Paper Products is a market leader in the packaging industry, and a backdoor play on the FMCG industry. It has a 65% share of flexible packaging, catering to the entire FMCG industry (HUL, Nestle, Cadbury, ITC, Britannia, etc). The company is a subsidiary of a Finnish MNC, Huhtamaki, which is one of the largest packaging companies worldwide and owns 61 per cent stake. Going forward, the growth drivers are:
a) Capactiy addition going on at Rudrapur which will be company’s fourth plant.
b) New product launches for packaging; two of them have gone in commercial production recently.
A low P/BV of 1.2, ability to support capex with internal accruals and a debt-free balance sheet makes the case for Paper Products even stronger. A high and consistent dividend is just the cherry on the cake (see table). Moreover, the current EV/EBTIDA of 4.4 does not factor in the growth prospects for the business.
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