In July 2014, when Prima Plastics, a micro-cap with a market capitalisation of Rs. 222 crore, was languishing at the throwaway price of Rs. 19.20, Chetan Phalke of Alphainvesco recommended a buy. His logic was that there is a humongous demand for plastic furniture in India and abroad and that Prima Plastics has a great future ahead. He explained that the stock had an average ROIC of 20%, low P/E (3.10x), low debt, CAGR sales growth of 16%, CAGR profit growth of 39%, high dividend yield (5%) and other virtues which make it a sound investment candidate. “Fundamentally, company appears strong at the current levels” Chetan Phalke confidently said.
|PRIMA PLASTICS LTD – KEY FUNDAMENTALS|
|MARKET CAP||(Rs. CR)||222|
|EPS – TTM||(Rs.)||[*C]||11.16|
|LATEST DIVIDEND DATE||22 MAR 2016|
|BOOK VALUE / SHARE||(Rs.)||[*C]||58.48|
[*C] Consolidated [*S] Standalone
|PRIMA PLASTICS LTD – FINANCIAL RESULTS|
|PARTICULARS (Rs CR)||MAR 2016||MAR 2015||% CHG|
(Source: Business Standard)
A similar opinion was expressed by an anonymous blogger called ‘aceinvestortrader’.
In a post of November 2014, the blogger dramatically called Prima Plastics a “Mega Multibagger in Making” and said that he was “awe struck the moment I realized what a great brand I was missing in my core portfolio”. After some number crunching and facts assimilation, the blogger concluded that Prima Plastics had broken out of a 9 year long consolidation and that “it will not just double or triple and stop. It will go wayyyy beyond”. He exhorted all his followers to “grab the opportunity while the big guys are busy analyzing messed up big businesses”.
Well, the analysis and buy recommendations by Chetan Phalke and aceinvestortrader were brilliant because the stock has taken off into the stratosphere like a rocket.
When Chetan Phalke recommended Prima Plastics, it was quoting at Rs. 19. Today, it is at Rs. 202. This means that in just about 24 months, the stock has notched up mind-boggling gains of 810%. Even from the time of aceinvestor’s recommendation, the stock is up nearly 400%.
The best part is that all the virtues referred to by the experts are still intact in Prima Plastics. In fact, they may have got better.
IDBI Capital has issued an initiating coverage report in which Prima Plastics is recommended to be bought on the logic that the company is “riding on the fast track”. The rationale is very sound:
“Prima Plastics (Prima) is the fourth largest moulded plastic furniture player in India, operating in Western & Southern area through strong distribution (425) and dealers network (5000+). It also exports (16% of Consolidated revenues) to US, Africa and Middle East (ME). During FY12-15, it reported revenues and earnings CAGR of 19% and 22%, respectively while debt level brought down to negligible level (from 0.4x in FY12) and ROE improved from 9% (FY12) to 12.4% (FY15). Going forward, the company would be on a fast growth track due to (1) Shut down of its loss making Aluminium Composite Panel (ACP) business in FY15 (2) Capacity expansion in India and African JV (3) Entry in Central America (JV; 4,000MT capacity) (4) Improving working capital cycle. Given its strong future prospect led by robust earnings growth & uptick in return ratios, FCF generation capability and robust balance-sheet, we assign a P/E multiple of 12x on FY18E EPS (v/s 1 year forward industry average P/E of 16x), translating a price target of Rs235 (63% upside). Initiate with a BUY.”
These sentiments have been echoed by Ekansh Mittal of Katalyst Wealth in his research report.
Ekansh Mittal has explained the nuts and bolts of Prima Plastics and emphasized that its consistent growth track record, proven business model and reasonable valuations make it a good bet for investment.
Ekansh also got his timing right because the stock has notched up handsome gains of nearly 83% since his recommendation six months ago.
Prima Plastics has also issued an investors presentation where the future plans of the Company are explained in detail. It is inter alia pointed out that the African (Cameroon) JV operation is adding capacity by approx 50% in both the segment in this year which will be funded by internal accruals and that a new plant is being added in Central America (Guatemala) (under a 90:10 JV) which will be commissioned in November 2016.
So, in the light of the consensus of eminent expert opinion, we will have to keep a close eye on Prima Plastics to see whether it is able to delight its shareholders with more mega gains!