Pick of the week:

MANJUSHREE TECHNOPACK

BSE Code: 532950

CMP: Rs.42.85

Introduction: Manjushree Technopack Limited is an integrated packaging solution provider, delivering its customers with innovative cutting edge plastic packaging solutions.

Founded in 1997 by Vimal Kedia, Manjushree started as a small umbrella manufacturing unit in Guwahati, Assam and thereafter in 1984 forayed into manufacturing of Plastic Flexible packaging. Manjushree come up with its first IPO in 1995 to diversify into the PET bottles manufacturing unit in Bangalore. Today, Manjushree is the largest converter of PET and Preforms in India with an installed capacity of 30,000 MTPA and caters to the packaging needs of the FMCG fraternity. Besides PET, Manjushree also manufacturers oxygen barrier Retortable Multi layer and Stretch Blow Moulded bottles - both of these were brought into India for the first time by Manjushree.

Manjushree’s sales network consists of 6 marketing offices in all the major metros in India with two manufacturing facilities in Bangalore, with over 30,000 sq. meters of built up area, employing over 500 people and using the best of Japanese and American Technologies. Company produces over 120 million containers per annum, for 5ml-15litre capacities in over 240 designs, shapes and sizes.

Company’s clientele includes multinationals from a wide variety of industry segments: UNI-LEVER GROUP, NESTLE, HEINZ, PEPSICO, GLAXOSMITHKLINE, LOTTE, P&G, COCA-COLA, CADBURYS, RECKITT BENCKISER, WRIGLEYS, PERFETTI VAN MELLE AND ARYA VAIDYASALA to name just a few.

Shareholding Pattern: The promoters hold 57.15% while the general public holds 42.85%. The promoters have been steadily increasing their stake since the last few quarters.

Triggers:

• Overall installed capacity of plant has gone upto 21,740 MTPA in view of expansion cum diversification project completed during the year, as compared to 9120 MTPA as at previous year end. The major capacity additions have been for the manufacture of PET Preforms to the tune of 11100 MTPA and the balance capacities have been added for the containers. The actual production of containers and performs during the FY09 amounted to 6722 MT (2008 - 4410 MT) excluding conversion jobs of 1757 MT (2008 - Nil) resulting in a capacity utilization of 39% of year-end installed capacity on absolute basis, which is due to the fact that the major capacity additions have been made only towards the fag end of the year. The turnover of manufactured items was 6657 MT (2008 - 4200 MT).
• The company has now embarked upon further expansion of PET / Monolayer containers / Preforms manufacturing capacity during current and next year at an estimated capital outlay of Rs.30 Cr to be fully financed out of internal accruals--as a result of which the overall plant capacity is likely to increase by 7000 MTPA by the end of FY 2011.
• The Company continues to have a strong focus on innovation, research and development for sustained growth while enjoying a preferred supplier status with most of its MNC clientele in FMCG, Parma and allied sectors. It has a dedicated team of technically qualified / trained personnel and professionals manning different operational segments in a decentralized environment.
• The company is completely focused on its niche of rigid plastic packaging where the growth opportunities are tremendous. It is confident of seeing a 30% CAGR in its business, for the next 5 years. What is important to note is that capital Expenditure has been doubling every year from last 3 years--from Rs.8 Cr to Rs.16 Cr, to Rs.32 Cr in FY09. The company has announced a Rs.64 Cr Term Loan for acquisitions of fixed assets in the current year.
• Manjushree has an equity base of just Rs.13.55 Cr that is supported by huge reserves of around Rs.45.91 Cr leading to a share book value of Rs.43.9. The promoters hold 57.15%, non-promoter corporate bodies hold 16.41% while the investing public holds 25.45% stake in the company. For Q3FY10, it recorded net sales of Rs.39.35 Cr with net profit of Rs.2.63 Cr against net sales of Rs.27.48 Cr with net profit of Rs.1.98 Cr in Q3FY09. For the first 9 months of FY10, it recorded net sales of Rs.108.64 Cr with net profit skyrocketing 42% to Rs.7.60 Cr against net sales of Rs.82.59 Cr with net profit of just Rs.5.50 Cr in the corresponding period previous year. The quarterly EPS was Rs.1.94 while the 9 monthly EPS was Rs.5.61. At the current level, the stock is available at a forward P/E multiple of just 6. MTL paid 10% dividend for FY09.

Conclusion: The stock has been trading between Rs.42-47 for quite sometime, taking Rs.42 as the support. It is unlikely that this support zone would be broken unless there is a crash in the markets. Investors can buy this stock with a stop loss of Rs.42. On the upper side, the stock can zoom up to Rs.55-56 levels in the short-term and Rs.67-69 level in the medium-term.

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report.

The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.

Note: The stock was recommended to the Paid Groups, last week, on Sunday (02-05-10).