Prima Plastics Nano Nivesh Initiating Coverage Research Report By ICICI-Direct

PPL envisaged a series of expansions in FY15-16 to increase domestic & overseas capacity by 64% through internal accrual of ~Rs 35 crore. In FY16, It increased domestic capacity by 15% by adding a new plant in Andhra Pradesh (AP) to increase penetration in eastern & southern regions. Further, PPL increased its overseas capacity by ~3x (by doubling capacity in Cameroon and starting a new facility in Central America (Guatemala)).

This would help PPL serve the rising demand for moulded furniture, increase presence in untapped markets and reduce export related freight cost

• Overseas business to drive future growth: Prima Dee-lite (50% JV) posted a strong performance with revenue, earning CAGR of ~40%, 22%, respectively, in FY12-16, supported by strong EBITDA margin (average 29% EBITDA margin). The encouraging performance was backed by lucrative demand, change in product mix and brand acceptance, which also boosted the confidence of the management to expand into new geographies. We believe the strong performance of Prima Dee lite would continue albeit lower than historical trend due to an increase in overhead expenditure and rising competition. To replicate the same performance, PPL formed another JV (90% owned by PPL) in Central America that will start manufacturing moulded furniture by Q4FY17. We believe the overseas business will contribute ~39% by FY19E in topline (from 27% in FY16) due to current expansion