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Tuesday, September 30, 2014

Wim Plast Ltd: Our 7-Bagger Stock - ROI @ 233% in 9 Months

Dear Reader,

If you invest in fundamentally strong small and mid cap companies with a medium to long term horizon (3 - 7 years), you will get rewarded for sure. Wim Plast Ltd is classic example of "Buy Right and Sit Tight" strategy. Stock price of Wim Plast (BSE Code: 526586) in the month of march this year has seen an appreciation of almost 50% and many investors might have booked profits looking at price rise from Rs. 400 to 600 in just a month's time. But those who are holding it are now sitting with a much bigger pie of profit.

Considering strong fundamentals and attractive valuations of the company, we suggested all our Hidden Gems members to add Wim Plast in their portfolio with initial allocation of 3-4% since beginning of this year. Wim Plast has gained whopping 233% since beginning of this year and currently trading at price of Rs. 1380. Today, stock is up by more than 15% and made life time high of Rs. 1400. Wim Plast has given returns of 37% since beginning of this month, returns of 130% during last 6 months and mind boggling returns of 650% since our initial recommendation in Aug'11.

We are pleased to inform our readers that Wim Plast is part of our Wealth-Builder portfolio with initial allocation of 7%. Our equity analysts published Hidden Gem - Aug 2011 research report and shared it with all Hidden Gems members almost 3 years back on 30th Aug'11. Hidden Gem stock - Aug'11 - Wim Plast Ltd and was recommended at average price of Rs. 185 and in last 3 years, stock has multiplied investment of Hidden Gems members by more than 7 times giving absolute returns of 650%.
Wim Plast is a zero debt company with maximum promoters holding of 75%. Company is posting good results every quarter and is maintaining revenue growth of 20% YoY. Company is maintaining operating margins above 17% since last 5 years and is taking all right steps to deliver consistent growth. ROE is above 23% since last 5 years, which is good for such a small cap company. Company has strengthened its brand equity of ‘cello’ branded products throughout country and has been continuously increasing the ad spend. Company is launching new models for its product range including various new designs. Another prominent brand of the company ‘Cello Bubble Guard Sheets’ has gained rich response from the users for applications like Tile Protector, False Ceiling, Wall Panel and Packaging materials.

Moreover, company has recently purchased around 1 (one) acre of Lase hold Land at Sipcot Industrial Complex, Gummidipoondi, Tamilnadu for further expansions. The commercial production of the new manufacturing unit was expected by the end of the 2nd quarter of this financial year. 

Wim Plast has delivered EPS of Rs. 54 for financial year 2013-14. As per our estimates, Wim Plast can deliver EPS of Rs. 60 for FY 14-15 and is trading at estimated PE of 23 which make it fairly valued at CMP. With ongoing expansions and good demand of its products, we believe Wim Plast will continue to deliver robust growth like that of last quarters and hence we advice all our member to continue holding Wim Plast in their portfolio. Please note that we do not suggest fresh investment in the stock at current market price.

Below is the summary of Wim Plast Ltd - Hidden Gem - Aug'11 Research Report.

Company Background

Wim Plast Limited incorporated on 7th October, 1988, and listed in the year 1994 at the Bombay Stock Exchange Ltd. (BSE) and the Ahemedabad Stock Exchange Ltd. (ASE).

In the year 1994 company setup manufacturing unit of plastic moulded furniture at Daman in which company got grand success in the business. In the process of diversification in 2005 company has setup plants at Baddi, Himachal Pradesh for processing of bubbleguard extrusion sheets and also moulded furniture which a new innovation in India in the field of extrusion technology.

Presently the company has manufacturing units at Daman, Baddi and Chennai also have Depots in Gujrat, Rajasthan, Andhra Pradesh, Haryana and Punjab and have strong consumer base through out the country.

Cello is the undisputed leader in plastic finished goods. Since 1975, the group has been shaping plastics into high quality convenience products for homes and industries making life better & easier. Ceaselessly endeavoring to set new bench marks in quality and constantly innovating to blaze new trails in the marketplace. Today Cello offers larger range of products than any other manufacturer in India.

All surpassing the highest international standards in quality Cell's R&D, manufacturing technology, production processes, materials, quality standards and the high skilled workforce of 5000 people are among the best in the world making Cello the no. 1 brand of plastic products in India.

Product Range: 

1.Plastic Moulded Furniture 2. Material Handling 3. Cello Bubble Guard Board  

False Ceiling

Stronger and Lifelong Revolutionary False Ceiling Panels (first time in Asia), a perfect product to fulfill all your needs of false ceiling.

Ideal for Offices, Warehouses, Stores, Industrial sheds, Textile Industries, Chemical Industries, Pharma Companies, Hospitals, Hotels, Docks, Ports & Commercial Complexes.

Inherent Advantage
  • Light Weight Strong & Durable
  • Moisture & Water Proof
  • Termite, Insect & Bacteria Proof
Wall Panels

Cello Bubble Guard Wall Panel has various advantages over other material namely, moisture & termite proof, Fire retardant, Economical, Maintenance free. Available in various designs.

Wall Panels can be directly pasted on the solid surface with the adhesive recommended (SG 1000 of 3 M / SP5 of Pidilite) and joints can be finished with sealants, tapes or decorative beadings.

The panels offers high tensile strength, resists stress cracking, retains stiffness & flex. These wall panels are also available in seamless appearance, clad with tongue & grove system offer permanent utility / decorative paneling designed to provide flexibility, durability & beauty.

Door Panel/Partition

Cello Bubble Guard Part ions / Door Panels are versatile to use available in various attractive designs, which don’t need paint or polish.

They are easy to install and easy to cut, can be fixed by any unskilled laborer. The panels are light weight, water proof, termite proof & non-toxic. The panel offers high tensile strength, resists stress cracking, retain stiffness & flex. These panels are used as filler of aluminium, PVC, Wood & other frame. They are non-staining. The panels are insured of better durability, longer functional life & also effective cost.

Floor Protector

In the under construction sites, the floor tiles are laid prior to the finishing of the buildings. All the electrical and other fittings are done after the flooring is completed. Portable scaffoldings, tools and other equipments move on the floor, to complete the remaining work.

To avoid the damage to the tiles, Plaster of Paris (POP) is laid on the Flooring and removed after the completion of the job. POP has many disadvantage as it is cumbersome to lay & remove, Skilled labour is required, Time Consuming , Disposition of debris after completion is the major problem, while removing / scrapping operation chances of getting scratches to the tiles. Construction site becomes shabby, uncomfortable, dusty, and unhygienic.

Recent Developments  (as on 30 Aug'11)

Business Expansion Plans, 24 August 2011

Wim Plast Ltd has informed BSE that the Company has initiated following expansion projects:

1. The Company has acquired land of 8092 sqmt. at Haridwar, for setting up of manufacturing unit of Plastic Moulded Products. The commercial production of the Unit will start by the end of last quarter of current financial year.

2. The Company is in the process of setting up of new extrusion plant at Daman for manufacturing of Flutted & S-flutted polypropylene sheets. The sheets will mainly used for packaging and advertisement. The Commercial production of the unit will start by the end of the second quarter of current financial year.

Total cost of the above projects will be funded by internal accruals of the Company.

Investment Rationale

1. Earnings Visibility: Wim Plast revenues are expected to improve significantly on the basis of manufacturing unit at Daman getting operational by the end of 2nd quarter of current financial year.

2. Innovative Product Launches: Management is focusing on innovative products like Cello Bubble guard board offering unique benefits to its consumers. Company has the advantage of early entrant in this segment with minimum competition and wide distribution network across the country.

3. Open Market Purchase of Shares by Promoters: Promoters share holding is 72.96%. Promoters have been continuously making open market purchase since last one year. During last one year, promoters have increased their stake by almost 1%. (as on date, promoters holding is maximum at 75%)
 
Saral Gyan Recommendation (30 Aug'11)

i) Management has been conservative in past but now with new developments with expansion plans for their existing facilities and set up of new plants at new locations give visibility for revenue growth in coming years. New facilities at new location will also give opportunities to company to move into new regions expanding their customer reach.

ii) The Management holds 72.96% equity in the company and has been continuously increasing its stake at current valuations (increased holding by 1% during last one year) which gives confidence of growth prospects in coming quarters.

iii) The stock is available at low valuations, existing P/E ratio of 6.5 make the stock valuations attractive while comparing it with peer stocks like Nilkamal and Supreme Industries.

iv) The operating margins and net profit has grown significantly. Since last 2 years, company has improved its margin and profit margins of 11-13% seems sustainable even after expansion due to less dependence on debt, currently cash balance is in excess of total debt of the company. No equity dilution since last many years is another positive.

v) At current market price of Rs 204.55, dividend yield works out to be more than 2% (Company has announced Rs. 4.50 dividend per share). On equity of Rs. 6 crore the estimated annualized EPS for FY 2011-12 works out to Rs. 38 and the Book value per share is Rs. 139.16. At a CMP of Rs. 204.55, stock price to book value is 1.47. Currently, the scrip is trading at 6X FY 2011-12 estimated earnings which make it an attractive buy at a price range of 175-180.


Saral Gyan Team recommends “BUY” for Wim Plast Ltd for a target price of Rs. 430 over a period of 12-18 months.

Buying Strategy:
  • 20% at current market price of 204.65
  • 80% at price range of 175-180
To Read/Download Hidden Gem Aug'11 Research Report - Click Here 

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Regards,

Team - Saral Gyan