UFLEX LTD - Q2 FY18

Uflex Ltd, one of the largest flexible packaging materials and solutions company reported Income From Operations/Revenue with a de-growth of 2% YOY at Rs. 15938 Mn compared to Rs. 16245 Mn in the corresponding September quarter FY17. PAT maintained its positive momentum with 4% YOY growth and was reported at Rs. 943 Mn compared to Rs. 904 Mn same period previous year. EBDITA stood at Rs. 2355 Mn with mild uptick of just 1% in the current September quarter and constant sequentially. Operating expenditure was curtailed with 2% de-growth YOY at Rs. 13641 Mn compared to Rs. 13975 Mn in Q2 FY17 whereas on sequential basis operating expenditure declined at a higher rate of 8% in the current September quarter. As a result, EBDITA margins jumped 46 basis points YOY and 100 basis points sequentially even with Revenue moving in negative territory in Q2 FY18. Net Profit Margin on the other hand jumped 35 basis points YOY with sequential rise of 48 basis points. Net Profit Margin was reported at 5.92% compared to 5.56% corresponding quarter previous year. EBDITA Margin stood at 14.78% against 14.32% same period previous year. One basis point is equal to 0.01%. Other Income grew 6% YOY and was reported at Rs. 58 Mn compared to Rs. 55 Mn corresponding quarter previous year in Q2 FY17. In quarterly terms, Other Income rose 53% in the current Q2 FY18. Profit before Tax stood at Rs. 1073 Mn in Q2 FY18 against Rs. 1095 Mn same period previous year, falling 2% YOY. Sequential performance was almost constant with respect to PAT & EBDITA whereas Revenue declined 7% in the current September quarter.

Uflex Ltd is engaged in providing end-to-end flexible packaging solutions to customers viz. packaging design & colour scheme, packaging structure, packaging products such as value added anti-counterfeiting solutions to prevent look alikes & filling machines. Clientele of the company includes Perfetti, Nestle, P&G, Britannia, Fritolay, Tata, Cadbury to name a few. The company has strong global sales and distribution network with customers in about 140 countries. The company’s aseptic packaging material manufacturing plant at Sanand, Gujarat has been commissioned and has commenced operations. Though the September numbers reported subdued growth, volume numbers seem to be stable with sales volume growing 9% YOY. The company continues to reduce its interest burden and control depreciation expenditure to improve its bottom-line. We recommend BUY for the stock for medium & long term investment with target price of Rs. 520.00.

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