Nilkamal Plastics - Rs.191.00

Nilkamal Plastics Ltd (NPL) is India's leading manufacturer of moulded furniture and material handling crates. In fact, it is the world's largest manufacturer of moulded furniture and Asia's largest plastic processor of moulded products. Under its material handling division, NPL has the largest variety and widest range of plastic crates and an elite clientele from all sectors of industry & business like automobiles, bottling, breweries, engineering, electronics, food processing, retail chains, logistics, pharmaceutical, textile, garments, dairy, fruits and vegetables etc. The furniture product range comprises chairs, dining tables, coffee tables, sofa sets, trolleys, shoe racks, multipurpose racks, baby chairs, stools etc to mention a few. NPL is now in the process of launching moulded plastic office furniture under the brand name ‘Novella’, apart from introducing storage cabinets and wrought iron look alike rocking chairs for the home segment. Soon it will be launching a range of cabinets for libraries/studies and innovative designs of sofa set among other products. It also has its exclusive stores – ‘Nilkamal Home Ideas’ in as many as 20 B&C class towns and is planning to set up 15 more stores in the next six months.

NPL has five huge state-of-the-art manufacturing facilities located across the four corners of the country besides having joint venture manufacturing plant in Srilanka & Bangladesh. It also has warehousing facility along with marketing office in Ajman Free Zone in UAE, which caters to the requirement of customers in the Middle East & Africa. Recently, NPL diversified into lifestyle furniture business by setting up special large format retail chain under the brand name ‘@home’ that offers imported furniture, home furnishing and accessories. It has already set up 3 stores each in Pune, Mumbai & Ahmedabad and is planning to set up 27 more @home stores in major cities in the next three years and also set up over 40 franchisee operations in smaller towns and cities. Although most of the products available at these stores are currently imported, NPL is looking at tie-ups with international furniture and home furnishing brands to exclusively market them through the @home stores. Also in the pipeline is setting up of a full-fledged kitchen and office solutions facility within the @home stores under the brand names @kitchen and @office respectively. In addition to this retail venture, NPL eventually plans to set up a manufacturing base in India for particle board furniture. In future, NPL also intends to diversify into the business of construction and real estate development.

With increasing disposable incomes and aspirational lifestyles, there is a huge potential in retailing of lifestyle and home furniture business. For the first six months ending 31st Sept’ 05, its sales grew by 6% to Rs.165 cr. but NP was down 24% to Rs.4 cr. due to higher raw material cost. For the full year, it may clock turnover of Rs.350 cr. and NP of around Rs.9 cr. which works out to an EPS of Rs.11 on a small equity of Rs.8.50 cr. Although rising crude oil prices is a concern, its retail venture will improve margins going forward. It can even report an EPS of Rs.18 and Rs.25 for FY07 & FY08 respectively. Hence long-term investors can accumulate this scrip at declines with a price target of Rs.250 (55% return) in 15~18 months.