Intertape Polymer Group is a leading developer and marketer of packaging and protective solutions for industrial and retail use. The company provides a variety of paper and film-based pressure-sensitive and water-activated tapes, polyethylene and specialized polyolefin films, protective packaging, and engineered coated products.
The company has operations in 31 locations, including 21 manufacturing facilities in North America, four in Asia, and one in Europe. Over the years, Intertape Polymer has built extensive manufacturing and research and development facilities that develop a comprehensive range of packaging, protective and industrial product solutions.
Intertape Polymer serves a wide spectrum of end markets ranging from food processing, general manufacturing to transportation, construction, oil and gas, agriculture, and aerospace, marine, and medical applications. The company provides a broad range of products, ranging from carton sealing machines, flatback tape, and duct tape to roof underlayment, stretch films, and water-activated tapes.
Intertape’s product bundle can be broadly classified into tapes (59%), films (15%), protective packaging (13%), and woven (13%). It is focusing on strengthening its product portfolio, expanding its global footprint, providing protective solutions, and driving operational efficiency for future growth.
Key Investment Data
- Opportunity Score: 34
- Ticker: TSE:ITP
- Sector: Consumer Cyclical
- Industry: Packaging & Containers
- Market Cap: 1.64B
- P/E: 17.26
- Dividend Yield: 2.83%
- Payout Ratio (TTM): 47.30%
- Canadian Dividend Aristocrat: YES
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 3/10
- Dividend Income Fit: 2/10
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Revenue Growth & Market Exposure
Intertape Polymer has built a huge product portfolio given its manufacturing expertise, technologies, and extensive R&D activities. Its global sourcing expertise and impressive product line allow it to cater to the customized needs of a huge base of customers in varied industries. A broad and comprehensive range of packaging, protective and industrial product solutions is Intertapes’ key competitive advantage and offers good opportunities to cross-sell. Customers also prefer Intertape for its low-cost structure.
Intertape has been growing both organically and through acquisitions and has a sound track record of successful integrations. Intertape is also positioning itself to offer comprehensive solutions to distributors and e-commerce retailers that are utilizing automation to streamline their operations. Intertape’s scale and customer relations have the potential to open up new opportunities in different verticals in this area.
Moreover, packaging requirements continue to evolve as large e-commerce players commit to improving the packaging standards to reduce waste and improve sustainability. The company is in a good position to benefit from its leading position in the packaging industry driven by a growing global footprint and improving operational excellence. Higher e-commerce demand has translated into increased demand for packaging products.
Intertape has revised its revenue outlook to $1,135 – $1,200 million for the full year as a result of the COVID-19 impact. The company reported increased revenue and margins in the latest quarter on the back of high demand. It is estimating revenue of $1.375 and $1.450 billion in 2021 and more than $100 million in incremental revenue on an annualized basis by the end of 2022 as well as additional growth into 2023 and beyond. Intertape’s revenues have grown at 20% CAGR in the last three years.
Intertape Polymer is a Dividend Aristocrat. It has a dividend yield of 2.7% and a reasonable payout ratio of 48%. The company last raised its dividend by more than 6% and has compounded its dividend growth by 2%+ per annum over the last three and five years. Intertape’s EPS have grown at more than 10% CAGR in the last five years.
Intertape is expecting good returns (15% IRR) from its Capex, especially in high-growth product categories. The company completed the strategic CapEx program in 2018, which resulted in almost five times more free cash flow in 2019. Intertape expects total capital expenditures of $100 million in 2021, including $70 million to expand production capacity in the high-growth product categories. It is also estimating strong free cash flow generation in the second half of the year.
Water-activated tapes, films, and wovens are Intertape’s high-growth product categories. It caters to highly diversified end markets which leads to diversified revenue streams. The company expects its asset utilization and past investments in its high-growth product categories to drive margins in the future. Adjusted EBITDA for 2021 is now expected to be between $235 and $250 million.
Intertape’s solid turnaround since 2011, recovering from the status of a struggling company to reaching double-digit earnings margins is impressive and indicates the resilience of its management team. With debt repayment, the company now has an improved capital structure. Intertape is positioning itself better to ensure effective service to e-commerce customers and meet their packaging needs.
The Polyair acquisition has expanded Intertape’s product bundle targeting e-commerce. Capital investments and acquisitions strengthen Intertape’s footing for future success.
The label market is large and highly fragmented but has no single large player. CCL Industries is Intertapes’ prominent competition. CCL Industries is the clear leader given its huge scale of operations and global reach. Winpak Ltd., IPL Plastics, Richards Packaging are other big competitors.
A solutions-oriented approach to address specific end-user needs differentiates Intertape Polymer from its competitors. Low-cost leading asset base, a strong product portfolio, and scale are its other competitive advantages.
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|TSE:CCL.B||CCL.B||CCL Industries Inc.||Consumer Cyclical||Packaging & Containers||0.59||71.55||12.84||20.55||20.55||3.18||0.0117||1.17||0.2440||4||0.84||0.1728||8||6||Intermediate||YES||YES||YES||NO||Canada||1|
|TSE:WPK||WPK||Winpak||Consumer Cyclical||Packaging & Containers||0.12||40.77||2.65||19.87||19.87||2.10||0.0000||0.00||0.0000||0||0.00||0.0000||0||0||Intermediate||NO||NO||NO||NO||Canada||1|
|TSE:ITP||ITP||Intertape Polymer Group Inc.||Consumer Cyclical||Packaging & Containers||0.34||27.77||1.64||17.26||17.26||2.24||0.0283||2.83||0.4730||4||0.63||0.0505||3||2||Intermediate||NO||NO||YES||NO||Canada||1|
Intertape should continue to improve its top-line growth on the back of large capital expenditure on strengthening its facilities, enhancing its product portfolio, and strong acquisitions. Intertape is also favorably placed to gain from increasing demand from e-commerce customers which continues to grow at double-digit rates exceeding the conventional brick-and-mortar retail market.
As the pace of capital expenses slows down, Intertape should start benefiting from improving operational efficiencies and cash flows. The company’s focus on strengthening its product bundling, low-cost manufacturing base, and operational excellence should help solidify its position as a global leader in packaging and protective solutions.