EQS Group-News: Research Dynamics
/ Key word(s): Research Update
This report is published by Research Dynamics, an independent research boutique
Packaging Division to provide the next leg of growth
Long-term drivers in place for further lift: The global pharmaceutical market is expected to register a CAGR of 3%-6% during 2020-25e, with emerging economies clocking a much higher growth of 7%-10% (CAGR). Such growth will be driven by megatrends such as the ageing global population, urbanization, civilization, lifestyle diseases, and improved medical and medicinal care.
Levers identified for further expansion: The division's primary focus, i.e 90% of the pharmaceutical offerings, is on the primary pharma packaging (blister packs, solid dosage forms), while 10% is on special applications (ampoule packagings, syringe packagings, medical devices). The demand for blister packaging is expected to clock a CAGR of >4%-7% during 2018-23e, whereas the demand for PVC monofilms grows at 3% to 5%, the higher margin coated PVdC barrier films grows at 7% to 9% during the same period. In line with the growing and emerging trends, the company is studying the expansion possibilities into new products and markets. The blister packs, which are used as barriers, can also be used as protectors from contamination and/or for transport, thus have the potential to become an incremental addressable market for the company. Similarly, the company exploring way to become a packaging specialist for primary pharmaceutical packaging such as containers, bottles, ampoules, syringes, etc. made of plastic, or other materials such as glass, metal or paper for the pharmaceutical market.
Well established network supported by state-of-the-art operations: CPH already has an operational presence in four out of the top five future pharma markets globally (in 2025e). The company has a direct sales presence in 85 countries and operates via local agents in >40 countries. It has state-of-the-art operations with five production sites spread across four continents. Of the five, the one in Brazil is expected to commence operations in 2Q22. The company is also at the forefront of innovation and has developed more than 10 innovative products since 1970. With such operational strength and a wide reach, the company stands to benefit from the ongoing development in the pharmaceutical market.
Growth to be balanced by sustainable approach: The Packaging division expects its mon-material blister systems to meet the requirements of the circular economy.
Valuation and conclusion
The global economy is expected to recover gradually from 2021e with the IMF forecasting 6% growth in 2021. While this bodes well for the business in general, in the short-term, we expect the uncertainty to continue. Specifically, the Paper Division is expected to be under pressure due to an unfavorable operating environment. However, the Packaging and Chemical Divisions are expected to be the key beneficiary of a revival in economic activity and should offset the expected weakness in the Paper Division to some extent. Specifically, we believe the Packaging Division to emerge even stronger in the ongoing economic revival as it has all positive levers in place to capture upcoming opportunities. Operations aside, management's focus on offering sustainable solutions and the simplification of the corporate structure should improve investor sentiment going forward. We remain encouraged by management's commentaries, which did not include any changes to the mid-to-long-term goals. Moreover, we expect the group-level cost optimization initiatives to offer support to the company's stock price.
File: CPHN_Investor Day Update_18.6.2021
End of Media Release