Wim plast

Stock Opportunities Untested - but worth a good look
185

At current price of 300, Mcap of 360 Crores & EV of 290 Crores (70 Cr. in liquid fund) stock seems very lucratively valued, given the B2C status and renowned “Cello” brand. P/E= 6.5x & EV/EBITDA= 3.8x

I read annual reports and other publicly available data and seems like they’re facing still competition in core furniture business and that’s the reason for no growth for 5 years!!

If anyone tracks it closely, can you please answer my queries

• Breakup of top-line between plastic furniture, bubble guard sheet, cooler over past few years and expected growth going forward.
• Margin profile for various different products?
• Total capex done for air-coolers over the years
• CAPEX of 25 Crores in 2019 done for?
• Plans with their JV Wim Plast Moldetipo Pvt Ltd?
• Expected growth in top-line at a consolidated level?
• Massive fall in crude will reduce the RM prices. Co. can improve its operating margins or does it need to pass on most of the cost savings in the form of lower prices to customers?

186

I had bad experience -

  1. no proper response from company on investors queries
  2. promoters are having other business (which is not included in the listed company). Hence, no core focus on the listed business
  3. channel check- huge inventory at company, dealers and distribution level on air cooler and plastic furniture. No demand and too much competition
    Hence, if you look for capital protection this company might be good but not for good return on investing
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187

Overall the growth component has remained lackluster…until growth comes back, I feel this will remain value-trap at best.

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188

Thanks for the response. No doubt, there are few grey patches regards to corporate governance. Few of them which I discovered are as below

• As per 2009 agreement with BIC, it had right to scale its stake in a staggered manner to 90%. But in 2010, Cello’s promoter argued against it and BIC went to international litigation and won the case
• Another agreement with BIC was of non-compete but BIC claims that Rathod’s are strongly linked with newly started UNIMAX brand who’s promoter are brother in law of Pradeep Rathod. Also, its top level management are ex-employees of Cello
• In 2016 symphony took cello to court on using its two air cooler models which were copy of symphony’s model and court ruled in favour of symphony.
• 2019: La Opala files & wins trademark infringement lawsuit against Cello Plast pertaining to opal glass tablewear

Whereas the co. have been paying dividends from past 2 decades and has good cash flows which gives slight comfort pertaining to CG.

Thanks for the input. Can you please tell me when was the last time you checked it?

Also, at its Pardi (Aircooler) plant, do they manufacture only the plastic component of cooler and use the mechanical component manufactured by others or they are integrated manufacturer for air cooler ?

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189

I checked in Feb 2020.
Many plants are manufacturing products of listed and non-listed products!!. Plant manufacture plastics dust collection bins (listed company products) also products other cleaning products (floor mop, brush, etc) non-listed products. Die and mold plant manufacture die & mold for both listed and non-listed company. I raised such red flags to company but till date no satisfactory answer!! Hence, i skip this company of investment!

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190

I agree they are very opaque about product bifurcation within listed and private space.

Eg: Kleeno brand is shown under letterhead of the listed space! So I assumed all the products under kleeno were in Wim-Plast whereas on private website : https://celloworld.com/, products from kleeno are also listed!

Thanks for your response, it helps a great deal in understanding cos with limited public info!

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191

I called the company for the same reason - why they use listed company to promote products of promoters private (unlisted company) products. I literally blasted investor relation officer and asked to connect call with company MD but she denied and dropped my call…finally I dropped company from my investment list !!

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192

RED FLAGS ON WIM PLAST

  • Promoter group and their close relatives are having history of violating corporate governance and ethics, Read how they did from the link below
    https://www.livemint.com/Companies/lL9kI5ILFrXfHv3ppkQKSK/Cello-pens-maker-moves-high-court-against-former-promoters.html

  • Company having brand image “CELLO” which is good but ,It’s promoters seems to be repeating the similar kind of fraud that they did to French stationery maker Bic Clichy, with unlisted private companies by diverting business

  • Promoters are not investor friendly

  • Promoters holding reducing even during market tough times, We should think how a zero debt and cash rich company promoters SELL their own stake, And this is not a good sign.

  • Promoters diverted profits to liquid funds and this company having ROCE 19. I still wonder how a cash rich company invest in low return liquid funds instead of investing on business development.OR at least they buyback it’s own shares from open market so that their own stock fall was limited and safe guard shareholder interest

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193

Its group company cello world is coming with an IPO, is anyone looking into it?

194

My relative saw the IPO ad and asked… “arent they already listed?”
And I said, “yes, I thought Wimplast had the Cello brand…”
It looks like another case of ‘ dont trust brands owned by holdco or promoter entity’. Interesting that nobody seems to be whining about this… But lets see how this pans out…

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195

True high valuations, staying away from it. They are already under litigation for cello brand for stationery. In their DRHP the company did not even own the Cello Brand and would have to pay 0.5% of sales as royalty which can even be increased to 1%.
I think they have scrapped that now but still very inflated valuations and only OFS.