HINDUSTAN TIN WORKS LTD.(HTWL)

Transcription

1 HINDUSTAN TIN WORKS LTD.(HTWL) Date :17 th October, 212 Stock Performance Details Background Current Price : Rs. 47.6** Face Value : Rs. 1 per share 52 wk High / Low : Rs / Rs Total Traded Volumes : 1,461 shares** Market Cap : Rs. 49 crore** Sector : Containers & Packaging - Tin EPS (FY212) : Rs per share P/E (TTM) : 1.14 (x)^ P/BV (TTM) :.66 (x)^ Financial Year End : 1 st April 31 st March BSE Scrip Name : HINDTIN BSE Scrip Code : **as on17 th October, 212; ^ as on June 212 Shareholding Details June 212 Particulars Shareholding Nos. (%) Promoter & Promoter Group Holding 39,88, Total Institutional Holdings (FIIs & DIIs) 1,23, Public Holdings 53,87, Total 1,3,99, Hindustan Tin Works Ltd. (HTWL) was founded in 1958 and is based in New Delhi, India. Hindustan Tin Works Limited manufactures and sells tin containers and printed sheets for packaging applications primarily in India. The company's product range includes various types of tin/metal cans and can components used in packaging baby foods, edible oils, paints, pure ghee, lubricants, fruit pulp & vegetables, juice, milk, protein powder thinner, aerosol, slip lid, and shaped cans; and shoe polish containers etc. It s clientele includes prominent names like Nestle India, Heinz India (P) Ltd, Brooke Bond Lipton, Dalmia Industries, Indian Oil Corporation, HPCL, Asian Paints, etc. It is also engaged in trading of tinplates which is one of the key raw materials for the company s products. The company s manufacturing facilities are located in Sonepat at Haryana and at Mumbai, Maharashtra in India. Strategy Focus The company is looking at expanding its operation in the non food industry such as paints packaging, shoe polish cans, aerosols and pesticides packaging sectors which are likely to provide revenue growth in the future on the back of increasing demand for products from these fast growing sectors. HTWL formed a joint venture with Rexam of U.K. specifically to manufacture cans for beverage market i.e. carbonated soft drinks and beer. This JV company intends to set up an aluminium beverage can line in addition to a steel can line. For the same, it intends making an investment of around Rs. 2, million which will have a capacity of 85 million beverage cans at its Taloja facility in Maharashtra. HTWL also formed this JV to be able to get access to technological advancement and best global manufacturing practices for distribution and manufacturing of two piece cans. It also intends to augment its manufacturing capacity of the steel line to 9 million beverage cans per annum from the existing 3 million beverage cans. During the current fiscal (FY213) Religare Finvest increased its stake in the company by 2.41% to 14.9%. An Initiative of the BSE Investors Protection Fund 1

2 Financial Snapshot Particulars From the Research Desk of LKW s Gurukshetra.com Standalone Financials (Rs. In Million) Income Statement FY12 FY11 FY1 Net Sales / Income from Operations 2,466. 2, ,848.6 Expenses Cost of material consumed 1, ,57. 2,174.5 Change in Inventories Power & Fuel Cost Employee Benefit Expenses Administrative & Other Expenses EBIDTA Depreciation & Amortization Finance Costs / Interest Expense Other Income Profit After Tax (PAT) Key Ratios Income Statement EBIDTA Margins (%) PAT Margins (%) Balance Sheet Networth Non Current Liabilities / Loan Funds Non Current Assets / Fixed Assets Inventories Debtors Key Ratios Balance Sheet Debt : Equity (x) Book Value (BV) (in. Rs.) Return on Capital Employed (ROCE) (%) Return on Equity (ROE) (%) Debtors Turnover (x) Inventory Turnover (x) Valuation Ratios P/E (x) P/BV (x) EV / EBITDA (x) Source: Capitaline.com; as on year ended 31 st March, 212; Company Annual Report; Food can packaging which is the core business activity of HTWL constitutes about 9% of the total sales. Further, this sector could continue to provide stability in terms of revenue generation as the demand for canned / packaged food increases. An Initiative of the BSE Investors Protection Fund 2

3 The company reported a decline of 16% in its turnover from Rs. 2,947.8 million in FY211to Rs. 2,466.4 million in FY212, on account of challenging economic conditions domestically and globally. Further, due to Rupee Depreciation, high inflation and volatility in commodity prices, the cost of production as a percentage of sales increased to 92% in FY212 as compared to 9% in FY211. Of this, Raw Material costs formed a major portion which too increased to 54% as a percentage of Net Sales. Resultantly, the EBIDTA and EBIDTA Margins came under pressure and stood at Rs million a decrease of 32% on a y-o-y basis. The margins stood at 7.8% down by 19 basis points as compared to the previous fiscal. In line with a subdued topline growth, lower operational performance and a high interest rate scenario the Profit after Tax (PAT) declined by around 5% to Rs million in FY212 as compared to Rs million in FY211. Consequently, PAT Margins also came under pressure and stood at 2.3% against 3.8% in the previous fiscal. Additionally, by virtue of its operations in a high volume low margin business segment and lack of bargaining power with customers, the ability of the company to enhance its margins would need to be monitored. The company s debt on books, both long term as well as short term has declined on a y-o-y basis and stood at Rs million as against Rs million in FY211. Resultantly, the debt to equity ratio too has declined from.86 (x) in FY211 to.7 (x) in FY212. While the company has carved out a niche in the rigid metal packaging industry, it faces stiff competition from unorganised players in the metal packaging industry. Further, in the organised segment, it competes against large players like Novelis (Group Company of Hindalco) which is also engaged in manufacturing cans used in the food and beverage industry. Another, factor which may impact the operations of HTWL are threat of cheaper and more convenient plastic packaging products which are gaining importance, as demand for packaged food products as well as from other industries like paints, aerosols is rising. However, to de-risk its revenues, the company has forayed into manufacturing of aluminium / steel cans catering to demands of watch manufacturing companies that manufacture watches catering to the premium and luxury segment. During Q1 FY13, the net sales as reported stood at Rs.91.8 million a marginal decline of 1% as compared to corresponding period in the previous year. In line with the marginal decline and lower overall cost of production, the EBIDTA stood at Rs million during Q1 FY13 as compared to Rs in Q1 FY12. Notably, the bottomline increased by 5% at Rs. 33 million on account of increase in other income by 36% which stood at Rs. 6.4 million for the period under review. Performance on the Bourses % Stock Performance Hind Tin Work as on 17th October 212 BSE Small Cap An Initiative of the BSE Investors Protection Fund 3

4 Peer Comparison The below mentioned table provides a snapshot of the financial performance of Hindustan Tin Works with its comparables peers in the metal (rigid) packaging industry. It also faces competition from Novelis one of the group companies of Hindalco which has much larger scale of operations. About the Industry Standalone Financials (Rs. in Million) Particulars Hindustan Tin Works Kaira Cans Net Sales 2,466. 1,89.8 EBIDTA PAT EBIDTA Margins (%) PAT Margins (%) P/E (x)^ P/BV (x)^ Debt : Equity (x).7.5 EV / EBITDA (x)^ Source: Capitaline Database, ^TTM as on June 212; Over the years, packaging has evolved from being an essential security covering for a product to being an important aspect of hard selling and marketing in recent times. This is because the packaging determines the final salability of a product. The packaging industry is expected to register strong growth driven by buoyant end-user demand. The growth is led primarily by FMCG and Pharmaceuticals sector which are the key consumers. Increasing focus of FMCG companies on innovative packaging that give scope for enhanced aesthetics as well as extended shelf life the growth for packaging industry is expected to continue at a healthy pace ` Rigid packaging continues to dominate the packaging industry. It accounts for 65% of the overall packaging while flexible packaging makes up for the rest of the 35% market. Further, growth in alcoholic and nonalcoholic beverages will drive rigid packaging while flexible packaging is expected to be driven by the processed foods market. A visible trend has emerged over the years in the packaging industry in terms of preference for using flexible packaging over rigid metal container packaging. Increasingly polymer-based packaging (both rigid and flexible) is preferred mainly due to lower cost, ease of transport and convenience. The flexible packaging industry segment has been using polymer for the past few years while the rigid glass and metal containers are rapidly being replaced by PET and HDPE containers Driven by increased preference and growth in end-user industries, the share of polymer-based packaging products is likely to increase going forward. Most players in the glass & industrial packaging (rigid) segments are in the organized space. While, on the other hand, paper, industrial polymer (flexible), consumer polymer (rigid and flexible), metal and aluminum foil packaging are segments characterized by presence of numerous unorganized players. Further, with limited scope for product differentiation and low entry barriers, small packaging companies do not enjoy bargaining power as compared to the larger ones who primarily cater to larger, quality conscious clients. In the rigid packaging segment, there is an increasing challenge posed by availability of polymer based packaging products which are being used as substitutes for metal packaging. Despite, the above, the overall prospects for the packaging industry appear to be satisfactory. Outlook While, the company has been able to carve out a niche and emerge as a leading player in the metal packaging industry / can manufacturing segment of the packaging industry competition from unorganised segment and large players and better and cheaper polymer based substitute products are likely to pose challenges to the growth of the company going forward. Nevertheless, its diversification into segments such as packing for luxury watches and its foray into flexible packaging would contain downsides to profitability in the longer term. An Initiative of the BSE Investors Protection Fund 4

5 Financial Graphs Rs. in Millions 3, 2,9 2,8 2,7 2,6 2,5 2,4 2,3 2,2 Net Income from Operations 2, , ,466. FY 21 FY 211 FY 212 EBITDA & EBITDA Margins Rs. in Millions % FY 21 FY 211 FY 212 EBIDTA EBIDTA Margins PAT & PAT Margins Rs. in Millions % FY 21 FY 211 FY 212 PAT PAT Margins An Initiative of the BSE Investors Protection Fund 5

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