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Showing posts with label Polyplex Corporation. Show all posts
Showing posts with label Polyplex Corporation. Show all posts

Tuesday, July 27, 2021

Value Pick - Polyplex Corporation - ROI of 109% in 10 Months

Dear Reader,

Value Pick stock of Aug 2020 - Polyplex Corporation (BSE Code: 524051, NSE Code: POLYPLEX) which we released on 13th Sept'20 is giving returns of 109% to our Value Picks members in period of 10 months. We suggested Buy on Polyplex Corporation at price of Rs. 711 with a target price of Rs. 1160.

We are pleased to inform you that Polyplex Corporation stock made its all time high of Rs. 1565 recently and closed at Rs. 1482.60 today giving absolute returns of 109 percent. Polyplex Corporation is a 2-Bagger stock for our Value Picks members in period of 10 months.

Net profit of Polyplex Corporation rose 445.58% to Rs 125.32 crore in the quarter ended March 2021 as against Rs 22.97 crore during the previous quarter ended March 2020. Sales rose 8.76% to Rs 1294.16 crore in the quarter ended March 2021 as against Rs 1189.91 crore during the previous quarter ended March 2020.

For FY2020-21, net profit rose 81.47% to Rs 511.81 crore in the year ended March 2021 as against Rs 282.04 crore during the previous year ended March 2020. Sales rose 9.61% to Rs 4918.27 crore in the year ended March 2021 as against Rs 4487.10 crore during the previous year ended March 2020.

Below is the summary of Polyplex Corporation shared by us under Value Pick stock - Aug'20 released on 13th Sept 2020.

1. Company Background:

Polyplex Corporation Multibagger Stock
 Corporation Limited is the flagship company of the Polyplex group, promoted by Mr. Sanjiv Saraf. The company is engaged in manufacturing of PET films (Polyethylene terephthalate films) and BOPP films (Biaxially Oriented Polypropylene films). PET and BOPP films are applied in the flexible packaging market. Polyplex Corporation Ltd has the fifth-largest capacity of polyester (PET) film globally. Its polyester capabilities include both thin and thick PET film in a wide range of thickness and surface properties covering a spectrum of applications. Since inception in 1984, the company has grown from a small single-line facility at Khatima in the foothills of the Himalayas in India, into more than half a billion-dollar multinational presence with manufacturing and distribution facilities in India, South-East Asia, Europe and the Americas.


The Polyplex model of expansion moves it closer to its regional markets to deliver more efficiently and cost-effectively to its customers. Its fully integrated green-field film lines with upstream resin plants and downstream metallizers and other offline coating capabilities ensure cost-competitiveness, environmental friendly besides bringing the advantages of a single-point supply for a portfolio of film products to its customers. It has a unique model of on-shore, off-shore and near-shore business locations which complement its focus on customer relationship, access & intimacy.


The company’s diversified business portfolio also includes BOPP, Blown PP/PE and CPP films produced in state-of-the-art plants with economic size. Integrated downstream capabilities of Metallizing, Holography, Silicone Coating, Offline Chemical Coating, Extrusion Coating and Transfer Metallized Paper deliver further value-added products.


The company has a global presence, supplying to about 1900 customers in 83 countries across Europe, the Americas, the Indian sub-continent, Far East, Asia Pacific and the Middle East.


Being one of the leading PET Film manufacturers, Polyplex operates close to its key regional markets, with manufacturing and supply points across the world. It runs integrated manufacturing & distribution operations in six countries viz. India, Thailand, Turkey, U.S.A., Indonesia & Netherlands.


The company offers innovative solutions to its partners. Consequently, Polyplex has successfully adopted the 3R (reduce, reuse and recycle) concept while coming up with new-age packaging substrate solutions. It has taken various initiatives to recycle waste, save energy and use clean technology to reassert its environmental commitment and continually strives to manufacture sustainable products which can gain global acceptance, for example green candy wraps, direct digital printable films, transparent chlorine-free high-barrier films, UV printable carton lamination films, shrink sleeve wraps and label films, etc.


The company has been consistently introducing specialty products with various innovative applications and uses. Recent examples include films for back sheets of solar panels, thick films for electrical and electronic appliances, easy-to-tear packaging films for food and cosmetics, foldable films for medical and industrial uses, high-barrier high-adhesion films for metallic surfaces, transparent barrier films for food packaging, specialty-coated PET films and films for print media suitable for digital printable and UV inks, among others.


Polyplex has come up with several projects focusing on CO2 footprint reduction. Digital printing offers high-quality graphics without the usage of solvents unlike conventional printing techniques such as Flexo and Rotogravure. With a lot of technologies available for digital printing itself, the company has been able to develop products for most segments suitable for different digital technologies such as inkjet, dry toner, liquid electro-photography, etc.

2. Recent Development: (as on 13th Sept'20)

Polyplex Corporation board declares interim dividend of Rs. 32 – Aug 2020

The Board of Directors of Polyplex Corporation Ltd have declared payment of Interim Dividend for the Financial Year 2020-21 @ Rs. 32 per share (of the face value of Rs. 10 each), subject to TDS / Withholding Tax.

Other than interim dividend, the Board of Polyplex Corporation Ltd also declared Final Dividend of Rs. 6 (Rupees Six only) per equity share of the Face Value of Rs. 10 each for the Financial Year 2019-20. Record Date for the purpose of payment of Interim Dividend for the Financial Year 2020-21 as well as final dividend for FY 2019-20 was 26 Aug 2020.

The dividend yield at current price is attractive at 4.50 percent.

ii) Expansion of BOPET line in Indonesia – Nov 2019

Polyplex Corporation commissioned a BOPET line in Indonesia in November 2019, increasing its capacity by 16 percent.

The management has planned capex over FY20–22 on which it is targeting 15 percent incremental pre-tax return on capital employed. The following projects are under implementation. The capex cost for BOPP Line in Indonesia is around INR 400 crores and other projects aggregate to around INR 275 crores. A substantial amount of the capex is expected to be spent in FY 2020-21.

Expansion in BOPP segment will enable the company to actively participate in new developments in sustainability. Other benefits related to on-going Projects are:

  • Expansion of product portfolio
  • De-bottlenecking of existing film lines
  • Increasing the share of speciality films
  • Recycling Project - additional step towards sustainability   
3. Financial Performance:

Polyplex Corporation net profit rises 120.50% in the June 2020 quarter

Net profit of Polyplex Corporation rose 120.50% to Rs 178.63 crore in the quarter ended June 2020 as against Rs 81.01 crore during the previous quarter ended June 2019. Sales rose 3.80% to Rs 1159.59 crore in the quarter ended June 2020 as against Rs 1117.09 crore during the previous quarter ended June 2019

Polyplex Corporation net profit declines 77.46% in the March 2020 quarter

Net profit of Polyplex Corporation declined 77.46% to Rs 22.97 crore in the quarter ended March 2020 as against Rs 101.90 crore during the previous quarter ended March 2019. Sales rose 2.43% to Rs 1189.91 crore in the quarter ended March 2020 as against Rs 1161.69 crore during the previous quarter ended March 2019.

For the full year, net profit declined 14.54% to Rs 282.04 crore in the year ended March 2020 as against Rs 330.04 crore during the previous year ended March 2019. Sales declined 1.81% to Rs 4487.10 crore in the year ended March 2020 as against Rs 4569.89 crore during the previous year ended March 2019

4. Investment Rationale: (as on 13th Sept'20)

i) The outlook for PET film industry remains positive on account of growth in flexible packaging industry as well as emerging application of PET films in photovoltaic, display and optical films driven by increased demand for renewable energy sources and expanding sales of smartphones, tablets, flat screen TVs. Moreover, during the current Covid 19 pandemic, there has been elevated demand for packaged foods due to its inherent properties of safety & hygiene thus mitigating the risk of contamination. Also the move from unpackaged to packaged is expected to gather further momentum especially in Asia considering increase in packaged product consumption due to hygiene and safety.

ii) Diversification into various substrates has helped the company to establish itself as a complete packaging film provider. The thick film line and the blown film lines in Thailand as well as the new blown film line in Turkey seek to strengthen our presence in the diverse industrial end use segments also besides flexible packaging. The company has accelerated investments in niche downstream products to exploit synergies, broad-base the portfolio and provide a scalable platform for further growth. The setting up of extrusion coating lines in Thailand, silicone coating lines in India and Thailand, offline coaters in India, Turkey & Thailand comprise such downstream investments.

iii) The company has strong and deep customer relationships, access & intimacy which are backed by a combination of onshore and near-shore business model. In the current socio-political environment (post Covid-19), there is an increasing risk aversion towards concentrated supply chains and trend towards de-globalization with a preference for local/regional suppliers and shorter supply chains. Our value proposition of distributed manufacturing base has an advantage as compared to the other participants with concentrated capacities and has helped achieve status as Tier-1/Strategic supplier in several large/multi-national customers/groups.

iv) Focus on innovation and collaborative application development helps the company become a preferred supplier/partner with several large multinational customers. The company has developed and optimized “chemical recycling” process for manufacturing Sarafil rPET Polyester film with recycled content up to 90 percent. The company developed various biodegradable films (PET, Blown PP/ PE, CPP) which meet the requirements of anaerobic biodegradation either in accelerated land fill or high solids anaerobic conditions complying to ASTM D5511 & D5526 standards. It has recently added capacity to a facility in Thailand for recycling in-house and sourced plastic waste. The company has decided to further invest in a new post-consumer bottle flake washing and recycling project which would further add impetus to its sustainability agenda.

v) The company has established itself as one of the most profitable producers of PET Film by way of cost efficient operations resulting from high productivity and low overheads. Its products have gained wide acceptance in the global markets, such as the United StatesEuropeSoutheast AsiaSouth America and Australia, where the company has been consistently exporting a substantial part of its production. Polyplex has a global footprint providing customers a low-risk, reliable and cost effective supply chain and is a preferred strategic partner in flexible packaging. The company has 6 manufacturing facilities in 5 countries with multiple warehouses & liaison offices worldwide.

vi) Polyplex corporation holds 51% stake in its listed subsidiary, Polyplex (Thailand) Public Corporation. Polyplex Thailand has market capitalisation of INR 4,455 crore and is available at price to book value of 1.46. However, Polyplex corporation has market capital of INR  2,274 crore and is available at P/B of 0.75. Hence, Polyplex corporation is trading at almost 50 percent discount to Polyplex Thailand market capital. Moreover, peer group companies in India like Cosmo Films and Jindal Polyfilms are trading at price to book value above 1 with higher price to earnings multiple whereas Polyplex corporation being market leader is available at lower valuations.

vii) Polyplex corporation has strong R&D capability. The company has a separate R&D department registered with the Department of Scientific and Industrial Research (DSIR), Ministry of Science and Technology (India). It has 15 dedicated personnel in corporate R&D supplemented by local technical service and R&D team having significant experience in chemicals, coatings, resin, customer process and relevant fields with focus on providing innovative solutions to customers. Total 18 patents (across products, processes & countries) and 5 trademarks (across brands and countries) are granted to the company.

viii) The company has a large international presence with active sales in all major regional markets/countries with an extensive base of about 1,900 customers and low customer concentration. Its top 10 customers contributed 28% of revenues in FY 2019-20. Almost 67% of the company’s revenues were from PET films (thin and thick) in FY 2019-20. Of the total sales of the group, 65% was accounted by ultimate end-users.

ix) To enhance its competitive advantage and differentiation, the company has been continuously investing in Business Process Improvement and Excellence programs. A BPE (Business Process Excellence) team is continuously working to undertake several Group-Level initiatives to improve company’s business processes and optimizing cost through continuous improvement in the areas of freight, packing, inventory management, electrical and thermal energy consumption, indigenization of spares, waste reduction & reuse of waste material, CRM and customer complaint handling. The benefits from these BPE programs have been continuously accruing over the last 5-6 years and significant incremental benefits are expected in the future as well.

x) As per our estimates, Polyplex corporation can deliver PAT of 455 crores for FY 2021-22 with estimated EPS of Rs. 144.90. At current price of Rs. 711, stock is attractively valued at price to earnings multiple of 4.9x based on expected earnings of FY 2021-22. Assigning reasonable P/E ratio of 8 on estimated EPS for FY21-22 considering market leadership position of the company, focus on increasing contribution of innovative and value added products, robust demand scenario and subdued raw material prices, we arrive at price target of Rs. 1160.

5. Key Concerns & Risks:

PTA (Purified Terephthalic Acid) and MEG (Monoethylene Glycol), being derivatives of crude oil, their prices move in tandem with crude oil prices. Polyplex group’s profitability margins remain susceptible to any adverse movement in the prices of raw materials.

ii) The company’s overseas subsidiaries have availed term borrowing denominated in Euro and USD and hence remain exposed to forex risk on account on any adverse movement in the foreign currencies.

iii) Given the environment hazards of plastics, the sector remains sensitive to the government regulations.

6. Saral Gyan Recommendation: (as on 13th Sept'20)

Polyplex corporation is one of the lowest cost manufacturers globally, driven by scale economies, operational excellence, vertical integration and strategic manufacturing locations. The company is promoted by Mr Sanjiv Saraf who is the chairman of the company and has more than 35 years of experience in the corporate world. The top management of the company comprises qualified professionals from diverse fields ably supported by experienced staff with long industry experience.

Diversification into various substrates has helped the company to establish itself as a complete packaging film provider. The thick film line and the blown film lines in Thailand as well as the new blown film line in Turkey seek to strengthen its presence in the diverse industrial end use segments also besides flexible packaging. The company offers unique value through differentiated products and applications leading to a healthy growth in mix of specialty, innovative and value added products in its portfolio. The recent investments in Holography machines in India, Thailand & Turkey besides paper metallizing business in India will further provide opportunities for enhancing its range of value added products thus improving overall profit margins.

Considering robust growth outlook of PET film industry on account of growth in flexible packaging and the company’s recent capacity addition, favourable demand supply scenario, rising share of its value added films and attractive valuations with dividend yield of 4.5 percent, Saral Gyan team recommends “Buy” on Polyplex Corporation Ltd at current market price of Rs. 711 for target of 1160 over a period of 12 to 24 months.

Buying Strategy:
  • 70% at current market price of Rs. 711
  • 30% at price range of Rs. 570 - 620 (in case of correction in stock price in near term)
Portfolio Allocation: 3% of your equity portfolio.

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