Kanpur Plastipack: Slow FIBC demand impacts business

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26 Aug, 2025 12:21

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CRISIL Research has come out with its report on Kanpur Plastipack (KPL). According to the research firm, the company has expanded its FIBC capacity by 1,200 tonnes per annum to 14,200 tonnes, which became operational in October 2012. Company's expansion of the multifilament yarn capacity to 2,400 tonnes from the existing 1,200 tonnes is on track; the capacity is expected to be operational by end-FY13.

KPL' Q2FY13 results were below CRISIL Research's expectations. Revenues declined by 7% y-o-y and 14% q-o-q to Rs 437 mn mainly due to lower realisations. EBITDA margin improved by 87 bps y-o-y (down by 244 bps q-o-q) to 12.4%. Adjusted PAT declined by 54% y-o-y (down 60% q-o-q) Rs 16 mn. The company has started providing for tax on a quarterly basis from Q1FY13. The Q2FY13 results were impacted by slowdown in FIBC demand due to poor macroeconomic conditions and we expect the business environment to remain challenging over the next few quarters. We maintain the fundamental grade of 2/5.

Challenging macroeconomic conditions impacted FIBC demand; expanding client base to ensure offtake
According to the management, a slowdown in global demand for flexible intermediate bulk containers (FIBCs) is impacting business. While the company was able to utilise almost full capacity during the quarter, it had to lower the realisations to ensure offtake. Also, the company's key client in South America has cancelled its orders, the impact of which will be seen in H2FY13. To ensure full utilisation, the company is now focusing on expanding its client base. It has acquired new customers in the US and South America in Q2FY13. The demand from Europe continues to be slow. We believe that business will be impacted by the slowdown in demand over the next few quarters and the ability of the company to ensure offtake by acquiring new clients remains a key monitorable.

Capacity expansion progressing as planned
The company has expanded its FIBC capacity by 1,200 tonnes per annum to 14,200 tonnes, which became operational in October 2012. Also, the company's expansion of the multifilament yarn capacity to 2,400 tonnes from the existing 1,200 tonnes is on track; the capacity is expected to be operational by end-FY13. The company has indicated that the demand for multi-filament is strong and CRISIL Research expects full utilisation of this capacity in FY14. However, KPL may find it challenging to ensure full utilisation of the incremental FIBC capacity, which remains a key monitorable.

Earnings estimates revised downwards for FY13; fair value maintained at Rs 47
We have reduced FY13 revenue estimates by 7% and earnings estimates by 16% to factor in lower realisations and higher interest cost. We broadly maintain our FY14 estimates as we expect revenue to be driven by the expanded FIBC and multi-filament yarn capacities. We continue to value KPL based on the discounted cash flow method and maintain the fair value of Rs 47 per share. We have maintained our fair value despite downward revision in FY13 earnings estimates as we believe that the long term prospects of the industry are intact. At the current market price of Rs 28, our valuation grade is 5/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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