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

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

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Yellowstone Equity

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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>RPPL reported decent Q2FY24 earnings, led by volume growth and margin expansion. Revenue growth was somewhat tepid due to decline in realization led by volatility in raw material prices.</li>
<li>RPPL is seeing good traction in exports with improving mix of value-added products and enhanced geographic reach. Revenue from exports is guided to triple to INR 30cr+.</li>
<li>RPPL has also entered into In-mold Labeling (IML) in rigid plastic injection molding products. This could be a game changer for RPPL in terms of growth and target market potential.</li>
</ul>


RPPL reported decent Q2FY24 earnings, led by volume growth and margin expansion. Revenue growth was somewhat tepid due to decline in realization led by volatility in raw material prices.
RPPL is seeing good traction in exports with improving mix of value-added products and enhanced geographic reach. Revenue from exports is guided to triple to INR 30cr+.
RPPL has also entered into In-mold Labeling (IML) in rigid plastic injection molding products. This could be a game changer for RPPL in terms of growth and target market potential.


RPPL: Climbing Up the Value Chain | All Set for a Strong FY25

<ul>
<li>RPPL reported a weak Q1FY24 due to correction in raw material prices that led to inventory losses and decline in EBITDA margin to 12% vs 14%+ QoQ and 16% YoY.</li>
<li>Given that Q1 tends to be a high demand quarter, RPPL had kept high inventory, which further accentuated the inventory losses.</li>
<li>The raw material prices have stabilized now. EBITDA per kg should stabilize back to around INR 34-35 and should help the EBITDA to grow in line with the volume growth. </li>
</ul>


RPPL reported a weak Q1FY24 due to correction in raw material prices that led to inventory losses and decline in EBITDA margin to 12% vs 14%+ QoQ and 16% YoY.
Given that Q1 tends to be a high demand quarter, RPPL had kept high inventory, which further accentuated the inventory losses.
The raw material prices have stabilized now. EBITDA per kg should stabilize back to around INR 34-35 and should help the EBITDA to grow in line with the volume growth. 


RPPL: Weak Q1FY24 Earnings, However, Long-Term Growth Trajectory Remains Intact

<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

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: Climbing Up the Value Chain | All Set for a Strong FY25

RPPL reported a decent Q2FY24. Margins are stabilizing as raw material pricing is normalizing. RPPL's long-term growth trajectory is attractive led...

Ankit Agrawal, CFA

RPPL: Weak Q1FY24 Earnings, However, Long-Term Growth Trajectory Remains Intact

RPPL reported a weak Q1FY24 due to decline in raw material prices. However, RPPL is on track to achieve INR 500cr revenue by FY26. At current...

Ankit Agrawal, CFA

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

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