Categories Concall Highlights, Earnings, Industrials

TCPL Packaging Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from TCPL Packaging Ltd (TCPLPACK) Q3 FY23 Earnings Concall

Management Update:

  • [00:03:54] TCPLPACK said its second flexible packaging line commissioned at the start of the year is well received and generated significant interest, leading to a positive ramp-up in utilization. The company is now considering plans to add a third line in the same segment.
  • [00:05:52] The company said it’s focused on growth through diversification and sustainably growing the company in the future to create substantial value for all stakeholders.

Q&A Highlights:

  • [00:07:00] Gunjan Kabra from Niveshaay enquired about the revenue contribution of flexible packaging QonQ and capacity utilization of old and new plants. Saket Kanoria MD said the revenue share cannot be revealed. Capacity utilization of the old and new flexible plant is at 90% in the last quarter. TCPLPACK is excited to look into further expansion in this segment.
  • [00:09:00] Gunjan Kabra from Niveshaay enquired about the export contribution and if growth was led by export or domestic. Saket Kanoria MD replied that last year, exports was 25% in the balance sheet. This year, exports have grown compared to overall domestic growth. Exports now account for a higher percentage of overall revenue.
  • [00:11:22] Gunjan Kabra from Niveshaay asked that on the RM front, if the company is seeing price decrease on the virgin side paper. Saket Kanoria MD answered that the paper market has declined in the last month, with recycle declining more than virgin.
  • [00:13:35] Pavan Kumar from RatnaTraya asked about the utilization of paperboard and the capex expected for the new flexible line. Saket Kanoria MD said utilization in the paperboard carton overall is about 80%. TCPLPACK is expecting to incur INR50 crores in capex over the next 2 years for a brownfield expansion, and expect a turnover ratio higher than 2.5.
  • [00:18:50] Vipul Shah from RW Equities enquired about TCPLPACK delivering upwards of INR350 crores in top line and if it’s sustainable. Saket Kanoria MD replied that TCPLPACK have added capacity and have some headroom, so even if pricing is adjusted it can still hope for a volume increase to make up for it. FMCG results in 3Q23 showed that volume growth has been low for India.
  • [00:22:19] V. Rangan asked how many customers were added in FY23 and the conversion cycle number of days. Saket Kanoria MD replied that all these things were normal. And on customer add, there are many customers TCPLPACK keep adding and it’s difficult to give a precise number.
  • [00:27:21] Pulkit Singhal from Dalmus Capital asked about the aspects of exports in future. Saket Kanoria MD said the macro picture for India in terms of exports is very positive, with freight going down, exchange rate in favor, raw materials available, and a better political image. Multinational customers are exploring India as a sourcing hub, and this trend is expected to keep growing.
  • [00:29:33] Pulkit Singhal from Dalmus Capital enquired if there is any margin risk going forward or if it will increase in future. Saket Kanoria MD answered that the current margin is healthy and TCPLPACK is striving to increase it. However, competition and low volume growth makes it challenging to grow margins. If volume growth increases as a whole, then rising fees will benefit all companies.
  • [00:31:09] Resham Jain from DSP Investment asked that on flexible packaging, post second line of operation, if margins are close to paperboard margins. Saket Kanoria MD answered that flexible margin has improved since the second line started in April, but it is lower than paperboard due to higher turnover ratio. With time, margins should increase, though not matching paperboard due to the industry’s investment and turnover profile.
  • [00:36:20] Resham Jain from DSP Investment queried about capex for FY23 and FY24. Saket Kanoria MD answered that TCPLPACK’s capex for FY23 is estimated to be INR100 crores, and for FY24 it is expected to be lower. The company is exploring opportunities to see where else and what else it can do.
  • [00:38:38] Anushree from Alpha Invesco asked if smaller pack sizes are driving growth and realization difference in smaller vs. 20s. Saket Kanoria MD replied that there is no difference in the margin of 10s and 20s cigarette packs, as most cigarettes sold in India are in 10s packs. The 20s packs are a small king size segment and there is also a new 5s pack, but with very small volume.

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