Moulded Products

Industries Served By Manjushree Technopack:
- Tea & Coffee - Pharmaceuticals - Confectionery - Fruit juices - Aerated Beverages
- Liquor - Sauces & Ketchups - Household cleaners - Pickles - Health Supplements
- Mineral water - Promotional items - Spices

The Packaging Industry is considered to be one of the world’s largest diversified sector and is ranked 9th
amongst the top 10 industry sectors in the world. The total size of the Indian packaging industry is about $25 billion with an annual growth rate of about 13-15% per annum.

Manjushree has forayed into new segments to diversify like liquor, personal care, dairy and edible oils. Companies such as United Spirits, Reckitt Benckiser, Bacardi, Diageo and Big cola for PET bottles and PET Preforms business have been added to the company’s portfolio in the past few quarters.

Find entire list of clients here:
Link: Click Here

According to management, the company stepped up promotional activities in international markets through active participation in various international exhibitions and conferences. The latest manufacturing facility in Bidadi that is set up with an investment of Rs. 150 crore has boosted Manjushree’s current production capacity to 80,000 million tonne per annum. It is a LEEDs certified eco-friednly manufacturing plant with cutting-edge automation and modernization.
Going strong in line with company’s expansion plans, the construction of the fourth unit, which is a green-field project in Harohall Industrial Area in Bangalore is underway and is expected to be completed by March 2014.
Moving beyond FMCG and liquor, Manjushree has made significant inroads into sectors such as dairy, agro-chemicals and specialized pharma segment - nutracenticals.

Moving onto numbers now,
Over the past 5 years, company has been growing at a CAGR of 27.5% in sales, and 26.3% in net profit.
For the first 9 months ending Dec '13,
The Revenues have grown by 22% YoY, and Net Profit has declined by 14% YoY.
The numbers are muted mainly because of higher input cost aided by Rs depreciation.
The good thing is that the exports are growing significantly over last 1 year, and the company is taking steps to improve it further.
In times to come, I think the profits will go back to normal, and sales, on the other side, will continue to impress, hence future looks bright. But that can take its own time.

Major Risks:
The company debt levels are a bit on the higher side, but that is because of the business model of the company, justified by CRISIL below. Finance cost is very high off-late.

According to CRISIL, Manjushree will maintain steady revenue growth, supported by healthy demand from its end-user segments, and its established position in the plastic packaging industry, over the medium term. Manjushree's operating profitability is expected to be sustained at healthy levels of 19-21% over the same period. The company's financial risk profile is also expected to remain adequate, supported by steady cash generation; however its gearing levels, will continue to remain at average levels despite some moderation (from levels of 1.8 times at March 31, 2013), due to continuing partly debt funded capital expenditure (capex) and working capital intensive nature of operations.

My Views:
At CMP of 155, the stock is trading at P/E ratio of 8.7 based on Mar '13 numbers. The ratio is expected to be around 9 after results of Mar '14, as the profitability is expected to be slightly lower than Mar '13. The ratio makes Manjushree much cheaper than its peers. The revenues for FY14 is expected to be around 430 Cr, and profit is expected to be around 22 Cr. Off-late, we have seen good amount of promoter buying also in the counter, which raises hopes of company performing much better in quarters to come.
The company has paid dividends regularly, thought not a very high one.
Do enough research work before making investment in the company, as suggested every time.