Wim Plast Ltd (WIMPLA) 1320

Company Update Rating matrix Rating : Hold Target : 1420 Target Period : 12 months Potential Upside : 8% What s changed? Target Unchanged EPS FY17E Changed from 46.4 to 46.7 EPS FY18E Introduced at 56.1 Rating Changed from Sell to Hold Quarterly performance Q1FY17 Q1FY16 YoY (%) Q4FY16 QoQ (%) Revenue 99.3 86.5 14.8 99.7-0.3 EBITDA 22.5 15.9 41.6 25.0-9.9 EBITDA (%) 22.7 18.4 430bps 25.1-241bps PAT 13.5 9.4 42.9 15.9-15.0 Key financials Crore FY15 FY16 FY17E FY18E Net Sales 365.4 358.4 446.2 530.4 EBITDA 60.7 74.2 90.4 107.6 Net Profit 38.4 45.1 54.9 68.2 EPS ( ) 32.0 37.6 45.8 56.8 Valuation summary FY15 FY16 FY17E FY18E P/E 41.3 35.1 28.8 23.2 Target P/E 44.4 37.7 31.0 25.0 EV / EBITDA 27.8 22.6 18.5 15.3 P/BV 9.6 8.0 6.5 5.3 RoNW (%) 21.6 21.1 20.8 21.3 RoCE (%).1.4.4.3 Mcap/sales 4.7 4.8 3.8 3.2 Stock data Particular Amount Market Capitalization ( Crore) 1,584.4 Total Debt (FY16) ( Crore) 0.0 Cash and Investments (FY16) ( Crore) 14.4 EV ( Crore) 1,570.0 52 week H/L 1514 / 776 Equity capital ( Crore) 12.0 Face value ( ) 10.0 Price Performance (%) 1M 3M 6M 12M Nilkamal 7.4 18.1 18.8 36.9 Supreme Ind (5.6) 0.1 16.0 51.1 Wim Plast 9.1 36.2 58.5 38.7 Research Analyst Sanjay Manyal sanjay.manyal@icicisecurities.com Hitesh Taunk hitesh.taunk@icicisecurities.com September, 2016 Wim Plast Ltd (WIMPLA) 1320 Margin expansion drives strong earnings Wim Plast (WPL) recorded sales growth of ~15% YoY to 99.3 crore in Q1FY17 largely driven by its cooler sales. Performance of plastic segment remained flat as volume growth of 6-7% YoY was offset by a decline in realisation by 8%. Benefit of lower commodity prices helped in expansion of gross margin by 854 bps YoY, which was partly offset by an increase in other expenditure by 396 bps YoY. EBITDA margin increased 430 bps YoY to 22.7%. The higher tax rate (up 330 bps YoY) was on account of expiry of exemption of tax benefits. Finally, WPL reported growth of 43% YoY in net profit to 13.5 crore We have introduced FY18E estimates and tweaked FY17E estimates aligning with Q1 and FY16 performance. We have modelled revenue CAGR of ~22% in FY16-18E led by ~4x jump in sales of cooler segment while the plastic segment is expected to record 12% sales CAGR mainly led by volume growth. We expect EBITDA margin to stay elevated (at ~20% vs. historical average of ~17-18%) considering its strong brand and introduction of premium furniture product. WPL is expected to record PAT CAGR of 22% largely driven by sales growth Among key beneficiary of economic reform like GST The plastic moulded furniture business is largely dominated by the unorganised segment (market share ~55%). Over the last five years, WPL has done a capex of over ~ 75 crore to increase the manufacturing capacity (bubble guard and mould) and diversification in the new business (air cooler). Growing demand for plastic furniture (branded category) coupled with implementation of GST (reduction of tax arbitrage for the unorganised segment) would further help WPL gain substantial market share (currently 13% in value terms) along with other major brands like Nilkamal and Supreme. WPL has a strong dealer network (~10,000 across India) and has been targeting the upper 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, WPL is also looking for opportunities to expand in new geographies like Andhra Pradesh and Tamil Nadu. In addition, sharp growth in sales of air cooler segment (4x jump in FY18 due to lower base) would reduce the associated fixed cost and advertisement expenses. Hence, we believe there would be minimal pressure from the new product category into overall EBITDA margin. We have modelled flattish EBITDA margin for FY17E-18E on a conservative basis. Earnings growth, strong balance sheet & GST to enhance valuation The company has well leveraged its brand to push sales of air cooler & recorded sales of 30 crore in FY16 (vs. our estimate of 5 crore). We introduce FY18E estimates with revenue, earning CAGR of 22% backed by 4x jump in cooler sales and plastic sales CAGR of ~12% (shift in demand from unorganised to organised). Despite being new in air cooler segment, EBITDA margin stayed elevated (20.7% FY16, 22.7% in Q1FY17). We believe margins will stay elevated considering stabilisation of new business (higher operating leverage) and lower commodity prices. Also, WPL s strong balance sheet and close to debt-free capital structure (resulted in strong RoE: ~21% & RoCE: %) is well equipped to ride out the next growth cycle triggered by GST implementation. Also, as the economy improves, given its strong client base, WPL s business model provides earnings visibility. We believe growth will accrue gradually, going ahead. Hence, we upgrade WPL to HOLD rating with a revised target price of 1420 (valuing 25x FY18E EPS). ICICI Securities Ltd Retail Equity Research

We believe the addition of a new dealer network for air coolers coupled with a shift in demand towards branded category (air cooler unorganised sector contributes 75% in volume term and 56% in value terms) would help in driving sales of the air cooler segment We believe the company will continue its growth journey albeit at a fast pace at ~22% CAGR in FY16-18E (compared to historical growth rate) due to sharp growth in the new category Although benefiting from lower crude prices, the company has also leveraged its strong brand to maintain pricing power. Despite the competition, it has managed to record EBITDA margin of ~20.7 (vs. historical average of 17-18%) Exhibit 1: Net sales growth trend Strong performance of new product categories to drive sales As part of diversification and to leverage its existing strong dealer network, WPL entered the air cooler business in FY16 with an initial outlay of 10 crore. The company recorded sales of 30 crore within a year of its launch against our expectation 5 crore. We believe that with the addition of a new dealer network for air coolers coupled with a shift in demand towards branded category (air cooler unorganised sector contributes 75% in volume term and 56% in value terms) would help in driving sales of the air cooler segment for WPL. In addition, focus to serve the incremental demand by sourcing manufacturing (following the asset light model) with no major capex would not put much burden on WPL s balance sheet. Since the major fixed cost has been absorbed in FY16, we believe sharp volume growth would provide higher operating leverage in the air cooler segment. Historically WPL has recorded strong sales CAGR of 16% in FY12-16 led by plastic segment volume CAGR of ~15% (I-direct estimate). The volume growth was largely driven by stabilisation of new plants, addition of dealers in new geographies and a gradual shift towards branded product categories. Further, better monsoons would help in the growth of demand from rural India, which has remained a key driving force of the plastic product category. We believe the company will continue its growth journey albeit at a more rapid pace at ~22% CAGR in FY16-18E (compared to historical growth rate) due to sharp growth in the new category of air coolers. Further, the company plans to enter bathroom accessories in the coming future. Margin to remain intact backed by benign commodity prices... The company has largely benefited from benign raw material prices (polypropylene prices declined ~20% YoY in FY16). As a result, the gross margin expanded sharply by ~974 bps YoY in FY16 and 854 bps YoY in Q1FY17. Despite the new product launch and passing on the benefit of lower raw material prices to its customer, the company managed to clock such a high margin clearly indicating that the company is leveraging its strong brand Cello. As a result, we expect the EBITDA margin to remain at elevated levels (at ~20% vs. historical average of ~17-18%). Further, higher tax outgo (after the elimination of tax benefits related to its manufacturing facilities) would be offset by the company s debt free status, which would result in PAT CAGR of 22% for FY16-18E. Exhibit 2: EBITDA margin trend ( crore) 600 500 400 300 200 100 201 CAGR ~16% 248 6 365 358 CAGR ~22% 446 530 (%) 25.0 20.0 15.0 10.0 5.0 17.9 17.7 18.1 16.6 20.7 20.3 20.3 - FY12 FY13 FY14 FY15 FY16 FY17E FY18E 0.0 FY12 FY13 FY14 FY15 FY16 FY17E FY18E ICICI Securities Ltd Retail Equity Research Page 2

Valuation Earnings growth, strong balance sheet & GST to enhance valuation WPL is leveraging the brand Cello by creating value in the market where Nilkamal and Supreme are already present and are expected to benefit from rising urbanisation. Further, it has also well leveraged its brand to push up the sales of air cooler and recorded sales of 30 crore in FY16 (vs. our expectation of 5 crore). We have introduced FY18E estimates with revenue, earnings CAGR of 22% backed by 4x jump in cooler sales and plastic sales CAGR of ~10% (shift in demand from unorganised to organised). Despite being new in the air cooler segment, the EBITDA margin remained at elevated levels (20.7% in FY16 and 22.7% in Q1FY17). We believe margins will remain elevated considering stabilisation of new business (higher operating leverage) and lower commodity prices. Also, WPL s strong balance sheet and close to debtfree capital structure (resulted in strong RoE: ~21% & RoCE: %) is well equipped to ride the next growth cycle triggered by GST implementation. Also, as the economy improves, given its strong client base, WPL s business model provides earnings visibility. We believe growth will accrue gradually over a time frame. Hence, we upgrade our rating to HOLD with a revised target price of 1420 (valuing 25x FY18E EPS). Exhibit 3: One year forward P/E 1400 1200 25x 1000 800 20x 600 400 200 15x 10x 0 31-Mar-06 30-Sep-06 31-Mar-07 30-Sep-07 31-Mar-08 30-Sep-08 31-Mar-09 30-Sep-09 31-Mar-10 30-Sep-10 31-Mar-11 30-Sep-11 31-Mar-12 30-Sep-12 31-Mar-13 30-Sep-13 31-Mar-14 30-Sep-14 31-Mar-15 30-Sep-15 31-Mar-16 Exhibit 4: Strong return ratio Exhibit 5: Free cashflow yield (%) 30 30 22.7 22.3.7 21.5 21.6.5 21.1.4.4 20.8 21.3.3.3.1 FY12 FY13 FY14 FY15 FY16E FY17E FY18E RoCE RoE 23 23 22 22 21 21 20 20 (%) 2.5 2.0 1.5 1.0 0.5 0.0 2.1 1.3 1.2 0.9 0.5 0.4 0.3 FY12 FY13 FY14 FY15 FY16 FY17E FY18E ICICI Securities Ltd Retail Equity Research Page 3

Financial summary Profit and loss statement Crore Total operating Inc 365.4 358.4 446.2 530.4 Growth (%) 23.3-1.9 24.5 18.9 Raw Material Expenses 190.8 166.5 172.4 191.5 Employee Expenses 12.3 15.8 21.4 25.5 Purchase of goods 53.6 40.7 69.2 95.5 Other expenses 48.0 61.2 92.8 110.3 Total Operating Exp 304.7 284.2 355.8 422.8 EBITDA 60.7 74.2 90.4 107.6 Growth (%) 13.2 22.2 21.9 19.0 Depreciation 9.0 11.2 12.8 13.7 Interest 0.1 0.2 0.1 0.0 Other Income 2.0 2.2 3.1 3.7 PBT 53.6 65.0 80.7 97.6 Total Tax 15.2 19.9 25.8.5 PAT 38.4 45.1 54.9 68.2 Growth (%) 18.0 17.7 21.7 24.1 EPS ( ) 32.0 37.6 45.8 56.8 Cash flow statement Crore Profit after Tax 38.4 45.1 54.9 68.2 Add: Depreciation 9.0 11.2 12.8 13.7 (Inc)/dec in Current Assets -4.1-22.6-40.1-36.6 Inc/(dec) in CL and Provisions 0.7-1.0 3.3 6.1 CF from operating activities 44.2 33.0 31.0 51.3 (Purchase)/Sale of Fixed Assets -22.7-11.9-12.0-12.0 Longterm loans and advances 0.3-2.0-1.1-1.0 Others -0.4 0.5-4.0-4.0 CF from investing activities -22.7-13.3-17.1-17.0 Issue/(Buy back) of Equity 0.0 0.0 6.0 0.0 Inc/(dec) in loan funds 0.0 0.0 0.0 0.0 Dividend paid & dividend tax -7.2-8.7-11.2-11.2 Others -4.6-0.2 5.9 0.0 CF from financing activities -11.9-8.9-5.3-11.2 Net Cash flow 9.6 10.8 8.6 23.0 Opening Cash 4.8 14.4 25.2 33.8 Closing Cash 14.4 25.2 33.8 56.8 Balance sheet Crore Liabilities Equity Capital 6.0 6.0 12.0 12.0 Reserve and Surplus 171.6 208.0 251.7 308.7 Total Shareholders funds 177.6 214.0 263.7 320.7 Total Debt 0.0 0.0 0.0 0.0 Def Tax Liability 5.3 5.9 5.9 5.9 Others 0.1 0.1 0.1 0.1 Total Liabilities 183.0 220.0 269.7 326.6 Assets Gross Block 153.3 164.5 176.5 188.5 Less: Acc Depreciation 67.2 77.6 90.4 104.0 Total Fixed Assets 86.4 87.0 86.2 84.5 Inventory 51.5 69.5 86.8 104.6 Debtors 40.6 48.0 61.1 72.7 Loans and Advances 17.7 14.8 24.5 31.8 Cash 14.4 25.2 33.8 56.8 Total Current Assets 124.2 157.6 206.3 265.9 Creditors 9.3 14.6 17.1 20.3 Provisions 8.5 1.9 1.7 2.0 Total Current Liabilities.9 28.9 32.2 38.3 Net Current Assets 94.3 128.7 174.1 227.6 Longterm loans and advances 2.4 4.4 5.5 6.5 Total Assets 183.0 220.0 269.7 326.7 Key ratios Per share data ( ) EPS 32.0 37.6 45.8 56.8 Cash EPS 39.5 47.0 56.4 68.2 BV 147.9 178.3 219.7 267.1 DPS 5.0 6.0 8.0 8.0 Operating Ratios (%) EBITDA Margin 16.6 20.7 20.3 20.3 PAT Margin 10.5 12.6 12.3 12.8 Asset Turnover 2.2 1.8 1.8 1.8 Inventory turnover 6.3 5.9 5.7 5.5 Debtor turnover 9.0 7.5 7.3 7.3 Creditor turnover 39.2 24.6 26.1 26.1 Return Ratios (%) RoE 21.6 21.1 20.8 21.3 RoCE.1.4.4.3 RoIC 30.7 32.3 32.9 34.8 Valuation Ratios (x) P/E 41.3 35.1 28.8 23.2 EV / EBITDA 25.9 21.0 17.1 14.2 EV / Net Sales 4.3 4.4 3.5 2.9 Market Cap / Sales 4.3 4.4 3.6 3.0 Price to Book Value 8.9 7.4 6.0 4.9 Solvency Ratios Debt / Equity 0.0 0.0 0.0 0.0 Current Ratio 4.1 5.4 6.4 6.9 Quick Ratio 2.4 3.0 3.7 4.2. ICICI Securities Ltd Retail Equity Research Page 4

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