Fundamental Research Report - Equity99

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• Online distribu�on to be a major growth driver: By distribu�on channel, the market is segmented as online and offline. Online distribu�on channel is es�mated to be the fastest growing segment owing to availability of a wide range of products, discounts on product, convenience of purchasing, easy comparison, and access to different size and colors.

• Ease of using plas�c furniture will drive future growth: Indian and global plas�c furniture market is not only expected to gain growth in the residen�al sector but also the commercial sector, including office spaces, hotels, and resorts. There are various advantages and benefits of using plas�c furniture like affordability, durability, light weight, low or no maintenance, eco-friendly, resistant to corrosion, no effect of termites and bugs, good weather ability, and flexibility. These are the key reasons which will lead the global market to improve its growth.

Prima Plastics Ltd

Fundamental Research Report

BUY

Date : 14-07-2020

Founded in the year 1993 by its ex-chairman late Shri. Manharlal V. Parekh Prima Plas�cs is a high quality small cap company, with a vast experience and global presence in the plas�c furniture industry. It has manufacturing capabili�es and presence across India which helps it to be near the core markets. Global plas�c furniture market is poised to grow in the coming years on the back of a) product addi�ons catering to various end-users, b) ease of using plas�c furniture, c) nuclear fami-lies increasing and d) addi�onal benefits vis-à-vis tradi�onal furniture of wood and metal. We recommend a compelling BUY for Prima Plas-�cs. At CMP of INR 49.60, stock trades at 4.5x trailing EPS. The stock is available at a significant discount to industry PE of 23.3x trailing EPS.

• Presence across India is a compe��ve advantage: Prima Plas�cs has presence across India with a robust distribu�on network of distributor and dealers. Company has 2 plants in West Africa and 1 plant in Central America which makes it a globally accepted plas�c products manufacturer. Plas�c furniture being a heavy product in nature, wide presence helps in lowering costs.

• Con�nuous product innova�on is one of the key moats: Prima Plas�cs has been consistent in adding value added plas�c products in its product bouquet. It has a wide range of consumer based plas- �c furniture products, but it has also gone beyond consumers and added plas�c products for the government needs.

CMP

BSC Code

Market Cap

52 Week High /

Low

Stock PE

TTM EPS

Dividend Yield

Recommenda�on

Book Value

Face Value

ROCE

ROE

: Rs.64.00

: 530589

: Rs.69.41 Cr.

: Rs.84.90 /

Rs.23.80

: 6.83x

: Rs. 9.24

: 2.41%

: BUY

: Rs.88.47

: Rs.10.00

: 11.97%

: 10.98%

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Prima Plastics Ltd

Equity99 research is also available onwww.equity99.com

COMPANY BACKGROUNDPrima Plas�cs is one of the leading exporters of plas�c moulded furniture from India. Company has entered in aluminium composite panel (ACP) market and from that it is making efforts to cater to the real estate market and has established a brand called ‘Aluma’. The product range of the company includes chairs, stool, baby chairs, dining tables, teapoys, trolley and other products such as planters, shoe rack, fridge stand and baby rocker. Prima Plas�cs has consistently won top ranked awards in ‘Top Exports Awards’ by PLEX COUNCIL.

History of the Company:• In the year 1993, Prima Plas�c’s ex-chairman, late Shri. Manharlal V. Parekh started the company with a single factory that manufactured plas�c products.

• As they got good trac�on from demand from consumer and healthy responses, the company gradu ally started acquiring various plants and machinery which could manufacture innova�ve furniture models of unlimited comforts for the customers.

• Therea�er, the company started expor�ng products to parts of Africa along with other countries.

• At present, the company has manufacturing plants worldwide and more than 10 depots. Prima has bagged consecu�ve top export awards from its incorpora�on and is one of the government recogni- sed export house.

Company’s Journey so far:

Events in chronological order Incorporated in 1993 as Public limited company by Late Shri. Manharlal Parekh (ex-Chairman) Set up its first manufacturing unit in Daman First IPO which was successfully subscribed at a high price Declared its first interim and final dividend in 1998 Set up its second manufacturing unit in Daman Set up a plant in Cameroon, West Africa (JV) Set up a new manufacturing plant in Kerala Established a subsidiary company and plant at Guatemala, Central America Set up a manufacturing plant in Ongole (Andhra Pradesh) In 2018, started its new division of ROTO moulding project

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Composi�on of BOD and Audit Commi�ee:

INVESTMENT RATIONALE• Con�nuous product innova�on is one of the key moats: Prima Plas�cshas been consistent in adding value added plas�c products in its product bouquet. It has a wide range of consumer based plas�c furniture products, but it has also gone beyond consumers and added plas�c products for the government needs.

Added road safety products in its product basket:

Prima Plastics Ltd

Board of Directors Name Designa�on Mr.Bhaskar Parekh Chairman Mr. Dilip Parekh Managing Director Mr. Krishnakant V Chitalia Independent Director Mr. Rasiklala Doshi Independent Director Ms. Hina Mehta Director Mr. Snehal Muzoomdar Director Mr. Shailesh Shah Addi�onal Director

Audit Commi�ee Name Designa�on Mr. Krishnakant V Chitalia Chairman Mr. Snehal Muzoomdar Member Mr. Dilip Parekh Member

Prima Plastics Ltd.Prima Plastics Ltd.


INDUSTRY OVERVIEWThe global plas�c furniture market size was valued at USD 11.9 billion in 2018 and is expected to expand at a CAGR of 3.9% from 2019 to 2025. The global plas�c furniture market is not only expected to gain growth in the residen�al sector but also the commercial sector, including office spaces, hotels, and resorts. There are various advantages and benefits of using plas�c furniture like affordability, durability, light weight, low or no maintenance, eco-friendly, resistant to corrosion, no effect of termites and bugs, good weather ability, and flexibility. These are the key reasons which will lead the global market to improve its growth. Manufacturers are prophesied to build new facili�es at strategic loca�ons to increase produc�on and improve their reach in the global plas�c furniture market.

Prima Plastics Ltd


Geographically, Asia Pacific is prophesied to take hold of a commanding share of the global plas�c furni-ture market because of the high demand for affordable, space-saving, and easily movable furniture. Increasing popula�on constantly raising real estate and infrastructure demand is expected to further push the demand in the Asia Pacific market.

Demand for versa�le, lightweight, flexible, and mul�-func�onal furniture offering easy portability and applica�on in small as well as large space is expected to drive the global plas�c furniture market. Due to growing trend of nuclear families, demand for easy moving and portable furniture is increasing in com-pact and integrated modular homes. A wide range of products as per the applica�on and demand of the consumers are available due to the ease of molding, designing, and shaping, which provides consumers a wide scope for purchasing.

Distribu�on Channel Insights:By distribu�on channel, the market is segmented as online and offline. Online distribu�on channel is es�-mated to be the fastest growing segment owing to availability of a wide range of products, discounts on product, convenience of purchasing, easy comparison, and access to different size and colors.

For instance, the world’s largest furniture retailer, IKEA witnessed a 31% growth in online sales. Moreo-ver, easy return and delivery makes it more convenient for consumers to purchase the furniture. Delivery types such as front door delivery, inside delivery, and white glove delivery make the shipping of furniture more easy and safe.

Offline distribu�on channel accounted for the largest market share in 2018 and is expected to witness significant growth. Tradi�onally, consumers prefer to buy furniture from the stores to assess the product and feel the aesthe�c and size. However, manufactures nowadays are changing the way consumers are shopping furniture. Augmented reality and virtual reality are the upcoming trends in the offline segment, where consumers can check if the product fits consumer’s requirement.

Prima Plastics Ltd


Regional Insights:Asia Pacific emerged as the largest regional market in 2018 and is expected to witness the fastest growth over the forecast period. Factors such as growing low-mid income popula�on, large number of house-holds, and growing IT sector and office space are expected to posi�vely impact the market demand in the region. The residen�al sector holds the largest market share in the region due to growing residen�al infrastructure. In Asia Pacific, India is the fastest and largest growing market owing to affordability, pres-ence of leading manufactures such as Nilkamal and Supreme Industreis, and increasing demand from the residen�al and commercial sectors.

Indian plas�c furniture industry:Plas�c moulded furniture has virtually exploded in the Indian scenario and from a stage of infancy the field has risen to almost 70 million in volume, consuming almost 170 kt of polypropylene material. The popularity of plas�c furniture has grown since it offers features unavailable in tradi�onally made furni-ture. Plas�c furniture is essen�ally based on composi�on of polypropylene (PP) which contains hopoly-mer to provide rigidity and copolymer to lend impact. Filler is incorporated at an average level of 15 percent to enhance rigidity and provide economy. Addi�onally UV stabiliser system is incoroporated to impart good outdoor life and an�sta�c addi�ves are added to reduce dust collec�on. There exist around 30 producers of PP chairs in India though 30% of the top producers corner almost 75% of the market share. Nilkamal Plas�cs and Supreme Industries are the market leaders in the Indian plas�c furniture market.

Market share of players in India:

Prima Plastics Ltd


VALUATIONAt CMP of INR 64.00, stock trades at PE of 6.83x. The stock is available at a significant discoun�oindustry PE of 23.3x trailing EPS.Prima Plas�cs is a high quality small cap company, with a vast experience and global presence in the plas�c furniture industry. It has manufacturing capabili�es and presence across India which helps it to be near the core markets. Global plas�c furniture market is poised to grow in the coming years on the back of a) product addi�ons catering to various end-users, b) ease of using plas�c furniture, c) nuclear families increasing and d) addi�onal benefits vis-à-vis tradi�onal furniture of wood and metal. We recommend a compelling BUY for Prima Plas�cs.

FINANCIALSAnnual Financials:

Ra�os:

Prima Plastics Ltd

INR mn FY15A FY16A FY17A FY18A FY19A FY20A Revenue 1,182 1,292 843 1,027 1,329 1,270 YoY 9% -35% 22% 29% -4% EBITDA 144 210 159 162 181 130 Margin 12.2% 16.3% 18.9% 15.8% 13.6% 10.2% YoY 46% -24% 2% 12% -28% PBT 104 172 144 122 115 120 YoY 65% -16% -15% -5% 4% PAT 67 123 105 95 95 100 EPS 15 20 20 20 10 9 YoY 83% -15% -9% 0% 5%

FY15A FY16A FY17A FY18A FY19A FY20A ROCE 19% 28% 20% 14% 12% 7% ROE 12% 21% 15% 12% 11% 12% P/E 2.8 2.1 2.1 2.1 4.2 4.6 P/B 0.8 0.7 0.6 0.6 0.5 0.5 EV/EBITDA 3.5 2.2 3.2 4.7 4.3 5.0 Net debt/Equity 0.0 - - 0.0 0.1 - Debtor days 13 14 18 10 11 NA


Quarterly financials:

Prima Plastics Ltd

4Q19 4Q20 YoY 3Q20 QoQ Revenue 403 332 -18% 338 -2% EBITDA 43 57 32% 49 16% Margin 10.7% 17.2% 649 14.6% 267 PBT 25 41 65% 32 26% PAT 15 37 155% 27 37%


Disclosure:Authors and the names subscribed to this report, hereby cer�fy that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securi�es. We also cer�fy that no part of our compensa�on was, is, or will be directly or indirectly related to the specific recommenda�on(s) or view(s) in this report. Research Analyst or his/her rela�ve or Equity99 Ltd. does not have any financial interest in the subject company. Also Research Analyst or his/her rela�ve or Equity99 Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publica�on of the Research Report. Further Research Analyst or his/her rela�ve or Equity99 Ltd. or its associate does not have any material conflict of interest. Any holding in stock – No.

Disclaimer:This report has been prepared by Equity99 Ltd. and is meant for sole use by the recipient and not for circula�on. The informa�on and opinions contained herein have been compiled or arrived at, based upon informa�on obtained in good faith from sources believed to be reliable. Such informa�on has not been independently verified and no guaranty, representa�on of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such informa�on and opinions are subject to change without no�ce. This document is for informa�on purposes only. Descrip�ons of any company or companies or their securi�es men�oned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicita�on of an offer, to buy or sell any securi�es or other financial instruments. This report is not directed to, or intended for display, downloading, prin�ng, reproducing or for distribu�on to or use by, any person or en�ty who is a ci�zen or resident or located in any locality, state, country or other jurisdic�on where such distribu�on, publica�on, reproduc�on, availability or use would be contrary to law or regula�on or what would subject Equity99 Ltd. or its affiliates to any registra�on or licensing requirement within such jurisdic�on. If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the a�en�on of the sender. This document may not be reproduced, distributed or published for any purposes without prior wri�en approval of Equity99 Ltd. Foreign currencies denominated securi�es, wherever men�oned, are subject to exchange rate fluctua�ons, which could have an adverse effect on their value or price, or the income derived from them. In addi�on, investors in securi�es such as ADRs, the values of which are influenced by foreign currencies effec�vely assume currency risk. It should not be considered to be taken as an offer to sell or a solicita�on to buy any security. Equity99 Ltd. may from �me to �me solicit from, or perform broking, or other services for, any company men�oned in this mail and/or its a�achments. Equity99 Ltd. and its affiliated company(ies), their directors, analysts and employees may; (a) from �me to �me, have a long or short posi�on in, and buy or sell the securi�es of the company(ies) men�oned herein or (b) be engaged in any other transac�on involving such securi�es and earn brokerage or other compensa�on or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other poten�al conflict of interests with respect to any recommenda�on and other related informa�on and opinions. Equity99 Ltd., its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any ac�on taken on basis of this report, including but not restricted to, fluctua�on in the prices of shares and bonds, changes in the currency rates, diminu�on in the NAVs, reduc�on in the dividend or income, etc. Equity99 Ltd. or its associates might have managed or co-managed public offering of securi�es for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. Equity99 Ltd. or its associates might have received any compensa�on from the companies men�oned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transac�on in the normal course of business. Equity99 Ltd. or its analysts did not receive any compensa�on or other benefits from the companies men�oned inthe report or third party in connec�on with prepara�on of the research report. Accordingly, neither Equity99 Ltd. nor Research Analysts have any material conflict of interest at the �me of publica�on of this report. Compensa�on of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transac�ons. Equity99 Ltd. may have issued other reports that are inconsistent with and reach different conclusion from the informa�on presented in this report. Research en�ty has not been engaged in market making ac�vity for the subject company. Research analyst has not served as an officer, director or employee of the subject company.

Prima Plastics Ltd

Fundamental Research Report - Equity99

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