Turnaround in Packaging Stocks: 4 Companies to Watch Out For...

Packaging is currently the fifth largest sector in the Indian economy. This reflects its pivotal role in driving industrial growth and innovation.

With an annual growth rate of 22-25%, the industry has become a preferred hub for packaging solutions, bolstered by advancements in technology and infrastructure.

The India Packaging Market was valued at US$ 50 billion (bn) in 2019. It's expected to reach US$ 205 bn by 2025, registering a CAGR of 26.7%.

The demand for packaging in India has expanded drastically, spurred by the rapid growth in consumer markets, especially in processed food, personal care, and pharmaceutical end-user industries.

The packaging industry is also driven by the factors such as rising population, increasing income levels, and changing lifestyles.

According to the Indian Institute of Packaging (IIP), the packaging consumption in India has increased 100% in the past decade, rising from 4.3 kg per person per annum (pppa) to 8.6 kg pppa as on FY20.

India is also emerging as a key exporter of packaging materials. US remains the major export destination for the packaging industry, followed by the UK, the UAE, Netherlands, and Germany.

In this article, we will look at the top stocks that are present in the packaging sector in India.

Read on...

#1 Polyplex Corporation

Polyplex Corporation is engaged in manufacturing of BOPP, blown PP/PE and CPP films used in the flexible packaging industry and in industrial uses like release liners, tapes, labels etc.

The company has 7 manufacturing facilities in 5 countries with multiple warehouses and liaison offices worldwide. It has an industry presence of more than 35 years.

Polyplex is ranked #2 globally (ex-China) in thin BOPET film capacity with market share of about 10%. The company is a leading global PET film manufacturer with a capacity of 0.5 million metric tonnes per annum.

The company derives 69% of its revenue from the food and non-food packaging segments and the balance 31% come from the industrial segment.

Polyplex has a large international presence with sales in all major international markets - more than 90 countries - with an active customer base of 2,600+ customers.

Coming to the financials, Polyplex reported an 8% revenue growth in Q1FY25 with operating profit growth of more than 160%. EBITDA margins expanded significantly from 3.9% in Q1FY24 to 9.7% in Q1FY25.

Going forward, management has guided for continued recovery in demand for both industrial and packaging segments. The management is taking conscious efforts to expand the portfolio and improve margins even further.

The stock is up 30% in the last one year due to strong operational performance.

#2 Jindal Poly Films

Jindal Poly Films Limited is a part of the B. C. Jindal group. It is one of the largest manufacturers of BOPET and BOPP films in India. The company produces BOPET, BOPP, CPP, thermal, metalised and coated films.

The company derives 79% of its revenues from the packaging films segment, 14% from non-woven fabrics, and the balance 7% from the labels division.

Jindal Poly Films exports its products to more than 80 countries with an export share of 30% in revenues.

The company has BOPET and BOPP capacities of 173,000 tonne per annum (TPA) and 294,000 TPA, respectively. It also has a strong position in the high-value-added metalised films market, with consolidated capacity of 100,000 TPA, and in coated products, with capacity of 11,000 TPA.

Jindal Poly Films' BOPET business is backward integrated which mitigates the inherent volatility in raw material costs.

The company recently announced a setup of its new BOPP production line at its Nashik plant which will significantly increase production capacity and is expected to provide cutting edge technology to the market.

Coming to the financials, the company reported a robust revenue growth of 48.3% in Q1FY25. EBITDA growth came in at 176%. EBITDA margins also improved significantly to 38.4% in Q1FY25.

Jindal Poly Films stock is up 39% in the last one year on the back of sustained financial performance.

#3 Cosmo First

Established in 1981, Cosmo First (previously Cosmo Films Limited) is engaged in specialty films for packaging, lamination, and labelling applications.

Its films offerings include biaxially oriented polypropylene (BOPP) films, cast polypropylene (CPP) films. It will also soon offer biaxially oriented polyethylene terephthalate (BOPET) films.

The company is the largest BOPP film exporter from India and 2nd largest player in speciality label films.

Cosmo First derives 50% of its revenues from packaging films segment, 24% from lamination films, 10% from label films, and the balance 16% from industrial films.

Geographically, the company derives 52% sales from domestic markets and the balance 48% from exports.

Cosmo First has a broad customer base including marquee clientele likes of Amcor, Coveris, Coca Cola, Hindustan Unilever, Cadbury, Pepsi etc.

The company has 4 state of the art manufacturing facilities, 3 in India and 1 in South Korea. It's BOPP capacity is at 0.2 million metric tonnes per annum.

Cosmo First also has an additional capacity of 0.14 million metric tonnes per annum for other products such as metalized films, thermal lamination films, etc.

Coming to the financials, the company reported a growth of 4.9% in its consolidated revenues. However EBITDA grew by 91% for Q1FY25. EBITDA margins almost doubled to 9.8% versus 5.4% in the previous year.

Shares of Cosmo First are up 51% since in the last one year. The stock is up by 13.5% in the past one month.

#4 Nahar Polyfilms

Incorporated in 1988, Nahar Poly Films Ltd. manufactures transparent & metalised flexible packaging films.

The company manufactures BOPP films of varied grades and thicknesses that find application in laminations, reverse printing, packaging, decoration, tapes, and textile bags. It supplies to more than 200 customers in India.

The company derives 91% of its revenues from the domestic market and the balance 9% from exports. Also, the company's top 10 customers account for more than 54% of the revenues.

Nahar Polyfilms had an annual production capacity of 30,000 tonnes at its factory in Raisne, Madhya Pradesh. In 2022, the company put up 2nd line of BOPP project with a capacity of 30,000 tonnes per annum taking the total capacity to 60,000 tonnes per annum.

Nahar Polyfilms reported 7.4% growth in consolidated revenues. EBITDA almost tripled YoY in Q1FY25. EBITDA margins came in at 8.9% as compared to the previous year's 2.2%.

Shares of Nahar Polyfilms are up 45% in the last year. Also, the stock is up 30.2% in the past one month.

Conclusion

As seen in Q1FY25 results, majority of the packaging sector companies have reported robust financial performance with accelerated sales growth along with strong margin expansion.

This solid beat in margins was led by lower raw material costs and better operating efficiency from operating leverage.

The packaging sector in India is experiencing robust growth, driven by rising consumer demand, increased urbanisation, and advancements in technology.

As industries across various sectors continue to prioritise sustainability and innovation, the packaging industry is adapting with eco-friendly materials, smart packaging solutions, and improved efficiency.

Despite challenges such as regulatory compliance and fluctuating raw material costs, the sector remains a crucial component of India's economic landscape.

Remember the challenges of investing in this sector before diving headfirst. A packaging company's performance is dependent on the economic growth of the country and raw material price volatility which can impact its margins significantly.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...