Intertape Polymer Group Inc. (TSX: ITP) is engaged in the development, production and sale of a range of paper and film based pressure-sensitive and water-activated tapes, polyethene and specialized polyolefin films, protective packaging, engineered coated products and packaging machinery used for industrial and retail use.

The Company reported a higher quarterly dividend of US$ 0.1475, up from US$ 0.14 in the previous corresponding period. Meanwhile, during FY19, dividend distribution stood higher at US$ 33.99 million, as compared to US$ 32.78 million in FY18. The group announced that its Annual General Meeting is scheduled on May 13, 2020.

The Company’s North American and European manufacturing segments are open and operating at normal levels. ITP ensured uninterrupted supply of its products for the first quarter of FY20 while the performance stood as per the expectation. The company is witnessing continued demand from the food & beverage industry and growth from e-commerce customer segments. For the near term, the group expects sustained demand and reaffirmed its outlook.  

FY19 Financial Highlights: For the period ended December 31, 2020, ITP posted revenue of US$ 1,158.5 million, up 10% on y-o-y basis, driven by incremental sales from the acquisitions of Polyair, Maiweave, and Airtrax. Operating profit stood at US$ 92.54 million, as compared to US$ 77.33 million in FY18. The increase was driven by improved revenue, lower manufacturing facility closures, restructuring & other related charges, partly offset by higher selling, general & administrative expenses and research expenses. The Company reported a slack in net profit at US$ 41.22 million, as compared to US$ 46.65 million in the previous financial period due to a rise in finance costs and income tax expense.

FY19 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock price soared ~59% in the last one month and the stock offers a lucrative dividend yield of 6.52% on a yearly basis. The Company offers packaging products related to retail consumption. The majority of the production facilities are located within North America, while the supply within the region has remained intact, thanks to the uninterrupted demand from retail and food industry. The company seems to have ample liquidity to navigate the current crisis and has slashed its FY20 capital expenditure. The company further believes that the demand would pick up in its e-commerce customer channel, thus balancing the reduced demand in industrial tape and woven products. Despite the recently recovery, ITP stock is still down about 24% on a year-to-date basis. Also, the stock is trading at a lower valuation multiple when compared to the industry average (9.5x forward P/E against industry average of 14x), which presents a good buying opportunity. Hence, we recommend a ‘Speculative Buy’ on the stock at CAD 12.62 as on April 24, 2020 market close.

ITP One-Year Daily Price Chart (Source: Thomson Reuters)

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