Prima Plastics Ltd Initiating Coverage Research Report By IDBI Capital

Incorporated in 1993 and HQ in Mumbai, 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.