Control Print Ltd - Research Report

 

Private Client Research

Rating

Buy

Sector

IT - Hardware

Company

Control Print Ltd

Reco Price
Rs. 256.40
Price Target (1.5 - 2 Years)
Rs. 513.00
Upside
100.08%

Date

February 08, 2017
Sensex
28335.16
CNX Nifty
8768.30

Exchange

Code

NSE
CONTROLPR
BSE
522295

New Inkjet printers and more focus towards consumables will drive the future growth.

Prominent player in oligopolistic market:
Control Print Ltd (CPL) has successfully transformed itself from a distributor of printers and consumables to a domestic indigenous manufacturer. The company is a prominent player in the four-player oligopolistic industry. As per industry sources, the domestic coding and marking industry size is pegged at Rs 900-1000 crores. The main players are Videojet with a market share of 29%, Domino Printech with 33%, Markem-Imaje with 22% and Control Print with the remaining 16%. Domino is strong in the food & beverages segment while Markem-Imaje is strong in the pharmaceuticals sector. CPL, on the other hand, is strong in the industrial and packaging segment.

Increasing share of consumables, margin accretive:
In FY12-16, sales grew at a CAGR of 18.9% while PAT grew at a CAGR of 33.2%, primarily on the back of a 13% (from 13.4% to 26.4%) expansion in the EBITDA margin. Margin expansion in FY12-16 was due to a change in product mix in favor of consumables, which is a high margin product, that too with a growing base of installed printers. Share of consumables in FY12 gross sales was 49% while the same in FY16 was at 71%. We expect the share of consumables to further increase to 77% by FY18E, which is expected to drive the expansion in margins, from 26.4% in FY16 to 28.0% by FY19E.

New Opportunity:
New area of opportunity is thermal inkjet printers; it is a new line. CPL has tied up with a Korean company for the technology for these thermal inkjet printers. They had also signed a similar Medtronic type agreement in the past, which was very successful. These new inkjet printers’ cost should yield them a 27% EBITDA margin. Main part is the cartridge – this is a high tech item and they have spent a $1 Million capex to develop it with a Taiwanese manufacturer, who will supply them their format of cartridges. On the other hand, Ink is the easy part. They fill the ink in these cartridges in their Guwahati plant. This technology is for the pouched milk industry and curd, and some select pharma companies. The company is confident on facilitating close to 1500 installations in the next 6 months. If they succeed, then it is likely to open up a huge scope for company.

Coding & Marking essential for products:
It helps satisfy the legal requirements by printing information such as MRP, Batch Numbers, Expiry Dates, Printing specifications, ISI logo, Company logos, etc. CPL helps in reduction of wastage of packaging material, by printing on the very last minute. This can reduce the inventory level too. Also, printing on production line, using standardized pouches of printing ingredients and other graphics avoid wastage, in case of change in ingredients or the customer destination. CPL tracks inventory through the supply chain by bar-coding and thus reduces cost; variable bar-coding enables tracking of products from one market to another; ensuring the most efficient supply chain by printing variable bar-codes onto shipper cartons enabling tracking of inventory by product. CPL is becoming prominent player in the industry with improved focus on consumables, Also increased Digitization will boost the company to go for coding and marking for their business.

New Launches:
CPL during the year under review had launched the following new products / upgraded versions of the existing products:

1. Thermal Inkjet Printer for variety of applications
2. High Resolution Piezo Inkjet Printer that shall be used for printing text, graphics, and variable barcodes on corrugated shipper cartons
3. New version of the Thermal Transfer Overprinter
New version of the Thermal Transfer Overprinter

Hence the company is continuously working on new products to improve its Product portfolio.

Stock Data

CMP (Rs)
254.45
Face value (Rs)
10
52 Week Range (Rs)
328.50 - 225.60
Market cap (Rs Crores)
398.00
Price To Book Value (x)
3.31
P/E Ratio (x)
17.38
EV/EBIDTA (x)
11.31

One Year indexed Stock Performance

Control Print LtdSensex
Control Print Ltd
Return (%)
1m
3m
12m
36m
Absolute
1.48
-9.72
-
-
Sensex
6.02
0.54
16.67
39.06

Shareholders

(in %)
31-Dec
Promoter
55.90
Public
44.10
Others
0.00
Total
100

+91 22 6639 3000
research@stockaxis.com

 

Industry

The industry of Coding and Marking is driven by legal requirements to provide product information to customers, printing specifications, ISI logo and Company logo; inventory control by reduction in wastage of packaging material and printing on the production line; traceability of products by date of manufacture, batch numbers, shift numbers, and real time-date and ensuring quality control, counterfeit prevention, marketing promotion by printing variable information and logos. Overall the industry growth is closely co-related to packaging industry growth and the manufacturing sector growth as a whole. Indian Coding Industry is estimated at Rs 900 -1000 crores as of FY2016. The Indian Coding & Marking industry has reached a level of maturity and acceptance across applications and is dominated value-wise by 4 players with your Company being amongst them. Industry has witnessed consistent growth of 15%+ over the last decade and is estimated to grow at similar rates approximately 10-15% revenue growth in the near future. This growth rate is expected to double in the next two years.

Profile

Control Print Ltd (CPL) is a leading coding and marking industry player with manufacturing capability in printing machines (printers), spare parts and associated consumables (ink). CPL started its journey in 1991 by venturing into the inkjet printer market and was primarily a distributor of Videojet printers. In 2008, CPL ended its association with Videojet and started indigenous manufacture of printers in India under its own brand name although in technical collaboration with various international agencies like KBA Metronic (Germany) and Macsa. CPL commenced production at its Nalagarh plant in July 2007. It includes production of large character printers, thermal transfer over printers and consumables. After attaining a sizeable printer base with assured consumables demand (high margin business), CPL finally turned around its operations in 2013. EBITDA margins improved to 19%. CPL has recently commissioned a new manufacturing facility in Guwahati Rs 25 crores and will be largely manufacturing high margin consumables from the said facility.

Profit & Loss Statement:- (Consolidated)
(Rs Crores)
Particulars
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18E
Mar-19E
Income:-
  • Net Sales
  • Growth (%)
  • Total Expenditure
  • EBITDA
  • Margin (%)
  • Other Income
  • Operating Profit
  • Interest
  • PBDT
  • Depreciation
  • Profit Before Taxation
  • Exceptional Income / Expenses
  • Profit Before Tax
  • Provision for Tax
  • Profit After Tax
  • Adjusted EPS
  • 91.06
  • -
  • 70.76
  • 20.30
  • 22.29
  • 0.90
  • 21.20
  • 0.75
  • 20.45
  • 1.41
  • 19.05
  • 0.08
  • 19.13
  • 5.25
  • 13.88
  • 10.20
  • 112.92
  • 24.01
  • 85.70
  • 27.22
  • 24.11
  • 1.29
  • 28.51
  • 1.05
  • 27.47
  • 2.14
  • 25.32
  • 2.34
  • 27.66
  • 7.79
  • 19.88
  • 13.45
  • 134.52
  • 19.13
  • 98.87
  • 35.65
  • 26.50
  • 0.55
  • 36.20
  • 1.64
  • 34.56
  • 2.88
  • 31.68
  • 1.61
  • 33.29
  • 7.82
  • 25.47
  • 16.25
  • 139.50
  • 3.70
  • 100.50
  • 39.00
  • 27.96
  • 1.00
  • 40.00
  • 1.80
  • 38.20
  • 3.55
  • 34.65
  • -
  • 34.65
  • 8.66
  • 25.99
  • 16.58
  • 161.50
  • 15.77
  • 115.50
  • 46.00
  • 28.48
  • 1.00
  • 47.00
  • 1.80
  • 45.20
  • 3.95
  • 41.25
  • -
  • 41.25
  • 12.38
  • 28.88
  • 18.42
  • 187.50
  • 16.10
  • 132.50
  • 55.00
  • 29.33
  • 1.00
  • 56.00
  • 1.80
  • 54.20
  • 4.00
  • 50.20
  • -
  • 50.20
  • 15.06
  • 35.14
  • 22.42
Source: Stockaxis Research, Company Data

Valuation

The company has strong double digit return ratios (FY16 RoE at 23.15%, RoCE at 28.84%). Stringent legal requirements over the display of necessary details on manufactured products, is proving to be robust demand driver. A better supply chain management by virtue of tracking the coded print on products in place and the company’s focus on increasing the application of coders and markers shows a strong footing and robust prospects going ahead.

Also, Control Print is trying to tap into new industries with the launch of new inkjet printers, which will eventually improve its client base. Hence with such strong financials and growing business prospects, we assign a valuation of 22.88x FY 2019E indicating target price of Rs 513, considering a long term horizon.

 

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