Wim Plast Ltd - Research Report

 
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Rating

Buy

Sector

Plastic Products

Company

Wim Plast Ltd

Reco Price
Rs. 1272
Price Target (1.5 - 2 Years)
Rs. 2000
Upside
57.23%

Date

April 28 2015
Sensex
27396.38
CNX Nifty
8285.6

Exchange

Code

NSE
WIMPLAST
BSE
526586

With the innovation of new products and increasing capacity, growth is set to expand in future.

Strong Brand:
Wim Plast Ltd (WPL) is the part of Cello group India and has been marketing all its products under brand name Cello. It has substantially gained market share in plastic furnishing market with growing popularity of Cello brand. The company has gained market share of 12% (in value terms) and is the third largest player after Nilkamal and Supreme in the organized market. However, the unorganized market share is more than 55% in India. WPL is constantly leveraging its brand by increasing distribution network and launching innovative products, which in turn will boost up its revenue over the years.

Manufacturing plants are located strategically:
WPL’s three manufacturing units at Chennai, Himachal Pradesh and Kolkata offer certain additional tax benefits to the company. These plants enjoy the benefits in excise duty and central sales tax and will get these benefits over the period of 10 years (100% income tax exemption up to initial five years and then 30-50% for next five years). This is certainly a competitive advantage of the company over its peers. Moreover, the company has extensive trade network as most of its manufacturing plants are located at close proximity to major cities like Mumbai, Delhi, Ahmedabad, Kolkata and Chennai. Going ahead, it is expected that company’s strong brand “Cello” would assist WPL to acquire larger market share in Tier II and Tier III cities with its increasing dealers in eastern regions.

New premium products launch to improve and maintain margins:
The company has launched 40 new products in the FY 2013 and plans to continue it new product launches over the years. WPL is promoting its bubble guard sheet to established builders. Also, the company plans to introduce bathroom accessories and storage materials in the coming years. With the recent expansion of Rs 40 crores the company is planning to increase manufacturing capacities in order to expand geographically. Hence with introduction of new products and increasing capacities the companies margins are expected to improve in next three years.

Diversifying product portfolio:
Its products consisted chiefly of plastic moulded furniture but now it is focusing on bubble-guard sheets to increase the latter’s proportion of revenue from the present 25% to 50% in the next few years. Hence company is slowly diversifying its product portfolio to maintain and improve its sales growth in next few years.

Strategic techniques:
As outbound freight cost is an overhang on margins and constrains marketing reach the company has adopted the policy to set up manufacturing facilities near key markets. This logistical advantage, along with its brand pricing power, offers the huge promise of margin stability. Hence companies regularly strategize its techniques to improve on its margins.

Improving its presence:
Initially the company had substantial foothold in western and northern regions of India with manufacturing facilities located at Daman and Baddi in Himachal Pradesh. Growing demand for its products led WPL to establish four manufacturing facilities in Chennai, Haridwar, Kolkata and Daman. In last two fiscal years, the company has incurred a capex of Rs 40 crores ( Rs 29 cr for manufacturing plant in Chennai, Haridwar & Daman in FY12 & Rs 11.20 crores in manufacturing plant in Kolkata in FY13) which was entirely funded through internal accruals and hence the balance sheet is stress free. Hence company has strongly improved its presence in last few years by expanding geographically in remote areas.

Strong Financials:
The company has maintained a 33% gross margin despite volatile raw-material prices. This is on account of its cost-plus pricing and prudent inventory management. Also being debt free, the company has exhibited a 30% CAGR in EBIDTA over FY 09-14. This enabled it to post high ROE and ROCE consistently. Ahead, its venture into newer areas, along with tax benefits in Chennai, Uttarakhand and Kolkata, would help it maintain strong growth rates and capital efficiency ratios.

Stock Data

CMP (Rs)
1441.75
Face value (Rs)
10
52 Week Range (Rs)
1720 - 585
Market cap (Rs Crores)
846.09
Price To Book Value (x)
5.04
P/E Ratio (x)
26.61
EV/EBIDTA (x)
16.00

One Year indexed Stock Performance

Wim Plast LtdSensex
Wim Plast Ltd
Performance (%)
1m
6m
12m
Absolute
4.23
-4.99
130.16
Sensex
-0.23
1.92
21.05

Shareholders

(in %)
31-Mar
Promoter
75
FII
0.05
DII
1.71
Others
23.24
Total
100

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Industry

The Indian plastics industry made a promising beginning in 1957 with the production of polystyrene. Thereafter, significant progress has been made and the industry has grown and diversified rapidly. Currently, the Indian plastics industry is spread across the country, employing about 4 million people and over 2,000 exporters. It operates more than 30,000 processing units, of which 85% to 90% are small and medium enterprises (SMEs). India is one of the most promising exporters of plastics among developing countries. The Indian plastics industry produces and exports a wide range of raw materials, plastic moulded extruded goods, polyester films, laminates, moulded/soft luggage items, writing instruments, plastic woven sacks and bags, PVC leather cloth and sheeting, packaging, consumer goods, sanitary fittings, electrical accessories, laboratory/ medical surgical ware and travel ware, among other products.

Company’s Profile

Commencing operations in 1988 in Mumbai Wim Plast manufactured plastic-moulded hot spots and casseroles, insulated water bottles, and jugs and flasks. It then bit the moulded household furniture bug and, in 1994, diversified by setting up a plant in Daman. In 2005 it diversified into bubble-guard extrusion sheets with a unit at Baddi (HP). Predominantly a western and northern operator, it has expanded operations to the south and east of India as well. Wim Plast is part of the Cello Group with annual sales turnover of more than Rs 10bn. It is the only listed entity in the group.It has manufacturing units for plastic molded furniture at Daman, Baddi, Chennai, Haridwar and Kolkata, and nine depots (in Jodhpur, Punjab, Hyderabad, Haryana, Vapi, Chennai, Muzzafarnagar, Kolkata and Cuttack) and a strong consumer base throughout the country.

Profit & Loss Statement:- (Standalone)
(Rs Crores)
Particulars
Mar 12
Mar 13
Mar 14
Mar 15
Mar 16E
Income:-
  • Net Sales
  • Growth (%)
  • Total Expenditure
  • EBIDTA
  • EBIDTA Margin (%)
  • Other Income
  • Operating Profit
  • Interest
  • PBDT
  • Depreciation
  • Profit Before Tax
  • Provision for Tax
  • Tax Rate (%)
  • Profit After Tax
  • Adjusted EPS
  • 201.47
  • -
  • 164.93
  • 36.55
  • 18.14
  • 1.23
  • 37.77
  • 0.17
  • 37.61
  • 5.59
  • 32.02
  • 9.27
  • 28.95
  • 22.75
  • 37.90
  • 248.08
  • 23.13
  • 203.69
  • 44.39
  • 17.89
  • 1.65
  • 46.04
  • 0.12
  • 45.92
  • 7.35
  • 38.57
  • 10.32
  • 26.75
  • 28.25
  • 47.08
  • 296.37
  • 19.47
  • 242.77
  • 53.60
  • 18.08
  • 0.35
  • 53.95
  • 0.22
  • 53.73
  • 9.03
  • 44.70
  • 12.18
  • 27.25
  • 32.51
  • 54.18
  • 395.50
  • 33.45
  • 320.50
  • 75.00
  • 18.96
  • 0.50
  • 75.50
  • 0.25
  • 75.25
  • 11.50
  • 63.75
  • 17.05
  • 26.75
  • 46.70
  • 77.81
  • 475.50
  • 20.23
  • 380.00
  • 95.50
  • 20.08
  • 0.50
  • 96.00
  • 0.25
  • 95.75
  • 14.50
  • 81.25
  • 21.50
  • 26.46
  • 59.75
  • 99.56
Source: Stockaxis Research, Company Data

Valuation

Considering its strong financial performance and brand value, the valuation is quite attractive among the listed peers. As the demand for plastic furniture has been growing because of the benefits of easy to use & maintain, excellent weather ability, light in weight and easy to carry, WPL will be benefited as it is the third largest manufacturer after Nilkamal and Supreme.

Hence we assign the valuation of 20.08x with target price of Rs 2000 with long term horizon.

 

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