Control Print Limited- Strong Outlook and New Products Are Key
Control Print Limited plans to maintain EBITDA margins north of 24% on a long-term sustainable basis. The company crossed INR200 crore benchmark of annual revenue in FY21 and its expanded installed base and newly added user segments should help it deliver strong financial performance. Improvement in profit margin should stem from a higher share of consumables revenue.
About Control Print Limited
Control Print Limited is a leading Indian player catering to niche coding and marking segment which has application throughout manufacturing industry. This market was earlier dominated by multi-national foreign companies and Control Print Limited is a leading face of ‘Make in India’ driven campaign of self-reliant India. The company is only integrated player having capability of manufacturing both printers and consumables domestically. Manufacturing facility for printers is situated at Nalagarh.
It has a strong national network of sales and services of 11 branch offices and strong technical support group comprising 400+ engineers. Strong network enables the company to cater end customers at their respective plant locations. The company is able to serve its clients right from installation stage to consumable supplies and maintenance related services through average product lifecycle of 5-7 years.
Growth Enablers of Control Print Limited:
- Strongest Ever Quarterly Performance: The company saw maintenance of a quarterly run rate of INR600+ million revenue and this was strongest ever performance for 3Q for the company. Revenue growth was 25.3% for 9M22, with all business verticals contributing to growth in revenue. The company saw growth across profitability measures as EBITDA / PBT / PAT / EPS grew by 22.9% / 29.8% / 22.3% / 22.3% YoY. Better inventory management and recovery in receivables led working capital improvement by 32 days for 9M22. Installed base has crossed 14,000 printers, shedding light on growth in consumable sales. The company saw market share growth in Building Materials segment, while dairy and food sector saw higher customer penetration.
- Large Repeat Order: In 2Q22, Control Print Limited saw PAN India success in sugar sector with main clients for its season and it received a large repeat order in dairy segment. Despite challenges related to COVID-19, the company was able to cross benchmark of INR200 Cr. annual revenue in FY21. The company ended FY21 with its best ever revenue of INR203.69 Cr, exhibiting 4.15% growth YoY. Operating profit of the company for FY21 was INR35.30 Cr. with a margin improvement of 6.78%. Net profit saw 10.33% growth to reach INR29.39 Cr. for FY21. Expanded installed base, added user segments, new sales approach of industry and product segment-wise go to market strategy should be able to support the company. With share of consumables revenue growing, the company is expected to see sequential improvement in its profit margin.
- Capitalising on Industry Dynamics: One important part of manufacturing and logistics process of industrial and consumer goods, coding and marking systems is a tool which is used to print variable information of product like lot size, expiry date, manufacturing date and other details on product and on packaging to provide true information to consumer. Coding and marking solutions have been seeing increased demand from more and more industries due to higher need for variable printing for product tracking and branding and requirement to meet government regulations. Increasing characters required with increasing regulatory compliances and shift from analogue to digital are factors likely to lend support. Overall, industry growth is correlated to growth in packaging industry and growth of manufacturing sector. Indian coding industry is pegged at INR12,000-15,000 million as of FY21 and should grow between 10% – 15% over next few years. Growth should stem from growing retail sector and higher demand for FMCG products because of contributory socio-economic and demographic factors like increasing urbanization, demand growth in food & beverages, population growth and rise of living standard and aspirational living. Another factor lending support is government regulatory mandates to meet industry standards. Indian coding and marking systems market growth should seek support from expansion of manufacturing and packaging sectors. Indian packaging industry growth stems from rising usage of innovative packaging, mainly flexible packaging. This is due to rising middle-class population and transition of rural markets. Packaging industry should grow because of expansion of e-commerce and food and beverage industries. Eventually, India should see demand for coding and marking systems in years to come.
- Strengths Provide Competitive Edge: Extraordinary situations have provided strength to the company and has geared up for any sort of challenge. The company is financially stable and exceeded its revenue targets. Stability of the company was reaffirmed by credit rating agency Crisil as it has given it an A rating, after taking into consideration short and medium-term impact of Covid pandemic. Investors should be able to maintain belief in management for an optimistic future. As pandemic has posed an uncertain future resulting into unknown challenges across spectrum, there was evident growth in printers demand with ensuing positivity. This shows good sentiment and a strong signal for a rise in momentum of industrial production and increased installed base should support business in upcoming periods. Flagship division CIJ saw better demand as production for customers increased. Main propellant for growth was increased production in some industries where the company has strong hold like Pipes, Cables, Steel, Food, FMCG, Beverages etc. The company saw growth in emerging sectors including Dairy, Pharma, Paints and Wood which contributed to the company’s growth, leading to better penetration and market share.
- New Products Launched: The company launched new products over past couple years like Thermal Inkjet, Thermal Transfer Overprintin and High Resolution. Products are exhibiting good response. With cutting-edge installations over past year, all 3 divisions have documented independent highest revenue. The company anticipates that TIJ, TTO and HiRES printers are state-of-the-art addition to rich range of products and should add value to its growth plan. New products displayed resilience in terms of generating revenue and continued to grow during tough year. This enhanced and built its confidence in products to grow exponentially in coming years.
- Strong Outlook Stemming from Consumables Sales: Despite pandemic and lockdown challenges, business environment in its key business verticals is favourable. With good number of printer sales in past couple years and better consumables sales expected in coming years along with improved industrial production, the company seems to be heading towards sustainable future. Launch of new products such as TIJ Printer, High-resolution printer and TTO printer weaved a profitable scenario. New launches saw good response from market and should exhibit exponential growth in coming years from varied sectors like Dairy, Beverages, Bakery, Frozen Food, Ready to Eat, Pharma, Packaging, Plywood, Lubricants, Carton Coding.
Conclusion
The company is quite optimistic about replacement market which should generate opportunities among key clients and sectors. Special focus area includes OEM sales and key customer accounts. Strong emphasis on improving marketing efforts and increasing visibility in market is expected. Pegging for higher market share having higher installed base should lead to long-term growth opportunities for consumables and this should assure the company’s growth. Pandemic impacted Indian economy as a whole and as normalcy returns, the company expects for similar upward trend of growth. Fundamentally, the company is strong and is emphasizing its plans and strategies on growth. Control Print Limited remains hopeful to charter a positive growth potential. The company has compounded its revenue at ~8.7% over FY16-FY21.
Currently, Indian coding and marking systems market is seeing substitution of analogue coding and making technologies with digital variants. With ongoing Industry 4.0 revolution, automation of industrial practices has been done at a faster pace. Manufacturers should mark, label, and code a range of products and shipments without compromising their production speed. Manufacturers plan to go through such procedures so that pallets, devices, parts, cartons, and shipments can be identified in an effective manner. Implementation of strict government regulations and escalation in demand for tracking should help Indian coding and marking systems. Pharmaceutical sector creates high demand for such systems because of burgeoning usage of packaging for safety, higher proliferation of blister packaging, and higher awareness about mentioning of drug information.
Stock of the company has seen a run up of ~56.7% between Jan 1 2021-28 Jan 2022. Valuation-wise, stock of the company trades at ~20.58x FY21 EPS, which is at a deep discount to sectoral average of ~32.2x. This exhibits that investors can consider going long on this stock.
