Recommendation From Packaging Industry

This section gives a recommendation of a stock having stock margin padding price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon


ORICON ENTERPRISES 

A WELL-DIVERSIFIED GROWTH STOCK FOR YOUR PORTFOLIO

HERE IS WHY
Robust revenue growth
Chemical stocks in favour
Capex plans

Oricon Enterprises is engaged in the business of manufacturing of pentanes, liquid colorants and pet bottles. The company's segments include logistics, automobiles, packaging, real estate, petrochemical, trading, liquid colorants and others. The company manufactures mixed pentane and heptanes at its manufacturing facility located at Khopoli (Maharashtra), with a capacity of over 10,000 tonnes per annum. USL handles cargos, such as coal, petcoke, polypropylene polymer, cent, clinker, steel plates, salt and sugar.

Oricon's products include roll-on pilfer-proof caps, chamfered closures, crowns, aluminium collapsible tubes, twist caps and printed metal sheets. It has an established market position for manufacture of closures and has among its clients companies such as Pepsi, Bisleri and Coca Cola.

Oricon manufactures mixed pentane, a petrochemical with industrial applications, and trades in metals and chemicals.Also, the company is monetising its properties in joint venture with Indiabulls Real Estate in Mumbai, which should lead to higher cash flow to fund the new capex.

Oriental Containers Ltd is the largest company in India manufacturing metals and plastics. OCL had revenues of Rs.378.46 crore and PAT of Rs.19.71 crore in 2016-17. Some of its leading customers are Coca-Cola, Pepsi, United Spirits, Hindustan Unilever Ltd. Some of the prestigious clients of the petrochemical business segment include Reliance Petroleum, IPCL – Baroda and Nagothane, Tamil Nadu Petro-Products Ltd., Nirma, LG, among others. 

The company is currently restructuring its operations which are expected to bring synergies. Also, the company is spending on establishing a new plant of preform at Odisha in a modular manner. Phase I (Rs.60 crore) is expected to be completed by January 2019 and Phase II (Rs.50 crore) in 2020. The capex will be partly funded through debt. The company reported improvement in financial performance due to restructuring.

On the financial front, on a standalone basis, the net sales of the company jumped 20 per cent to reach Rs.325.58 crore in the second quarter of the FY19 as against Rs.137.67 crore in FY17. The profit before interest, depreciation and tax (PBIDT) has increased tremendously to reach Rs.25.29 crore in Q2FY19 as against a loss of Rs.9.7 crore. The profit after tax (PAT) has climbed up by 44 per cent to Rs.17.87 crore in the second quarter of FY19 as against Rs.12.39 crore in the corresponding quarter of the same year.

Taking into consideration the annual financial results, the company’s net sales have risen by 38 per cent to Rs.52.54 crore in FY18 as against Rs.38.88 crore in FY17. The PBIDT has climbed by 100 per cent to Rs.20.76 crore in FY18 while in FY17 it was Rs.10.84 crore. The PAT rose by 88 per cent in FY18 to Rs.15.45 crore as against Rs.8.07 crore in FY17.

We would recommend a BUY on the stock looking at the above mentioned factors and the latest developments in the company as well as the customer base of the company.