Betting on expansion for growth….
We met the management of Wim Plast (WPL), mainly engaged in the
manufacture of plastic moulded furniture, which uses the established ‘Cello’
brand to promote its products. The company derives ~75-80% of its
business from plastic moulded furniture while 20-25% comes from bubble
guard extrusion sheets. Initially, WPL started its operation in the northern
and western regions. WPL has now expanded to the southern and eastern
regions (with upcoming plants in Chennai and Kolkata). The company has a
strong dealer network (~10,000 across India) and has been targeting the
higher middle class. However, the management has guided that WPL would
be expanding its dealer network in rural India (by adding 1000 dealers in
future). In addition, the company is also looking for opportunities to expand
in new geographies like Andhra Pradesh and Tamil Nadu (wherein it
recently acquired an acre of land). With the addition of new facilities, we
have modelled revenue, PAT CAGR of 20%, 21%, respectively, led by
volume CAGR of 16% and margin expansion of ~40 bps for FY13-16E.
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We met the management of Wim Plast (WPL), mainly engaged in the
manufacture of plastic moulded furniture, which uses the established ‘Cello’
brand to promote its products. The company derives ~75-80% of its
business from plastic moulded furniture while 20-25% comes from bubble
guard extrusion sheets. Initially, WPL started its operation in the northern
and western regions. WPL has now expanded to the southern and eastern
regions (with upcoming plants in Chennai and Kolkata). The company has a
strong dealer network (~10,000 across India) and has been targeting the
higher middle class. However, the management has guided that WPL would
be expanding its dealer network in rural India (by adding 1000 dealers in
future). In addition, the company is also looking for opportunities to expand
in new geographies like Andhra Pradesh and Tamil Nadu (wherein it
recently acquired an acre of land). With the addition of new facilities, we
have modelled revenue, PAT CAGR of 20%, 21%, respectively, led by
volume CAGR of 16% and margin expansion of ~40 bps for FY13-16E.
Focus on garnering market share from unorganised segment
The plastic moulded furniture business is largely dominated by unorganised
segments (market share ~55%). Over the last four years, WPL has done a
capex of over ~| 40 crore to increase the manufacturing capacity in order
to expand into new geographies. Growing demand for plastic furniture
coupled with a gradual shift towards the branded products category would
further help WPL gain substantial market share (currently 12% in value
terms) along with other major brands like Nilkamal and Supreme.
Launch of premium products to help in maintaining margin
The company has launched ~40 new products in the last year 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.
WPL has maintained its EBITDA margin in the range of 17-18% considering
its capability to pass on price hikes to dealers. We believe with the recent
expansion, the margin would remain at the same level considering lower
operating leverage and growing advertisement expenditure.
Ramp up in sales volume & leasing key for re-rating…
The stock is currently available at attractive valuations of P/E at 9.1x on
FY14E and 7.4x on FY15E earnings. However, we believe WPL will get
premium valuations due to the expected growth potential coupled with a
clean balance sheet. Based on the above factors, we arrive at a fair price of
| 578.
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