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Last Updated : Sep 30, 2016 02:39 PM IST | Source: Moneycontrol.com

Hold Wim Plast; target of Rs 1402: ICICI Direct

ICICI Direct recommended hold rating on Wim Plast with a target price of Rs 1402 in its research report dated September 29, 2016.

 
 
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ICICI Direct's research report on Wim Plast


Wim Plast (WPL) recorded sales growth of 15% YoY to Rs 99.3 crore in Q1FY17 largely driven by its cooler sales. Performance of plastic segment remained flat as volume growth of 6-7% YoY was offset by a decline in realisation by 8%. Benefit of lower commodity prices helped in expansion of gross margin by 854 bps YoY, which was partly offset by an increase in other expenditure by 396 bps YoY. EBITDA margin increased 430 bps YoY to 22.7%. The higher tax rate (up 330 bps YoY) was on account of expiry of exemption of tax benefits. Finally, WPL reported growth of 43% YoY in net profit to Rs 13.5 crore We have introduced FY18E estimates and tweaked FY17E estimates aligning with Q1 and FY16 performance. We have modelled revenue CAGR of 22% in FY16-18E led by 4x jump in sales of cooler segment while the plastic segment is expected to record 12% sales CAGR mainly led by volume growth. We expect EBITDA margin to stay elevated (at 20% vs. historical average of 17-18%) considering its strong brand and introduction of premium furniture product. WPL is expected to record PAT CAGR of 22% largely driven by sales growth.

The company has well leveraged its brand to push sales of air cooler & recorded sales of Rs 30 crore in FY16 (vs. our estimate of Rs 5 crore). We introduce FY18E estimates with revenue, earning CAGR of 22% backed by 4x jump in cooler sales and plastic sales CAGR of 12% (shift in demand from unorganised to organised). Despite being new in air cooler segment, EBITDA margin stayed elevated (20.7% FY16, 22.7% in Q1FY17). We believe margins will stay elevated considering stabilisation of new business (higher operating leverage) and lower commodity prices. Also, WPL’s strong balance sheet and close to debt-free capital structure (resulted in strong RoE: 21% & RoCE: 29%) is well equipped to ride out the next growth cycle triggered by GST implementation. Also, as the economy improves, given its strong client base, WPL’s business model provides earnings visibility. We believe growth will accrue gradually, going ahead. Hence, we upgrade WPL to HOLD rating with a revised target price of Rs 1420 (valuing 25x FY18E EPS). 

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First Published on Sep 30, 2016 02:39 pm
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