Bppl Holdings Plc · CSELK:BPPL.N0000
Bppl — Q1 FY2021 Earnings Presentation
36 slides from Bppl's earnings presentation, Aug 27, 2020
Slide 1: BPPL Holdings 1QFY21 Earnings Update
LANKA SECURITIES RESEARCH | +94 (0) 11 4 706 757 | research@lankasec.com Sri Lanka | Equities 27 August 2020 Consumer Staples BPPL HOLDINGS Earnings Update 1QFY21 EARNINGS UPDATE Rating: BUY Price: LKR 10.60 Target Price: LKR 14.20 Upside: 34% Expected dividend: LKR 0.20 RECYCLE Dividend yield: 2% |
Slide 2: Overview: BPPL Holdings
LANKA SECURITIES RESEARCH BPPL HOLDINGS OVERVIEW: BPPL HOLDINGS KEY SEGMENTS Brush market is mainly focused on North BPPL collects American markets ~300tonnes It is the only Brushware operation in Sri Lanka of plastics for a that recycles PET BPPL Holdings manufactures a month for their range of bru
Slide 3: Overview: History
LANKA SECURITIES RESEARCH BPPL HOLDINGS OVERVIEW: HISTORY BPPL was established in Beira Enviro Solutions Transferred BSF operations 1991 (Private) Limited: a company and sold its usable assets to that focuses on the BES in order to consolidate The Beira Group established with manufacture of recycled
Slide 4: Overview: Raw Material
LANKA SECURITIES RESEARCH BPPL HOLDINGS OVERVIEW: RAW MATERIAL BPPL collects ~300tonnes of plastics for a month for their production and the required plastic bottles are collected solely from Sri Lanka. According to Statista website (Statista), Sri Lanka is among the top five sources of plastic bags
Slide 5: Overview: Raw Material
LANKA SECURITIES RESEARCH BPPL HOLDINGS OVERVIEW: RAW MATERIAL Imported from China At present, local sourcing of PET flakes is sufficient for current production. Prevailing travel restrictions had impacted BPPL’s bottle collection as tourists are the large users of such bottles. However, collections
Slide 6: Overview: Manufacturing Process
LANKA SECURITIES RESEARCH BPPL HOLDINGS OVERVIEW: MANUFACTURING PROCESS CURRENT MANUFACTURING PROCESS FROM RAW MATERIAL TO FINISHED GOODS Raw material Work in progress Finished goods • Polypropylene (PP) Filaments • Low-Density Polyethylene (LDPE) Filaments • Recycled PET Yarn • Recycled PP Recycled
Slide 7: Overview: Plant Operations
LANKA SECURITIES RESEARCH BPPL HOLDINGS OVERVIEW: PLANT OPERATIONS BRUSHWARE FILAMENTS YARN CURRENT 1 shift: 90% OPERATING LEVEL 60% 80% 2 shifts 50% OUTPUT 60mn tuft per GENERATION 180T per month 40-45T per month month 7 August 2020
Slide 8: Overview: Global Foot Print
LANKA SECURITIES RESEARCH BPPL HOLDINGS OVERVIEW: GLOBAL FOOT PRINT BPPL primarily focuses on corporate market (B2B market). At present, company is penetrating widely into overseas markets. In addition, BPPL is selling the products under their own brand “Tip Top” in local super markets. MARKET SHARE
Slide 9: Overview: Markets
LANKA SECURITIES RESEARCH BPPL HOLDINGS OVERVIEW: MARKETS Local Export 2%-5% 95%-98% The local market is a B2B market where the buyer is an exporter. Therefore, the local supply of 2-5% can be categorized as an indirect export Europe, India, Australia & New Zealand 20% USA & Canada 80% 9 August 2020
Slide 10: Overview: Eco Spindles – Polyester Yarn
LANKA SECURITIES RESEARCH BPPL HOLDINGS OVERVIEW: ECO SPINDLES – POLYESTER YARN Eco Spindles, a wholly owned subsidiary of BPPL inaugurated Sri Lanka’s first ever polyester yarn plant at Horana Export Processing Zone during 2018. It has a capacity level of 40-45tonnes per month. This plant is one of
Slide 11: 1QFY21 Earnings Summary
LANKA SECURITIES RESEARCH BPPL HOLDINGS 1QFY21 EARNINGS SUMMARY 1QFY21 1QFY20 YoY Revenue 590 645 (9) Gross profit 187 243 (23) Other income 8 3 203 Operating expenses (100) (123) (19) Operating profit 94 122 (23) Non-recurring items - - - Net finance expenses (8) (8) 4 PBT 86 114 (25) Tax (26) (15)
Slide 12: 1Q Revenue Breakdown
LANKA SECURITIES RESEARCH BPPL HOLDINGS 1Q REVENUE BREAKDOWN Brushware Wood handles/ Filaments Yarn other than wood handles/wooden backs wooden backs 66% 20% 11% 3% Total Brushware sales 86% 12 August 2020
Slide 13: Quarter Trends: Brushware
LANKA SECURITIES RESEARCH BPPL HOLDINGS QUARTER TRENDS: BRUSHWARE 900 40% 33% 845 During the 1QFY21, BPPL recorded LKR 652mn 821 800 of brushware revenue, declined by 6%YoY. Even 740 741 30% 709 though sales dropped during 4QFY20 notably, 695 700 27% 660 brush sales picked up during 1QFY21 with new
Slide 14: Quarter Trends: Filaments & Yarn
LANKA SECURITIES RESEARCH BPPL HOLDINGS QUARTER TRENDS: FILAMENTS & YARN 160 15% 152 151 137 140 136 133 10% 11% 116 10% Filaments and yarn segment recorded a revenue 120 114 7% 107 5% of LKR 107mn (-7%YoY). Company was not able to report expected revenue from synthetic yarn 100 0% due to the disrup
Slide 15: Quarter Trends: Group Revenue
LANKA SECURITIES RESEARCH BPPL HOLDINGS QUARTER TRENDS: GROUP REVENUE 900 15% 775 800 12% 11% 10% 676 709 699 700 6% 674 645 5% 3% 609 590 600 Overall, group revenue has dropped by 9%yoy 0% during the 1QFY21, mainly as a result of less 500 -4% support from filaments and yarn section. -5% -5% 400 -9%
Slide 16: Quarter Trends: Group Net Profit
LANKA SECURITIES RESEARCH BPPL HOLDINGS QUARTER TRENDS: GROUP NET PROFIT The increase in corporate tax from 12% to 14% also dragged the profit to down in 1QFY21. 94 22 As a result of the above, group net profit declined 27 29 159 to LKR 60mn. 41 119 91 82 72 70 58 41 2QFY19 3QFY19 4QFY19 1QFY20 2QFY
Slide 17: Outlook: Market Opportunities – US & Canada Market
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: MARKET OPPORTUNITIES – US & CANADA MARKET In together, US & Canada markets account for around …The US cleaning industry (both household & commercial) is packed 80% of the total revenue of the group. BPPL holds with opportunities – an earlier forecast
Slide 18: Outlook: Brushware
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: BRUSHWARE The demand for BPPL brushware has remained strong during the Apr to June quarter as a result of cleaning becoming an essential service around the world. US Customers that prefer environmentally friendly products According to Brandessence Mar
Slide 19: Outlook: Polyester Yarn
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: POLYESTER YARN In 2019, recycled polyester accounted for around 14% of the polyester global market. Recycled polyester is mainly made from PET plastic bottles. Recycled polyester is made by breaking down used plastic into small, thin chips, which are
Slide 20: Outlook: Polyester Yarn
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: POLYESTER YARN GREEN CLOTHING: EASY TO THROW OUT-BETTER TO THROW ON Many companies globally are coming forward to recycle the waste plastic bottles and create sustainable environment. Not only entrepreneurs but fashion designers are also coming forwar
Slide 21: Outlook: Polyester Yarn
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: POLYESTER YARN Global polyester production (million mt) Recycled polyester Other polyester 53% 54% 55% 58% 46% 52% 42% 45% 36% 40% 31% 33% 11% 11% 12% 12% 13% 13% 14% 16% 14% 14% 8% 9% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Prada
Slide 22: Outlook: Polyester Yarn
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: POLYESTER YARN The map locates key supplies and innovators of recycled polyester based on their headquarters Source: TextileExchange 22 August 2020
Slide 23: Outlook: Polyester Yarn
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: POLYESTER YARN BENEFITS OF USING BPPL’S RECYCLED SYNTHETIC YARN FOR THE APPAREL MANUFACTURERS (VS IMPORTS) Fabric manufacturers can Savings in freight and significantly reduce inventory lead documentation costs times and inventory holding costs Enviro
Slide 24: Outlook: Polyester Yarn
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: POLYESTER YARN Revenue from the new polyester yarn operations were not recognized in the first nine month period in FY20 as full commercial production was delayed due to a faulty component in one of the plant’s power unit. However, the commercial oper
Slide 25: Outlook: USD Rate
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: USD RATE Even though the LKR/USD rate is stagnate in the recent period due to the global cues & import restrictions, we expect exchange rate would depreciate when control measures are relaxed and this could benefit exporters such as BPPL. 210.00 200.0
Slide 26: Outlook: Group
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: GROUP REVENUE (LKR MN) 3,200 3,073 3,100 3,000 2,900 2,858 2,800 2,741 We expect BPPL to report a revenue of LKR 2.9bn 2,700 2,616 2,626 2,600 for FY21, +9% higher than the previous year. 2,500 Expected sales in all three products (brush, filaments 2,
Slide 27: Outlook: Trend in ESG Investing
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: TREND IN ESG INVESTING According to a survey done among US individual investors, Morgan Stanley claims that investors care strongly about environment and social issues and that familiarity with and enthusiasm for sustainable investing is currently at
Slide 28: Outlook: Trend in ESG Investing
LANKA SECURITIES RESEARCH BPPL HOLDINGS OUTLOOK: TREND IN ESG INVESTING Morgan Stanley survey further states that 86% of individual investors agree that the ESG practices can potentially lead to higher profitability and may be better long-term investments. ESG investing consists of investing in ways
Slide 29: We Value the Share at LKR 14.20
LANKA SECURITIES RESEARCH BPPL HOLDINGS WE VALUE THE SHARE AT LKR 14.20 Current market price 10.60 DCF BASED VALUATION Enterprise value (LKR mn) 5,946 Average Price-earnings ratio 12.00 Debt (LKR mn) (1,581) Average Price-to-book ratio 18.00 Other adjustments (LKR mn) - Equity value (LKR mn) 4,365 N
Slide 30: We Expect a Dividend of LKR 0.20 Per Share for FY21
LANKA SECURITIES RESEARCH BPPL HOLDINGS WE EXPECT A DIVIDEND OF LKR 0.20 PER SHARE FOR FY21 FY16 FY17 FY18 FY19 FY20 FY21E FY22E Earnings per share (LKR) 1.01 1.42 1.19 1.20 1.31 1.01 1.09 Dividend per share (LKR) 0.36 0.42 0.42 0.42 0.42 0.20 0.33 Market price per share (LKR)* n/a n/a 13.20 9.90 7.
Slide 31: Share Information
LANKA SECURITIES RESEARCH BPPL HOLDINGS SHARE INFORMATION KEY DATA 3,500,000 14.00 Shares O/S (mn) 307 13.00 Market cap (LKR mn) 3,253 3,000,000 Market cap ($ mn) 17 12.00 3m – avg daily volume 83,481 2,500,000 11.00 3m – avg daily value (LKR 000) 831 3m – avg daily value ($ 000) 4 10.00 2,000,000 5
Slide 32: Earnings Forecast
LANKA SECURITIES RESEARCH BPPL HOLDINGS EARNINGS FORECAST INCOME STATEMENT (LKR MN) FY19 FY20 FY21E FY22E Revenue 2,741 2,626 2,858 3,073 Gross profit 964 896 990 1,065 Other income 10 9 11 11 Operating expenses (529) (559) (622) (672) Operating profit 445 346 379 404 Non-recurring items - 188 - - N
Slide 33: Financial Position Forecast
LANKA SECURITIES RESEARCH BPPL HOLDINGS FINANCIAL POSITION FORECAST BALANCE SHEET (LKR MN) FY19 FY20 FY21E FY22E PPE 2,822 2,922 2,949 2,976 Other non-current assets 25 18 18 19 Total non-current assets 2,847 2,939 2,968 2,995 Inventories 702 500 704 757 Trade & other receivables 736 771 799 859 Cas
Slide 34: Key Ratios Forecast
LANKA SECURITIES RESEARCH BPPL HOLDINGS KEY RATIOS FORECAST RATIO ANALYSIS FY19 FY20 FY21E FY22E Revenue growth (%) 4.8 (4.2) 8.9 7.5 PAT growth (%) 1.1 8.5 (22.8) 8.6 GP margin (%) 35.2 34.1 34.6 34.6 OP margin (%) 16.2 13.2 13.2 13.1 NP margin (%) 13.5 15.3 10.8 10.9 RoA (%) 9.3 8.8 6.6 6.6 RoE (%
Slide 35: Important Disclosures and Disclaimers
IMPORTANT DISCLOSURES AND DISCLAIMERS Equity research methodologies and definitions Equity research is based on a fundamental analysis of the companies covered, using the application of multiples and, where appropriate, discounted cash flow valuation models. In arriving at equity research recommenda
Slide 36: Lanka Securities Private Limited
Lanka Securities Private Limited A joint venture stockbroking firm between First Capital Securities Corporation (Pakistan), Bank of Ceylon and Merchant Bank of Sri Lanka 228/1, Galle Road, Colombo 04, Sri Lanka Tel: +94 (0) 11 4 706757, +94 (0) 11 2 554942 Fax: +94 (0) 11 4 706767 Web: www.lankasecu