Plastiblends India Limited is India’s largest manufacturer and exporter of Colour & Additive Masterbatches and Thermoplastic Compounds for the Plastic Processing Industry. Masterbatches, which are key ingredients in successful product formulation for plastic industry, are concentrated mixture of pigments & additives which are used by plastic processors to enhance the performance properties of the end product and also help reduce cost of the end product. These are generally sold as white masterbatches, black masterbatches and colour masterbatches etc.
Plastiblends is headquartered in Mumbai, India, with manufacturing facilities located in Daman (Western India ) & Roorkee, Uttarakhand (Northern India) with an annual manufacturing capacity over 75,000 MT.
- They export to more than 40 countries worldwide and have a strong foot hold in the global market. This highlights management’s ability to scale its operations.
- Increasing use of plastics in agriculture, packaging, automobile, consumer goods etc is driving the demand for masterbatches in the country. In light of the same, company has been looking to add production capacity to deal with the increasing demand.
- In March 2016, the company has started production at their new plant in Surat (Gujarat). The new manufacturing facility in Palsana, Gujarat provides additional capacity of 30,000 MT masterbatches and compounds. This is significant when we consider the existing annual capacity of 75,000 MT.
- Also, they have acquired land in Kolkata recently for further expansion. “In view of market potential and demand, the company has plans to further increase the manufacturing capacity and has acquired land near Kolkata, West Bengal to setup new manufacturing unit. The expansion will be funded mainly through internal accruals. The new manufacturing facility will be commissioned in phased manner subject to receipt of requisite approvals from statutory authorities,” said Plastiblends India Limited in a BSE filing on March 1, 2016. This highlights that company is confident of future growth. Also, another point to be noted here is that the expansion is being funded majorly via internal accruals.
- The company has lowered their debt over the past few years and as of FY 2015 had zero long term debt. As on date, the long term debt to equity ratio stands at 0.19. This is important because the margins in the industry are low and high debt can create issues specially in case of a slowdown.
- Promoter shareholding is at 62.06%. This has been slowly increasing over the past few quarters.
- Company has good consistent profit growth of 23.68% and sales growth of 18.64% over the last 5 years. This indicates improving margins due to operating leverage as also decrease in debt over the years. This further strengthens confidence in management.
The stock currently trades at a price of Rs. 425 which translates into a trailing PE of around 14.5. Given the potential scalability of the business, the stock is available at an attractive valuation.