Prima Plastics Ltd. share price target

The domestic business (contributes ~84% to topline) remains an underperformer with muted revenue CAGR of 6% in FY16-19 driven by volume growth mainly due to capacity addition. However, the gross margin has deteriorated by ~400 bps during the same period. This coupled with higher fixed cost (as post expansion plant utilisation remained low) dragged down EBITDA margin from ~11% in FY16 to ~6% in FY19. During the same period, standalone debt increased significantly from | 80 lakh to | 29 crore, resulting in a sharp increase in interest outgo. This was largely to fund...

We expect its revenue/EBITDA/PAT CAGR of 27.3%/35.9%/45% during FY17-FY19E on the back of volume growth and better margins at overseas business. We are raising our TP to Rs283 (14x FY19E EPS) from Rs271. Maintain BUY....

We met the management of Prima Plastic (PPL) to get an insight into its business and future plans. Operating mainly in the plastic furniture segment, PPL is the fourth largest player in the organised category after Nilkamal, Wim Plast and Supreme Industries. It has over 400 distributors and a dealer network of ~5000 across India. The company also export its products to the Middle East, Latin American and African countries and recorded export revenue CAGR of 15% in the last five years. To tap African markets, PPL formed a 50% JV in 2006 called Prima Deelite...

Prima Plastics' (Prima) Q1FY17 result came above our expectations. Standalone revenues/EBITDA/PAT increased by 7.4%/56%/51% YoY to Rs205/20/15 mn. EBITDA margin improved 300bps YoY to 9.5% in Q1FY17. The benefit of lower RMC reflected in operational performance along with better cost management expanded margins. Further, higher operating profit was translated into healthy net profit growth of 51% YoY to Rs20 mn in Q1FY17. The company is expanding its capacity in West Africa & India and foraying its presence in Central America (through JV) which is expected to complete by early Q3FY17. Post expansion, its capacity would increase from current 14,000mt to 22,500mt. Going forward, capacity expansion, new...