Shares of smallcap stock Control Print, in which seasoned investor Dolly Khanna holds a stake, rallied 61 percent on a year-to-date (YTD) basis, while the 30-share BSE Sensex rose 2.65 percent during the same period. The stock settled 0.0077 percent lower at Rs 645.45 apiece in Monday's (June 5) trade. Control Print shares have gained 6 percent in the last five trading sessions.

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Control Print has an average target price of Rs 690 per share. The consensus estimate represents an upside potential of 7 percent from the last price of 644.9.

The ace investor is well-known for buying stocks that tend to beat benchmark returns comfortably in the long term. Therefore, retail investors closely follow Dolly Khanna's portfolio for value picks. So, when Khanna added Control Print shares in her portfolio in December 2021, market observers were bound to follow this industrial coding sector stock.

Khanna holds 170,207 company shares, which is 1.04 percent of total paid-up capital of the company, according to the March 2023 shareholding pattern.

In the Spotlight: Control Print

CNBC-TV18 special, Inside Out, brings an in-depth analysis of Control Print after the company reported its best quarter in March (Q4FY23). Here's an outlook on the company's business, financials, product portfolio and growth guidance.

Control Print is a play on India’s economic growth and formalisation of economy. Additionally, in the past year, the industry was constrained by shortage of chips, which is now easing.

Valuations

Bloomberg estimates a big increase in its EPS (earnings per share) in the coming years, and so on forward earnings basis, it is seen trading at 16 times FY24E EPS and 13.5 times FY25e EPS. The key point will be to track them achieving this Rs 400 crore revenue target.

Shareholding pattern

The promoter entity holds more than 50 percent stake in the company and the institutional holding is near 15 percent, with some of the prominent domestic and foreign funds holding stake in the company.

This is the shareholding pattern as of March 2023:

Promoters: 51.78 percent.

India Max Investment Fund: 3.8 percent.

SBI Large & Midcap Fund: 4.89 percent.

Baring Private Equity India AIF: 3.37 percent.

Trustline Deep Alpha AIF: 1.57 percent.

Dolly Khanna: 1.04 percent

What stands-out?

A) The company's dividend payout has been healthy. Control Print has declared 32 dividends since January 21, 2002.

B) It is a debt free company with cash balance of over Rs 60 crore.

Industry background

The coding and marking solutions in India is oligopolistic in nature and its approximate market size is around Rs 1,800 crore. The market is dominated by three MNC players while Control Print is the only local player with a market share of 18.5 percent. The overall coding and marking industry growth in India is expected at 10 percent CAGR over the coming periods led by demand from industrial and consumer goods sectors.

Key players in the coding and marking industry

Domino Printech

Videojet

Markem-Imaje India

Control Print

Financials

Focusing on Control Print's revenue split, 55-60 percent of their business comes from the sale of consumables, which includes inks, ribbons and cartridges. Roughly 15-20 percent comes from the sales of printers. Added to that is service income — comprising the annual or comprehensive maintenance contracts — which amounts to approximately 10-15 percent. The remaining comes from the sales of spares, which is about 8-10 percent.

To give investors an idea of how it works is post the printer sales, there is a continuous demand for consumables over its life, which typically lasts for about 5-8 years, depending on its operating condition.

Control Print reported its strongest-ever quarterly threshold of Rs 80 crore, which was lead by multiple product portfolio offerings to clients and ensuing consumables sales. The EBITDA margins have been holding around mid-twenties and gross margins around 60 percent.

For the last few years, the company has delivered steady growth barring FY18 and FY19, when there was no growth. However, the company has guided that they will hit Rs 400 crore in standalone revenues by FY25, which compares with Rs 291 crore in FY23.

Control Print plans on achieving this target while widening its footprint, capacity and market share. Additionally, tax rates have been lower due to its Guwahati operations' tax benefits.

About the company

The company is involved in manufacturing coding and marking solutions in India, which are crucial in the manufacturing supply chains of both industrial as well as consumer goods. It is involved in development, research, manufacturing and marketing of printing machines, spare parts, consumables and associated services.

Now the demand for continuous inkjet technology-based printing has been rising as it enables high-speed printing and can be used on most of the product substrates and is cost-effective.

The industry is also witnessing a shift towards coding and marking solutions as it enables high-volume printing at high speeds. In terms of downstream industries, the food and beverage industry remains one of the biggest contributors to the growth of the industry, followed by manufacturing, pharmaceutical, electronics and automobile industry.

The company has exposure to a variety of sectors and its key clients include Ashirvad, Cipla, Godrej consumer products, Cadbury, Parle, Wonder Cement and Finolex Cables

(Edited by : Shoma Bhattacharjee)

First Published:Jun 6, 2023 7:16 AM IST