Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

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Regulatory Disclosure: 
Note that Ankit Agrawal (Proprietor of Yellowstone Equity) is a SEBI registered Research Analyst (Registration No.: INH000007216). Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

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Compliance/Grievance Officer:
Name: Ankit Agrawal
Email: services@yellowstoneequity.com
Mobile: +91-7575817289
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Equity Bottom-Up

<ul>
<li>Rajshree Polypack's (RPPL's) Q4FY23 came in weaker than expected on both the sales volume and the margins front. Higher depreciation and interest costs led by capex further dampened the profitability.</li>
<li>However, RPPL is executing well on its revenue growth targets led by regular capex led investments. It is on track to do INR 450cr revenues by FY25.</li>
<li>RPPL has potential to post a PAT of INR 30cr+ by FY25, suggesting that RPPL is available at around 6x P/E on a base of FY25E PAT.</li>
</ul>


Rajshree Polypack's (RPPL's) Q4FY23 came in weaker than expected on both the sales volume and the margins front. Higher depreciation and interest costs led by capex further dampened the profitability.
However, RPPL is executing well on its revenue growth targets led by regular capex led investments. It is on track to do INR 450cr revenues by FY25.
RPPL has potential to post a PAT of INR 30cr+ by FY25, suggesting that RPPL is available at around 6x P/E on a base of FY25E PAT.


RPPL: Q4 Weaker than Expected But On Track for Strong Earnings Growth Through FY25

<ul>
<li>Q3FY23 tends to be the weakest quarter seasonally. Volume de-growth was -10% QoQ, in line with the expectation as per historical seasonality trend.</li>
<li>Q4FY23 is all set to be a strong quarter. Management is confident of closing FY23 as per the previously stated revenue and margin guidance.</li>
<li>The new value-added segment, Barrier Packaging, has started to contribute meaningfully to the revenue. Tube Laminates, another value-added segment, will also start to contribute soon.</li>
</ul>


Q3FY23 tends to be the weakest quarter seasonally. Volume de-growth was -10% QoQ, in line with the expectation as per historical seasonality trend.
Q4FY23 is all set to be a strong quarter. Management is confident of closing FY23 as per the previously stated revenue and margin guidance.
The new value-added segment, Barrier Packaging, has started to contribute meaningfully to the revenue. Tube Laminates, another value-added segment, will also start to contribute soon.


RPPL: Q3FY23 Was Seasonally Weak As Expected, But Q4FY23 Is On Track To Be Strong

<ul>
<li>EBITDA per kg in Q2FY23 declined to INR 29.5 vs INR 35+ QoQ, due to one-off items and marginal decline in volume due to seasonality.</li>
<li>However, RPPL is on track for FY23 EBITDA of INR 37cr+ in line with our prior projection, with EBITDA per kg at INR 34-35 and volume at INR 11,000+ MT.</li>
<li>
<a href="https://www.smartkarma.com/entities/rajshree-polypack-ltd" target="_blank" data-smartkarma-citation="entities:33486:1" rel="noopener">Rajshree Polypack (RAJPPL IN)</a> continues to introduce new products including its venture into injection molding technology as well as sustainable packaging for disposable cutlery.</li>
</ul>


EBITDA per kg in Q2FY23 declined to INR 29.5 vs INR 35+ QoQ, due to one-off items and marginal decline in volume due to seasonality.
However, RPPL is on track for FY23 EBITDA of INR 37cr+ in line with our prior projection, with EBITDA per kg at INR 34-35 and volume at INR 11,000+ MT.

Rajshree Polypack (RAJPPL IN) continues to introduce new products including its venture into injection molding technology as well as sustainable packaging for disposable cutlery.


Rajshree Polypack (RPPL): Weak Q2 Was Due to One-Off Items, However FY23 Is On Track As Per Guidance

<ul>
<li>Q1FY23 earnings came in strong for RPPL led by robust demand and margin expansion. Volumes grew by 23.6% YoY and 24.5% QoQ.</li>
<li>Operational EBITDA per kg grew by 25%+ YoY and 36%+ QoQ to INR 37.5+ per kg as the price rise in raw materials was passed on.</li>
<li>RPPL has guided for a strong FY23. It can clock a volume of 10500+ MT and EBITDA of INR 35+ per kg, barring any adverse volatility in raw material prices.</li>
</ul>


Q1FY23 earnings came in strong for RPPL led by robust demand and margin expansion. Volumes grew by 23.6% YoY and 24.5% QoQ.
Operational EBITDA per kg grew by 25%+ YoY and 36%+ QoQ to INR 37.5+ per kg as the price rise in raw materials was passed on.
RPPL has guided for a strong FY23. It can clock a volume of 10500+ MT and EBITDA of INR 35+ per kg, barring any adverse volatility in raw material prices.


RPPL: Strong Earnings Led by Robust Demand and Margin Expansion

<ul>
<li>RPPL posted a decent FY22 despite significant rise in the raw material costs. Sales volume grew 30%+ and EBITDA per kg improved by 11%.</li>
<li>FY23 is likely to be robust for RPPL. Revenue growth is likely to be strong at 20%+. Margins are guided to expand to 15%+ level from current 13.5%.</li>
<li>RPPL is consistently improving the mix of value-added products like Barrier Packaging and Tube Laminates. Contribution from Barrier Packaging is likely to grow to 10-15% in FY23 from 5% currently.</li>
</ul>


RPPL posted a decent FY22 despite significant rise in the raw material costs. Sales volume grew 30%+ and EBITDA per kg improved by 11%.
FY23 is likely to be robust for RPPL. Revenue growth is likely to be strong at 20%+. Margins are guided to expand to 15%+ level from current 13.5%.
RPPL is consistently improving the mix of value-added products like Barrier Packaging and Tube Laminates. Contribution from Barrier Packaging is likely to grow to 10-15% in FY23 from 5% currently.


India

Rajshree Polypack Limited manufactures packaging products. The Company offers coffee cups, trays, lids, plates, bowls, and other containers, as well as plastics rigid sheet. Rajshree Polypack serves dairy, beverages, retail, pharmaceuticals, and electronics industries in India.

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Rajshree Polypack (RAJPPL IN)

RPPL: Q4 Weaker than Expected But On Track for Strong Earnings Growth Through FY25

RPPL is on track to do INR 450cr revenues by FY25 vs INR 250cr+ in FY23. At current valuation, an investment in RPPL has potential to more than...

Ankit Agrawal, CFA

RPPL: Q3FY23 Was Seasonally Weak As Expected, But Q4FY23 Is On Track To Be Strong

An investment in RPPL has potential to almost double over the next couple of years led by increased contribution from value-added products,...

Ankit Agrawal, CFA

Rajshree Polypack (RPPL): Weak Q2 Was Due to One-Off Items, However FY23 Is On Track As Per Guidance

We estimate an upside potential of 80%+ over the next couple of years. Q2 was weak due to one-off items but RPPL is on track to post a robust full...

Ankit Agrawal, CFA

RPPL: Strong Earnings Led by Robust Demand and Margin Expansion

RPPL is taking all the right steps to enhance its product offerings to deepen wallet share with existing clients. At current price, an investment...

Ankit Agrawal, CFA

RPPL: Set to Fire on All Cylinders

RPPL is making all the right moves: 1) Growing Volumes 2) Expanding Margins 3) Improving Mix of Value-added Products. FY23 is guided to see 20-25%...

Ankit Agrawal, CFA

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