Wim Plast Ltd (Buy)
Consumer Discretionary-Home & Office Products
CMP (as on Apr 26, 2017) : Rs. 1416
Target Price: Rs. 1628
Upside: 15%
“Cello” Brand Supported by Low Raw Material Prices and Strong Financials
Revenue to remain flat supported by volumes during FY17E-19E: I expect WPL’s revenue to remain flat with 3.4% CAGR during the period FY17E-19E mainly supported by the volume growth of 2.4% and realisations to grow at 1.0%. I expect the realisations to remain flat on the back of slow recovery in the raw material prices, but volumes to improve on account of increased capacity utilisations in the years to come assuming no new capacity additions.
Operating margins expected to remain healthy on account of slow recovery in the raw material (polypropylene) prices: Wim Plast consumes Polypropylene as the major raw material for its products manufactured. Polypropylene, being a crude derivative, witnessed a drop in the price due to the fall in the crude oil prices, hence benefitting the company to maintain its operating expenses better. I expect the EBITDA margins to be in the range of 20.3-21.0% during FY17E-FY19E.
Expected to maintain strong financials along with healthy cash flows: I expect the company to maintain its debt free position with an assumption that there will not be any capital expenditure in FY17E-19E and maintain healthy free cash flows in the years to come.
Valuation and Outlook:
WPL with the brand “Cello” to leverage on, along with the strong distribution network, will continue to maintain its operating margins in the years to come. Ie expect the company to maintain healthy cash flow from operations and find the new avenues to invest going forward. Assigning a higher multiple to FY18E EPS, I initiate coverage with a “BUY” rating for a target price of Rs.1628.
Consumer Discretionary-Home & Office Products
CMP (as on Apr 26, 2017) : Rs. 1416
Target Price: Rs. 1628
Upside: 15%
“Cello” Brand Supported by Low Raw Material Prices and Strong Financials
Revenue to remain flat supported by volumes during FY17E-19E: I expect WPL’s revenue to remain flat with 3.4% CAGR during the period FY17E-19E mainly supported by the volume growth of 2.4% and realisations to grow at 1.0%. I expect the realisations to remain flat on the back of slow recovery in the raw material prices, but volumes to improve on account of increased capacity utilisations in the years to come assuming no new capacity additions.
Operating margins expected to remain healthy on account of slow recovery in the raw material (polypropylene) prices: Wim Plast consumes Polypropylene as the major raw material for its products manufactured. Polypropylene, being a crude derivative, witnessed a drop in the price due to the fall in the crude oil prices, hence benefitting the company to maintain its operating expenses better. I expect the EBITDA margins to be in the range of 20.3-21.0% during FY17E-FY19E.
Expected to maintain strong financials along with healthy cash flows: I expect the company to maintain its debt free position with an assumption that there will not be any capital expenditure in FY17E-19E and maintain healthy free cash flows in the years to come.
Valuation and Outlook:
WPL with the brand “Cello” to leverage on, along with the strong distribution network, will continue to maintain its operating margins in the years to come. Ie expect the company to maintain healthy cash flow from operations and find the new avenues to invest going forward. Assigning a higher multiple to FY18E EPS, I initiate coverage with a “BUY” rating for a target price of Rs.1628.
