· With increasing awareness of masses about cleanliness and hygiene of food consumed during out of home situations, the demand for this kind of packaging is just zooming up.
· Company is trebling it capacity at the cost of Rs 240 Crs, which is completing in April'10 and thus growth potential is huge in coming years.
· Co. is also expanding the range of products to cater to the needs of different set of consumers and focusing on brand building, which will improve realizations and thus margins.
· Company's fundamentals are quite robust, with estimated EPS for current year, over Rs 37-38/- and Cash EPS 55-56. With present BV of Rs 205, and estimated BV of Rs 240 after March'10 results.
The expansion of Rs 240 Crs which is almost complete was funded earlier in 2007-08. At that time company raised about Rs 125 Crs through QIP route [placement to select institutional investors in Jan'08 at Rs 225 to 260 around]. So whereas most of the equity dilution has already happened, the fruits of this mega expansion [which will triple the capacity] will be visible from 2010-11.
The management confidence in outlook of company is visible from sustained rise in promoter's holding from 28.96% in March 09 to around 37% as of today. [after latest 3.09% stake acquisition in April'10].
Further even at current price you are getting shares at about Rs 100/- lower then QIP investors, who bought in Jan'08.
Looking to the robust demand of these products, significant ramp up in capacities and strong fundamentals, the valuations are looking too attractive. We renew our buying recommendation [earlier at Rs 88/- in May'09] with revised target of Rs 225 in next 3-4 months [earlier target was Rs 180/-] BUY.
