*Huhtamaki India Ltd (BUY; TP: Rs 325) Q1CY21 Results: In line revenue, commodity inflation impacted margins*
1. HPPL’s Q1 revenue was up 9% yoy at Rs 6.3bn, in line with our estimates.
2. Operating profit stood at Rs 423mn, down 15% yoy and operating profit margin at 6.7% was down 195bps yoy.
3. PBT at Rs 199mn fell 17.8% yoy. Reported PAT fell 40.7% yoy.
4. Parent commentary: Demand for flexible packaging was good across all markets. However, for the full year, restrictions and lockdowns negatively affected the sales in India.
5. Management guidance: Huhtamaki Oyj aims to achieve sales growth of 6-8% yoy in flexible packaging, as a long-term ambition, with 9-10% EBIT margin.
6. Huhtamaki India will take a hit in volumes mainly because of the lockdowns; it will also see some margin pressure mainly because of sharp increase in commodity prices. we have cut CY21 revenue numbers by 11%.
7. We assign a 15x CY22 target PE to HPPL’s earnings to arrive at a per share value of Rs 325, Maintain BUY