MERIT_1QFY22 Analyst Briefing Takeaways, (AKD, Off the Analyst's Desk, Nov 18, 2021)
AKD, Off the Analyst's Desk
MERIT : 1QFY22 Analyst Briefing Takeaways
- Merit Packaging Limited (MERIT) held its analyst briefing session today to discuss its 1QFY22 result. To recall, the company posted a loss of PkR57mn (LPS: PkR0.65) in contrast to a loss of PkR165mn (LPS: PkR1.87) in same period last year, an improvement of 65%YoY and a loss of PkRPkR141mn (LPS: PkR1.59) in previous quarter, an improvement of 60%QoQ.
- The topline has increased by 36%YoY/18%QoQ as the company has been able to increase the number of orders from its existing customers after the revamp. In addition to this, the gross margin has increased from 2.7% in 4QFY21 to 5.7% in 1QFY22. As a result, the company has posted operating profit of PkR14mn as compared to the losses in previous quarters. This has been made possible due to synergies by combining the manufacturing facility in Lahore (which had largely remained idle) with the Karachi factory, thereby decreasing the overheads.
- The production output during the last several years hovered in the range of 800MT whereas the company is now delivering output of ~1,200MT. At current capacity, the maximum output that the company can deliver is ~1,300MT. The management expects the orders to increase in medium term, hence, the company may start the expansion soon.
- Regarding the McDonald’s business, the company is in the process to receive the required certifications. McDonald’s team is expected to visit the MERIT’s premises in Jan’22. According to the management, the company will be ready to take orders from McDonald’s by the end of FY22 and start the production in FY23. Once this milestone is achieved, the company plans to target other food chains as well.
- In the flexible packaging business, the company is eyeing growth of ~15%, in line with the industry. The documented size of the market is 40,000MT while the total market size is roughly 2-3x the size of documented segment. In the current scenario, the supply exceeds the demand due to which the industry is highly competitive. The competitive edge for MERIT is its huge client base, majority of which include FMCGs and MNCs.
- Going forward, the company expects to increase the topline by ~40%YoY in FY22, exceeding the milestone of PkR4bn which emanates from higher number of orders and better pricing while the McDonald’s business in FY23-24 is expected to make the company profitable at the NPAT level.
AKD Research
Merit Packaging Limited is a Pakistan-based company engaged in the manufacture and sale of printing and packaging materials. The Company's services include pre-press, printing, offset printing, gravure printing and post printing. Its pre-press services include preparation of design, correction/improvement/changes in existing design to initial proofing. The Company's pre-press services also include computerized designing section and plate making section. Its facilities include approximately six color Heidelberg offset printing press, with double coating features. It has approximately five color Komori offset printing machines with single coating capabilities. Its Roto gravure department has approximately seven and eight colors printing machines to print on film and paper webs over 1,000 millimeters width. The Company serves its customers offset/flexible packaging requirements, as well as requirements for point of sale (POS) material.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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