Pyramid Technoplast
IPO Size: Rs. 166 cr
- Rs. 91 cr Fresh Issue, for Rs. 40 cr debt repayment, Rs. 40 cr working capital
- Rs. 62 cr Offer for sale (OFS) by the promoter (100% to drop to 75%)
Price band: Rs. 151-166 per share
M cap: Rs. 611 cr, implying 25% dilution
- 30% allocation to QIBs, 20% HNI, 50% retail
IPO Date: Fri 18th Aug to Tue 22nd Aug 2023, Listing: Wed 30th Aug 2023
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Industrial Packaging Company
Pyramid Technoplast manufactures polymer drums and rigid intermediate bulk containers (IBC), through blow molding technology, and mild steel (MS) drums, having installed manufacturing capacity of 20,612 MTPA, 12,820 MTPA and 6,200 MTPA respectively, at 6 plants in Western India. With close to 80% capacity utilization at current plants, company is establishing a greenfield 7th plant for IBC manufacturing, which is likely to get operational in H2FY24.
Sector Tailwinds
Company is a B2B supplier under ‘Pyramid’ brand to industries such as chemicals, agro-chemicals, pharma, refineries. These industries are witnessing healthy demand on account of Atmanirbhar Bharat, PLI schemes and China+1 phenomenon, which is expected to increase demand for company’s products at 8-10% for the next few years. As Pyramid is largely domestic focused (exports only 3% of revenue), it stands to gain from the underlying end-user sector growth.
Strong Financials
Since FY20, Pyramid’s revenue has grown at 23% CAGR to Rs. 480 cr, with polymer drums accounting for 50% of revenue, 30% from IBC and 10% from MS drums. During the same period, EBITDA rose at 41% CAGR to Rs. 52 cr in FY23, translating into 10.7% EBITDA margin. Net margin of 6.6% on Rs. 32 cr PAT for FY23, which rose 22% YoY, is also seen attractive. Due to prudent working capital management (3 month cycle), RoE is strong at 30%. Post repayment from fresh issue proceeds, gross debt will decline to Rs. 15 cr from Rs.55 cr.
Reasonable Valuation
On FY23 EPS of Rs. 10.2, shares are being offered in the IPO at historic PE multiple of 16x, and current year PE of 13x, estimating 20% for FY24E. This is reasonable as peers are ruling at higher or similar for lower margin. Peer Time Technoplast with a higher topline of Rs. 4,300 cr but net margin (5.2%) and lower RoE of 10% along with Rs. 800 net debt, is trading at historic PE multiple of 14x, while Mold-Tek Packaging, with Rs. 730 cr topline and 16% RoE is trading at a PE multiple of 40x.
19th Aug 2023 at 12:51 pm
18th Aug 2023 at 11:53 am
18th Aug 2023 at 10:34 am
17th Aug 2023 at 09:31 pm