The Global Packaging Index has risen considerably in the last one year driven by global supply shortage partly due to the intense demand for packaging materials.The significant increase has been seen across all three markets (metals, paper and plastics) with the most considerable impact seen on the plastics market. The upward price trend seen in the global plastics market has been driven by persistently tight supply and high demand for packaging applications because of the coronavirus pandemic. The global metal market was mainly driven by steel prices, with huge increases seen across the globe dominated by supply issues amid strong world demand . Plus high freight costs contributed to bullish global steel prices. Similarly, the global paper market continued to rise on the back of demand for corrugated materials and cardboard mainly due to an increase in e-commerce demand attributed to the Covid-19 pandemic. Manufacturers of corrugated boxes, a significant eco-friendly packaging material, are facing a severe raw material shortage due to increased exports leading to the corrugated box prices surging by more than 60-70% in the last few months. Corrugated boxes are extensively used by companies in the pharmaceutical, FMCG, foods, automobiles, electrical appliances and e-commerce sectors for packaging. Media sources say that top e-commerce platforms like Amazon and Flipkart are also facing the issue of packaging material shortage and might choose other alternatives if the situation arises. Companies are looking for alternatives like plastics or even wooden boxes that are now a cheaper option compared to corrugated boxes. Polyplex Corporation Ltd is engaged in the manufacturing of PET and BOPP films applied in the flexible packaging business. The company has come a long way since 1984 with it being a single factory unit to being a multinational presence across various countries around the world. The outlook for the PET film industry is quite positive on account of growth in the flexible packaging industry as well as increased demand for renewable energy sources and expanding sales of smart phones, TV, tablets, etc. Moreover, during the current Covid-19 pandemic, there has been an elevated demand for packaged foods in a significant manner. The company has a market cap of Rs 4700 crores and is available at price to book value of below 1. Compared to other peer group companies like Cosmo films, Polyplex Corporation is available at lower valuations and the stock merits a buy recommendation by analysts. As per stock analysts, it can deliver a profit after tax of over Rs 500 crore for the financial year 2021-22. The Polyplex stock has risen very sharply in the last one month by nearly 50% and currently quotes at around Rs 1500 on the Indian stock exchanges. Portfolio investors can accumulate the stock even at these levels for an investment horizon of one year wherein it can climb to nearly Rs 2200 levels.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.