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Wim Plast - Q1FY21 Result Update - ICICI Securities

Posted On: 2020-09-15 10:13:15

Wim Plast (WPL) reported a sluggish Q1FY21 performance. However, this was perceived to be due to nationwide lockdown. We believe the company would have lost almost 40 days of sales amid lockdown. As a result, revenue in Q1FY21 fell 75% YoY to Rs. 23 crore. Plastic segment (~87% of revenue) revenue fell 73% YoY while other segment (includes extrusion sheet, moulds, air cooler) revenue fell 83% YoY. On the margin front, gross margin declined ~600 bps YoY mainly due to adverse product mix. However significant saving in other expenditure, employee cost that were down 66%, 46% YoY respectively, helped restrict losses at EBITDA level at Rs. 12 lakh only. Finally, WPL reported bottomline loss of Rs. 1.5 crore in Q1FY21. We believe a sales recovery post ease in lockdown restrictions coupled with market share gains from unorganised pie would be key monitorables for WPL, going forward. Despite stiff competition, it has maintained its value market share of ~20% (in FY20). Further, a sharp increase of revenue contribution from value added products (VAP) categories from 11% to ~17% in the last four years, made a huge impact on gross margin front (up ~500 bps YoY in FY20). We believe at the CMP WPL is available at compelling valuation given its strong retail brand, debt free status and capability of throwing positive cashflows.

Valuation & Outlook

WPL is the third largest players in the plastic furniture industry with ~14,000 touch points across India. In the last five years, it has focused on increasing share of value added product category (currently ~17%) in its revenue. This has helped the company to maintain its EBITDA margin at elevated levels despite muted sales growth. Strong EBITDA margin, debt free status and prudent working capital management helped the company to generate strong CFO of Rs. 80 crore in FY20. As a result, WPL also increased its dividend payout to ~45% in FY20 vs. 26% in FY19. We believe that at the CMP, WPL is available at compelling valuations given its strong fundamentals. We revise our rating from HOLD to BUY with a target price of Rs. 490/share (12x FY22E earnings).

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Shares of WIM PLAST LTD. was last trading in BSE at Rs.397.05 as compared to the previous close of Rs. 391.8. The total number of shares traded during the day was 13265 in over 194 trades.

The stock hit an intraday high of Rs. 399 and intraday low of 380.2. The net turnover during the day was Rs. 5254138.

Source: Equity Bulls

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