Control Print (India) Ltd.: Good growth potential
BSE Code: 522295
Book Value: Rs.47.53
EPS: Rs.9.15
P/E: 5.40
Dividend: 20%
Market Cap: Rs.37.18
Performance: Market out-performer
Target: Rs.130-160 in 18 months
Introduction: Control Print (India) Ltd. (CPL) began in 1991 with a dream of bringing Indian packaging at par with the international benchmarks in terms of coding & marking and is the undisputed market leader in the coding and marking machinery with a market share of around 40%. It has a product range of contact coders, superior touch coders, specialized metal marking systems, sophisticated ink jet coders and advanced laser coders that can be used to print on any type of surface like plastic, glass bottle, paper, wood, steel etc. The company operates in a single segment, viz. Coding & Marking machines and consumables thereof.
The company has entered into a technical collaboration with KBA-Metronic AG, Germany for manufacture of Industrial Ink-Jet Printers at Nalagarh, Himachal Pradesh. The company has also entered into technical collaboration for Thermal Transfer Overprinters, Large Character Printers and ink-jet consumables. KBA-Metronic AG, Germany, is the undisputed worldwide technology leader in Coding, Marking and Printing. The venture will lead to Industrial Ink-jet Printers manufactured in India based on the know-how transferred from KBAMetronic. It is worth noting that KBA-Metronic AG is a wholly owned subsidiary of Koenig & Bauer AG (KBA), the world's third largest printing equipment manufacturer.
The company will also be manufacturing KBA-Metronic's wide range of specialized ink formulations for various applications. With this tie-up, the company will be the first Indian manufacturer of industrial inkjet printers. The company has already set up a manufacturing and assembly facility for marking and coding devices at its facility in Nalagarh, Himachal Pradesh and which has already started commercial production from FY08. It shall he expanded for production of the Industrial Ink-jet Printers.
The company plans to export printers to other emerging markets in conjunction with KBAMetronic. The company has launched its ‘Conprint’ range of consumables for ink-jet printers and has also started marketing the full range of products.
BSE Code: 522295
Book Value: Rs.47.53
EPS: Rs.9.15
P/E: 5.40
Dividend: 20%
Market Cap: Rs.37.18
Performance: Market out-performer
Target: Rs.130-160 in 18 months
Introduction: Control Print (India) Ltd. (CPL) began in 1991 with a dream of bringing Indian packaging at par with the international benchmarks in terms of coding & marking and is the undisputed market leader in the coding and marking machinery with a market share of around 40%. It has a product range of contact coders, superior touch coders, specialized metal marking systems, sophisticated ink jet coders and advanced laser coders that can be used to print on any type of surface like plastic, glass bottle, paper, wood, steel etc. The company operates in a single segment, viz. Coding & Marking machines and consumables thereof.
The company has entered into a technical collaboration with KBA-Metronic AG, Germany for manufacture of Industrial Ink-Jet Printers at Nalagarh, Himachal Pradesh. The company has also entered into technical collaboration for Thermal Transfer Overprinters, Large Character Printers and ink-jet consumables. KBA-Metronic AG, Germany, is the undisputed worldwide technology leader in Coding, Marking and Printing. The venture will lead to Industrial Ink-jet Printers manufactured in India based on the know-how transferred from KBAMetronic. It is worth noting that KBA-Metronic AG is a wholly owned subsidiary of Koenig & Bauer AG (KBA), the world's third largest printing equipment manufacturer.
The company will also be manufacturing KBA-Metronic's wide range of specialized ink formulations for various applications. With this tie-up, the company will be the first Indian manufacturer of industrial inkjet printers. The company has already set up a manufacturing and assembly facility for marking and coding devices at its facility in Nalagarh, Himachal Pradesh and which has already started commercial production from FY08. It shall he expanded for production of the Industrial Ink-jet Printers.
The company plans to export printers to other emerging markets in conjunction with KBAMetronic. The company has launched its ‘Conprint’ range of consumables for ink-jet printers and has also started marketing the full range of products.
Shareholding Pattern: The promoters hold 38.2% while the investing public holds 57.25% of which United India Insurance holds 4.52%, promoters have increased their holding from 36.57% to 38.2% in FY08.
Financials: For Q3FY08, its total income was flat at Rs.9.26 cr. as against Rs.10.45 cr. in Q3FY07 while the net profit was lower at Rs.1.04 cr. as against Rs.1.81 cr. in Q3FY07. This reduction in sales and profit was due to changeover of products.
Investment Rationale:
(1) Earlier, CPL made preferential allotments of 1,25,000 equity shares of Rs.10 each at a premium of Rs.53 per share i.e. Rs.63 per share as per SEBI guidelines to the promoters.
(2) The company declared a dividend of 20% for FY07 and may reward shareholders again in FY08.
Financials: For Q3FY08, its total income was flat at Rs.9.26 cr. as against Rs.10.45 cr. in Q3FY07 while the net profit was lower at Rs.1.04 cr. as against Rs.1.81 cr. in Q3FY07. This reduction in sales and profit was due to changeover of products.
Investment Rationale:
(1) Earlier, CPL made preferential allotments of 1,25,000 equity shares of Rs.10 each at a premium of Rs.53 per share i.e. Rs.63 per share as per SEBI guidelines to the promoters.
(2) The company declared a dividend of 20% for FY07 and may reward shareholders again in FY08.
(3) CPL plans to develop its land in a prime area of Mumbai, for commercial purpose in FY09. It will first develop its property at Chandivali, Andheri East, Mumbai. In fact, the value of its land is more than its market cap of Rs.37.18 cr. This is an important trigger for re-rating the scrip.
(4) CPL has commenced the commercial production of Conprint Hot Ink Coders and its consumables Ink Rolls at Nalagarh in Himachal Pradesh. The products are at par with similar imported products and it has received repeat orders from the users.
(4) CPL has commenced the commercial production of Conprint Hot Ink Coders and its consumables Ink Rolls at Nalagarh in Himachal Pradesh. The products are at par with similar imported products and it has received repeat orders from the users.
(5) The cumulative margins of printer and consumable sales are expected to expand further in FY09 and FY10.
(6) The company’s topline and bottomline is expected to see good growth from marketing of high end digital printers. The digital printers are used to print variable information on the Aluminum foil packaging of pharmaceutical tablet strips or on the packaging labels.
(7) One of the promoters has recently increased his holding in the company.
(8) The company’s clients include Coca Cola, Pepsi, P&G, Shaw Wallace, Cipla, Dr. Reddy’s Laboratories, Novartis, Rane Brakes, Tata Steel, SAIL, Hindalco, Jindal Iron, Aksh Optifibre and the like.
(9) With organized retailing coming off age in India, packaging has assumed importance. As a result, this technology has readymade domestic and overseas markets.
Concerns:
(1) Entry of new players could increase the already strong cut throat competition existing in the industry. With the market set to expand rapidly, many new players can be expected.
(2) Any delay in employing the latest technology could reduce growth targets. While CPL is lready in talks with many large companies for digital printers, the low cost machine sales would depend on its ability to market the product efficiently.
Conclusion: CPL is in a relatively new industry with mammoth growth potential. It is also the only listed company in this segment. This makes comparing valuations difficult and complex. It is worth understanding that CPL derives majority of its revenue from FMCG, Pharmaceutical and the Auto sectors. Since CPL is dependent on these sectors, it ought to get valuations closer to sectors dependent on these sectors. But the fact that it derives revenue from multiple sectors reduces its dependence on one particular sector. As a result stability in earnings is high. Profit visibility is also expected to improve as its printer base continues to grow over the next few years resulting in high consumable sales.
Considering these factors, the CPL share may get a valuation lower than the core sectors but closer to the dependent sectors. At a P/E of only 5.4, Book Value of Rs.47.53, Dividend of 20% and EPS of Rs.9.15, the scrip is available at an attractive CMP of Rs.49.45 and could get re-rated soon. The scrip is near its 52-week low of Rs.41 and thus has a minimum downside. In the short-term if the scrip is able to cross Rs.57 with good volume then the next target could be Rs.70-75. The stock is in the oversold territory and a bounce back could be expected very soon. Please keep a strict Stop Loss of Rs.45.5 in case it starts to slide or if the market dynamics change suddenly. I place a target of Rs.130-160 in 18 months time frame.
(7) One of the promoters has recently increased his holding in the company.
(8) The company’s clients include Coca Cola, Pepsi, P&G, Shaw Wallace, Cipla, Dr. Reddy’s Laboratories, Novartis, Rane Brakes, Tata Steel, SAIL, Hindalco, Jindal Iron, Aksh Optifibre and the like.
(9) With organized retailing coming off age in India, packaging has assumed importance. As a result, this technology has readymade domestic and overseas markets.
Concerns:
(1) Entry of new players could increase the already strong cut throat competition existing in the industry. With the market set to expand rapidly, many new players can be expected.
(2) Any delay in employing the latest technology could reduce growth targets. While CPL is lready in talks with many large companies for digital printers, the low cost machine sales would depend on its ability to market the product efficiently.
Conclusion: CPL is in a relatively new industry with mammoth growth potential. It is also the only listed company in this segment. This makes comparing valuations difficult and complex. It is worth understanding that CPL derives majority of its revenue from FMCG, Pharmaceutical and the Auto sectors. Since CPL is dependent on these sectors, it ought to get valuations closer to sectors dependent on these sectors. But the fact that it derives revenue from multiple sectors reduces its dependence on one particular sector. As a result stability in earnings is high. Profit visibility is also expected to improve as its printer base continues to grow over the next few years resulting in high consumable sales.
Considering these factors, the CPL share may get a valuation lower than the core sectors but closer to the dependent sectors. At a P/E of only 5.4, Book Value of Rs.47.53, Dividend of 20% and EPS of Rs.9.15, the scrip is available at an attractive CMP of Rs.49.45 and could get re-rated soon. The scrip is near its 52-week low of Rs.41 and thus has a minimum downside. In the short-term if the scrip is able to cross Rs.57 with good volume then the next target could be Rs.70-75. The stock is in the oversold territory and a bounce back could be expected very soon. Please keep a strict Stop Loss of Rs.45.5 in case it starts to slide or if the market dynamics change suddenly. I place a target of Rs.130-160 in 18 months time frame.
By Suman Mukherjee (Source: Moneytimes Internet)
