Recommendation from Containers & Packaging

This column gives you a scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

TCPL PACKAGING: GROWTH DRIVEN BY SUSTAINABLE SOLUTIONS

HERE IS WHY
✓ Demand for packaging on the rise
✓ Ambitious plan to increase capacity
✓ Devising environmentally friendly products

The demand for packaging in India has skyrocketed, driven by strong expansion in consumer markets particularly in the processed food, personal care and pharmaceutical end-user industries. Packaging is one of India’s fastest growing industries. In recent years, the industry has been a vital driver of technology and innovation, contributing to a variety of manufacturing industries such as agriculture and fast-moving consumer goods (FMCG). Factors such as increasing population, rising income levels and changing lifestyles are expected to drive consumption across numerous industries, resulting in increased need for packaging product solutions. 

According to Mordor Intelligence, the size of India’s packaging market is estimated to be USD 71.90 billion in 2023 with projected growth to reach USD 130.14 billion by 2028. The market is expected to experience a compound annual growth rate of 12.60 per cent during the period 2023-2028. In the packaging sector, TCPL Packaging Ltd. is recommended as a noteworthy company. TCPL is one of India’s leading producers of sustainable packaging solutions forcustomers across industries. The company partners with customers to provide paperboard-based packaging solutions including folding cartons, printed blanks and outers, litholamination, plastic cartons, blister packs and shelf-ready packaging. 

TCPL has also ventured into the flexible packaging industry with the capability to produce laminates, sleeves and wraparound labels. It is a leading supplier to the tobacco, liquor, consumer goods and food packaging industry in India. In Q4FY23, on a consolidated basis its revenue rose by 18.64 per cent YoY to ₹383.38 crore compared to ₹323.14 crore from the previous year same quarter

The PBIDT excluding other income increased by 35.64 per cent to ₹63.60 crore YoY as compared to ₹46.89 crore from the previous year same quarter. Net profit stood at ₹24.15 crore compared to ₹16.44 crore, a YoY increase of 46.88 per cent. Recently, TCPL has successfully commissioned an advanced offset printing line and associated equipment at its Silvassa facility. It has plans to install a new line at its Haridwar facility and establish a third line in its flexible packaging plant.

It expects to increase its effective capacity for cartons by 14,000-15,000 tonnes from the current 100,000 tonnes. Flexible packaging is expected to increase by about 6,000 tonnes on a base of 10,000 tonnes. TCPL operates eight manufacturing units across five locations. The company is well-positioned to meet the growing demand for environmentally friendly packaging solutions. TCPL has a wide range of sustainable packaging products, including recyclable and compostable packaging. This focus on sustainability is expected to drive its future growth.

TCPL’s major sustainability initiatives can generate more revenue in the future, which are in the areas of replacement of plastic in food packaging and e-commerce. The company is currently trading at a PE of 12.4x as against the industry PE of 18.8x and lower than its three-year median PE of 12.8x. In the last three years company has delivered average ROE of 18.6 per cent and ROCE of 17.2 per cent, respectively. Taking into account the company’s business and its expanding market, we recommend BUY.