Q2FY19 Result Update - Margins compress on account of higher crude prices Backed by strong volumes, Rajshree Polypack Ltd's (RPPL) topline increased 22.7% YoY to Rs671.2mn in 1HFY19. Volumes of plastic rigid sheets and thermoformed packaging products increased 7.2% YoY and 22.2% YoY to 1,309 MT and 1,965 MT respectively. Gross margin for 1HFY19 stood at 40.1% (44.4% in FY18) on account of rising crude prices (RM cost inflation is passed with a lag of one quarter). On account of rising cost pressure, EBITDA margins compressed 320bps YoY to 16.4% in 1HFY19. PAT increased 7.4% YoY to Rs50.9mn (margins compressed 110bps YoY to 7.6%). Additional capacity to come on stream by Oct'19: RPPL's current sheet extrusion and thermoforming capacity is at 10,200 MT (90% utilization in 1HFY19) and 4,320 MT (85% utilization in 1HFY19) respectively.
OutlookAt the CMP stock is trading at PER of 11.3x/7.7x/4.9x our FY19E/20E/21E EPS estimates. We recommend a BUY with a TP of Rs 161 (9x Sept-20E EPS).
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