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I-direct Instinct - PPAP Automotive - ICICI Direct

Posted On: 2021-07-22 07:10:51 (Time Zone: UTC)

PPAP Automotive (PAL) is a PV-focused ancillary manufacturing automotive body sealing parts and various interior & exterior plastic moulded parts.

- PV segment forms bulk of sales at ~94% with 2-W & CV forming the rest

- It counts Maruti Suzuki as its anchor client, with share in revenues at >50%

- Wallet share of >80% with key clients in its served products

- De-risking underway across segment, product and client levels

PAL reported a mixed performance in Covid-impacted FY21.

- Consolidated sales declined 10% YoY to Rs. 322 crore

- EBITDA margins dropped 380 bps YoY to 10.2% amid lower gross margins

- Consolidated PAT was at Rs. 2.1 crore vs. Rs. 18.2 crore in FY20

Key triggers for future price performance

- Provides a play on domestic PV growth; FY21-23E sales CAGR seen at 21%

- Post-Covid personal mobility preference, underpenetrated nature of car sales are industry tailwinds. PAL is poised to outperform, courtesy presence in well-performing new launches and amid new client additions

- With a firm client base in Japanese (Maruti, Honda, Toyota) as well as Indian OEMs (Tata Motors, M&M), PAL recently on-boarded MG Motors, Hyundai and Kia Motors as well with increasing share of business with them

- Margins to grow to 15.8% by FY23E; PAT to grow to ~Rs. 30 crore by FY23E

- De-risking plays under way (tooling, aftermarket, EV battery pack, non-auto)

- Product slate (sealing system & plastic body parts) immune to EV transition

- Trades at inexpensive valuation of <12x P/E & ~1x P/B on FY23E basis

Shares of PPAP Automotive Limited was last trading in BSE at Rs. 248.2 as compared to the previous close of Rs. 254.25. The total number of shares traded during the day was 2899 in over 409 trades.

The stock hit an intraday high of Rs. 254 and intraday low of 239.05. The net turnover during the day was Rs. 711428.

Source: Equity Bulls

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