Indian Packaging Industry - pisquareinvestments.com

Indian Packaging IndustryMolding India

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Indian Packaging Industry

Strictly confidential and for private circulation only. 2

• Packaging industry is the fifth largest industry in the Indian economy and one of the highest growth sectors in thecountry, with potential to grow even more with an increase in demand of E-commerce, Pharma and packaged food.

• Growth in packaging industry is directly related to the GDP growth.

• According to the Indian Institute of Packaging (IIP), packaging consumption in India increased 2x in the past decade,from 4.3 kgs per person per annum (pppa) to 8.6 kgs pppa.

• The packaging industry is expected to grow 1.8x by 2025 to reach USD 204.81 bn, as compared to USD 72.6 bn in 2020.

• The industry can be classified by the types of materials used:

o Flexible and Rigid packaging

o Plastic and Paper packaging

• There are around 22,000 registered packaging companies in India, operating in the area of glass, plastic, paper, metal and corrugated packaging

o ~85% of the manufacturers are in small and mid-sized segment

PI SQUARE INVESTMENTS Strictly confidential and for private circulation only. 3

Indian Packaging IndustryIndian Packaging Industry Market Size

USD 72.6 Bn(FY 2020)

USD 205 Bn(FY 2025E)

8.619 20

42

71

0

20

40

60

80

India Taiwan China Germany USA

Per Capita Packaging Consumption (Kg)

Source: FICCI, MFPI, Pi Square Research


Growth Drivers

Pillars of Growth

Pharmaceutical Sector• Substantial increase in the demand of drugs, injections,

and growth in sector as a whole

Government Policies• Phasing out single-use plastic led to innovation• Lower tax rates for new manufacturers, inline with mission

of ‘Make-in India’

Packaged Food• Inclination of population towards ready to cook food and

food products• Growth of FMCG industry

E-Commerce & Industrial Activity• Spectacular growth in e-commerce industry, with rising

sales of Amazon, Zomato, Flipkart, Myntra.• Increase in packaging needs with increase in industrial

activitySource: Pi Square Research


Value Chain & Trends

Feedstock Supplier

Raw Material Supplier

Packaging Producer Packer Brand

Owner End User

Supplier Power Buyer Power

Reduction of Harmful Materials

Trends

Space-Saving Packaging

Customer-Returns

Packaging

Innovative Print Branding

Minimizing Solvent-Based

Inks

Biodegradable Packaging

Better Recycling

Smart Packaging

Favorable Packaging

Facility Location


End Users & Packaging Segments

Food Products,

36%

Non-Alcoholic

Beverages, 18%

Industry Chemicals,

6%

Personal Care, 7%

Alcoholic Beverages,

5%

Pharma, 3%

Others, 25%

End Users Share of Volume

Flexible, 64%

Rigid, 36%

Packaging Segments Market Share

Rigid packaging market is projected to reach USD 24.02bn in 2024, from USD 14.9 bn in 2018

Source: FICCI, Pi Square Research


Types of Materials (1/2)

Plastic, 38%

Paper & Cardboard,

32%

Glass, 13%

Others, 10%

Packaging Materials Market Share

Rigid, 38%

Glass, 32%

Cartons, 13%

Caps, 10%

Metal Cans, 7%

Beverages Packaging: Materials Used

Source: FICCI, Packaging Gateway, Pi Square Research


Types of Materials (2/2)

Polyethylene, 33%

Polypropylene, 29%

Poly-Ethylene

Terephthalate, 17%

Poly Vinyl Chloride,

8%

Others, 13%

Flexible Packaging Materials’ Market Share

Poly- Ethylene Terephthalate,

70%

Polypropylene, 12%

HDPE, 10%

Others, 10%

Rigid Packaging Materials’ Market Share

Source: IIP, Pi Square Research


Government Policies

Source: FSSAI, T&A Consulting, Pi Square Research

Sr. No. Product HSC Code Effective Duty (%)

1 Jute Packaging 6305 50.5

2 Plastic Packaging 3923 31.0

3 Glass Packaging 7010 31.0

4 Paper Packaging 4819 24.5

5 Wooden Packaging 4415 24.3

Customs Duty on Packaging Material ImportsGovernment Policies

Food SafetyPackaging Standards Profit Linked Tax Holiday

• Ministry of ConsumerAffairs has made itmandatory for packageboxes of standard sizes

• Government of Indiaand Indian Institute ofPackaging designedthe packaging normsfor product exports

• Guidelines defininglabeling requirementsfor all packaged foodin India

• Mandatorycertification to ensurematerial quality andmeet global packagingstandards

• Companies involved inpackaging activities ofperishable food productsexempted from payingtax on 100% of profits andgains

• Step to encouragepackaging of fruits,vegetables, dairy andmeat products, andminimize waste.


Exports & Imports (1/2)

19%

8%

5%4%3%

3%

48%

Export of Packaging Material

USA

UK

UAE

Netherlands

Germany

Belgium

Others

26%

15%

6%5%5%4%

40%

Import of Packaging Material

China

USA

Germany

Italy

France

Japan

Others

• Exports mainly comprises of flattened cans, printed sheets &components, crown cork, lug caps, plastic film laminates,craft paper, paper board & packaging machinery, while theimports mainly include tinplate, coating & lining compounds.

• Imports mainly comprises of plastic and raw materials ofplastic. In FY 2019, India imported plastic raw materialsworth USD 11.56 bn, which is 67% of its total imports of USD17.26 bn.

Source: Ministry of Commerce, Pi Square Research


Exports & Imports (2/2)

3.85.2

7.2 7.17.9 7.7 7.6 7.6

8.9

11.0

6.3

8.59.7

10.9 11.5

13.1 12.9 13.0

16.017.3

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19

Export & Imports of Packaging Material (USD mn)

Exports Imports

Product-Wise Exports Growth (FY 10-19)

Product CAGR Growth

Woven sacks and FIBC 22.9%

Nets and fishnets 18.5%

Travel ware, of plastics 18.4%

Self-adhesive sheets / films 18.3%

Laminates 15.9%

Packaging items, of plastics 14.8%

Plastics raw materials 14.7%

Optical items 13.5%

Source: Ministry of Commerce, Pi Square Research


OpportunitiesTetra packaging technologyin demand as Indiaimported CHF 380 millionAseptic packaging paper in2018-19

Dairy exports witnessed a126% growth in 2019 with49 billion dairy packagingunits used nationwide.

Innovation in biodegradableplastics as single-use plasticcomprises 40% of nearly 10million tonnes plastic wastegenerated

Sustainable Flexible Packaging SegmentSynthetic paper, jute, paper, and agricultural waste as flexible packaging material gaining popularity

Demand from E-commerce and Customer IndustriesGrowth in Indian e-commerce, organised retail, FMCG, and online food aggregators to boost demand

Innovation by Leveraging Tech and AutomationSmart packaging for product management and tamper protection are expected to become a norm

The estimated costs of processing and packaging food in India are up to 40% lower than in Europe. Availability of skilled and cheaper labour andproximity to established export markets of South Asia and Middle East makes India an attractive venue for investment in packaging manufacturing.Sources: Packaging Industry Association of India (PIAI), Ministry of Food Processing Industries (MoFPI), Euromonitor

1

2

3


Challenges

Rapid Changes in Technology Rising

Input Costs

Shortage and Rising Cost of Raw Material

Costly Skilled

Manpower

Highly Inadequate Credit Flow

Government regulations

Lack of Advanced

Technology

Scarcity of Skilled

Man-Power

Costly Skilled

Manpower

Competitive Intensity


Classification of Industry PlayersPackaging Type Industry Players

Folding Cartons Parksons Packaging, Pragati Pack, Offset, TCPL Packaging, Borkar Packaging, Temple Packaging

Rigid Plastics Manjushree Technopack, Mold-Tek Packaging, Sunrise Containers, Hitech Plast, SSF Plastics, ChemcoPlastic

Flexible PlasticsUflex, Polyplex, Cosmo Films, Positive Packaging (Huhtamaki), Creative Polypack, Kanodia Technoplast, Kris Flexipacks, Uniglobe Packaging, Parikh Packaging, Packaging India, Kamsri (Pharmaceutical Packaging), Powerband Industries, Max Specialty Films

Corrugated Cartons Horizon Packs

Security Polybags, Envelopes Dynaflex

Labels Interlabels, Cosmo Films

Glass Neutral Glass & Allied, Borosil Renewables, Empire Industries,

Lamitubes Essel Propack, Skypack


Classification by Packaging Type (1/2)Flexible Plastics Market Cap Revenue (FY 20) EBITDA (FY 20) PAT (FY 20)

Uflex 3190 7405 1109 371

Polyplex 3500 4487 842 494

Cosmo Films 1288 2204 281 113

Jindal Polyfilms 3630 3533 745 489

Laminated Tubes

Essel Propack 7381 2760 571 212

Others

Jagdamba Polymers 521 206 41.5 27.3

Amounts in INR CRs


Classification by Packaging Type (2/2)Folding Cartons Market Cap Revenue (FY 20) EBITDA (FY 20) PAT (FY 20)

TCPL Packaging 431 870 126 36.5

Rigid Plastics

Mold-Tek Packaging 1322 437 80 38.2

Hitech Corporation 286 458 60 2.4

Glass

Borosil Ltd 2685 591 78.5 41.15

Empire Industries 380 574 74.6 34.2

Amounts in INR CRs


Packaging Machinery/Materials ManufacturersCompany Listed Type Industries Catering

Prasanna Packaging Machinery N Machinery Food Processing, Pharma, FMCG, Dairy

Pacfo N Materials Amazon, Myntra; Mainly paper packaging

Nichrome IntegratedPackaging Solutioms N Machinery Food Processing, Pharma, FMCG, Agro, Chemical

Asian Packing Machinery N Machinery E-Commerce, FMCG (Clients; Emami, Patanjali, Big Bazaar, Tata Tea, Godrej, MTR, Reliance Fresh, exports to 40 countries)

Hi-Pack & Fills Machines N Machinery FMCG, Pharma (Clients; MDH, Haldirams, Heniz, Cadbury, Cipla, Ranbaxy, Emami, Rasna, Reliance, Everest, exports as well)

FillPack Technology N Machinery Dairy, Food, Pharma, Cosmetics, Beverages (Clients: Amul Lotus, Nandini, Govind)

Laxmi Engineering Equipment N Machinery Pharma, Cosmetic, Food, Beverages, Chemicals, Colour, Herbals, Nutraceuticals


Comparative AnalysisParticulars Cosmo Films Polyplex Uflex Jindal Poly Films Essel Propack

Market Cap 1288 3500 3190 3630 7381Net Sales 2203.5 4487.1 7404.8 3532.6 2760.1PBIDT 280.5 842.1 1108.8 744.9 570.8PBIDTM% 12.7 18.8 14.2 21.1 20.7PAT 113.4 493.8 370.9 488.6 212.2PATM% 5.2 11.0 4.7 13.8 7.7EPS(Rs) 58.4 88.2 51.2 111.6 6.6ROCE% 14.3 17.9 9.6 17.7 15.8D/E(x) 1.07 0.25 0.77 0.77 0.42TTM EPS(Rs) 100.9 130.4 94.0 162.9 7.3Price/TTM CEPS(x) 5.4 3.7 2.9 4.3 15.2TTM PE (x) 7.4 8.8 4.8 5.1 30.8Price/BV(x) 1.6 1.1 0.6 1.5 4.2EV/TTM EBIDTA(x) 5.5 3.2 4.0 4.0 11.9EV/TTM Sales(x) 1.0 0.7 0.8 1.3 2.5Dividend Yield% 2.0 1.5 0.5 0.1 1.5MCap/TTM Sales(x) 0.6 0.8 0.4 1.0 2.4

Amounts in INR CRs unless otherwise stated; Numbers are for FY ‘20; TTM numbers are till Dec ‘20


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Indian Packaging Industry - pisquareinvestments.com

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