Prima Plastics - Strong Multibagger

Prima Plastics Limited - Strong Multi bagger

A middle class family satisfies its demand of furniture by purchasing mostly plastic chairs, tables etc. Easy maintenance, light weight, durability and economy are some of the features of the plastic furniture, which gives edge above the conventional wooden and metal furniture. Plastic molded furniture contributes immensely in saving forests. Moreover, customization in case of shape, design & molding can be easily done. Further, recycled plastics can be used for the manufacturing providing huge support to environment. The demand for plastic furniture from the rural and urban India is likely to pick up in upcoming years. The Indian plastic sector is highly unorganized and comprises 25,000 firms of which the top 100 odd players just account for 20% of the Industry turnover. Only 10%-15% firms are classified under medium scale operations while the rest of the units operate on a small scale basis. The per ca-pita consumption of plastics in our country is very low compared with western country consumption and is bound to increase in years to come. In case of molded furniture there are few listed players in India like Wimplast, Nilkamal, National Plastic Industries Ltd, Supreme industries etc



About Company
Prima Plastics Limited is an India-based company engaged in the business of manufacturing of plastic moulded articles and aluminium composite panel. The company started the operations in the year 1995 and conferred the top export award continuously for 15 years from PLEXCONCIL india.

About Promoters:
The company established by late Manharlal Parekh (National Plastics) and currently running successfully by his sons Bhaskar Parekh and Dileep Parekh. Promoters hold 59% stake with out any pledging and face value is 10Rs.

About Operations:
The Company operates in two segments: plastic moulded furniture and aluminium composite panel. PPL has two  manufacturing units located at Daman(U.T),Mazhuvannur(Kerala) for Moulded plastics and another manufacturing unit for Aluminium Composite Panel product at Daman. The Company designs and manufactures plastic moulded furniture from chairs, baby chairs, dinning tables, stools and teapoys in a range of colors. Knowing the brand power, PPL's operates moulded plastics under 'PRINCE' brand and ACP under 'ALUMA' brand.The company holds 50% stake in African JV Prima Dee-lite Plastics Pvt. Ltd.The Company is looking forward to expand its manufacturing base in India or abroad.


Financials:

PPL revenues crossed 100 crore mark in the year 2014 with a net profit of 6.9cr. Company revenues are growing at more than 26% and profit also growing at more than 40% over the last 3 years. PPL derives more than 95% revenues from Plastic moulded furniture and rest 5% from ACP segment. Domestics contribution is 82% and Export contribution is 18%. The Company’s key markets for international business are the Africa, Middle East, and United States. Company management forecasts moulded furniture growth to be more than 25% for the next 5 years. While the company shows good performance from moulded plastics division ,where as ACP division is in loss making segment, for the FY 2014 it reported 1.7cr loss. Currently ACP division is underutilized, once the demand for real estate pick up such as government initiative for smart cities company expects profit from this segment as well.


Financial Year   11-12        12-13        13-14
Sales                 69.84        87.41        103.08
EBIDT                7.90         10.43         14.57
Interest              1.20          1.27          1.26
Netprofit             3.75          5.08          7.60
EPS                   3.41          4.62          6.91

Sweet Spots:
1. Company market capitalization is less than 30 crores vs 107 revenues. Considering the market run up it is hard to find small cap stocks with good intrinsic value.

2.Introduced India’s first poly carbonate chair “Crystal” which has been appreciated by consumers & architects. The furniture division has augmented its range in the last financial year by adding a variety of products in categories like office seating solution, living and bedroom furniture, computer table, dining, designer chairs etc.

3.Prima Dee-lite Plastics Pvt. Ltd., Cameroon is a Joint Venture Company manufacturing Moulded Articles and HDPE Woven Sack Bags. The total turnover of JV Company for the calendar year 2013 was INR 4,724.71 lacs as compared to previous calendar year of INR 3,267.20 lacs. The profit for the year after depreciation and tax was INR 873.70 lacs as compared to INR 491.86 lacs in the previous year.

4. Company brand PRINCE is well known one in house hold plastic items segment particularly in south india.

5.ACP segment may turn into profit sooner than later because uses of Aluminium Composite Panel have increased over a period and entered in interior decoration market and small retail business due to its inherent advantage like zero maintenance, brightness, non-fading of colour with lapse of time, etc. Company has changed its focus from commercial real estate market to retail business and delivering steady result on slow but steady basis.

6.Regular dividend paying company from the last 5 years (10% of face value).

7.The company has good dealer network Rohtak, Jammu, Delhi, Coimabatore, Punjab, Kanpur, Hyderabad, Jaipur, Vapi & Hugly.

8. Finally cheaper valuation compared to peers such as WIMPLAST, NILKAMAL and Supreme Industries.


Financials:

Host Spots:

1.Company is in a competitive segment, where organized market is mere 20%.

2. ACP division is a loss making segment.

3.Polymer prices are directly influential w.r.to Crude oil prices though current low crude price may augur well in the short term.