Huhtamaki India's (HIL) Q4CY20 performance was hit by pandemic led disruptions like unavailability of containers (hit export business), logistic issues and lower volume offtake of economic packaging products. Also, labelling business took a hit in Q4CY20 due to limited outdoor activities. Further, despite significant competition in the flexible packaging business HIL has refrained from taking any price cut and kept its focus on maintaining gross margins. While gross margin was up ~82 bps YoY supported by better mix, lower operating leverage dragged overall EBITDA margin down by ~356 bps YoY to 6.4%. We continue to like Huhtamaki for its innovative packaging solutions providing capacity (backed by strong R&D of parent), strong clientele base and comfortable balance sheet position (D/E at 0.3x).
Valuation & Outlook
We revise our revenue, earnings estimates downward by ~9%, 18%, respectively, considering the current quarter performance. We value the stock at Rs. 360 i.e. 19x P/E on CY21E-22E average EPS of ~Rs. 19 (earlier target price Rs. 375). We maintain our BUY recommendation on the stock.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Huhtamaki_CoUpdate_Mar21.pdf
Shares of Huhtamaki India Limited was last trading in BSE at Rs.286.65 as compared to the previous close of Rs. 276.6. The total number of shares traded during the day was 30792 in over 1204 trades.
The stock hit an intraday high of Rs. 289.5 and intraday low of 276.6. The net turnover during the day was Rs. 8795627.