Buy Wim Plast; target of Rs 490: ICICI Direct

ICICI Direct's research report on Wim Plast

Wim Plast (WPL) reported a sluggish Q1FY21 performance. However, this was perceived to be due to nationwide lockdown. We believe the company would have lost almost 40 days of sales amid lockdown. As a result, revenue in Q1FY21 fell 75% YoY to Rs 23 crore. Plastic segment (~87% of revenue) revenue fell 73% YoY while other segment (includes extrusion sheet, moulds, air cooler) revenue fell 83% YoY. On the margin front, gross margin declined ~600 bps YoY mainly due to adverse product mix. However significant saving in other expenditure, employee cost that were down 66%, 46% YoY respectively, helped restrict losses at EBITDA level at Rs 12 lakh only. Finally, WPL reported bottomline loss of Rs 1.5 crore in Q1FY21. We believe a sales recovery post ease in lockdown restrictions coupled with market share gains from unorganised pie would be key monitorables for WPL, going forward. Despite stiff competition, it has maintained its value market share of ~20% (in FY20). Further, a sharp increase of revenue contribution from value added products (VAP) categories from 11% to ~17% in the last four years, made a huge impact on gross margin front (up ~500 bps YoY in FY20). We believe at the CMP WPL is available at compelling valuation given its strong retail brand, debt free status and capability of throwing positive cashflows.

Outlook

We believe that at the CMP, WPL is available at compelling valuations given its strong fundamentals. We revise our rating from HOLD to BUY with a target price of Rs 490/share (12x FY22E earnings).

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