Ddev Plastiks Industries Ltd - Ratings upgraded to 'CRISIL A / Stable / CRISIL A1'

CRISIL Ratings has upgraded its ratings on bank loan facilities of Ddev Plastiks Industries Limited (DPIL) to 'CRISIL A/Stable/CRISIL A1' from 'CRISIL A-/Stable/CRISIL A2+'.

The rating upgrade reflects improvement in business risk profile for DPIL on the back of strong and improving market position. The revenue for FY22 grew by ~45% year of year to Rs. 2249 crores owing to better realizations from increasing share of sales in the high voltage (XLPE) segment and increase in share of exports in the similar period. The growth momentum continued in 9 Months FY23 with the company clocking revenues of Rs 1853 crores as compared to Rs 1619 crores in 9 months FY22.

Operating margins also improved in FY22 to 5.7% from 4.0-4.5% during the earlier 2 fiscals. The improvement in margins was due to the shift in focus of the company from low margin PVC products towards higher margin products within the segment and also increase its share of high margin XLPE compounds. DPIL was able to convert old manufacturing facilities at a low cost to increase the production capacities of higher margin products. DPIL also has a strong inventory management policy where it buys raw material in bulk at lower costs and is able to offload the unused inventory very quickly and at a competitive cost via trading route. Furthermore, the company also has the ability to pass on increase in raw material prices to the customer within a short period of time. Owing to these reasons and the shift to high margin products, operating margins remined strong at ~5.6% during 9 months of fiscal 2023 and are expected to be in the range of 5.5-6.5% over the medium term.

Financial risk profile of the company is comfortable with estimated gearing of 0.82 times as on September 30, 2022 Networth is estimated to be ~Rs 445 crore as on December 31, 2022 and entire debt is in the form of working capital. Debt protection metrics are expected to be adequate with Interest Coverage and Net Cash Accruals to Total debt estimated at ~4.32 times and ~23% as on December 31, 2022. Debt protection metrics are expected to gradually improve over the medium term with increase in scale benefitting cash generation and efficient working capital management.

DPIL has also forayed into producing Halogen Free Flame Retardant (HFFR) compounds and production facilities of ~6000 MT/annum are expected to be commissioned by quarter 1 of fiscal 2024. With increasing focus on XLPE segment and demand picking up further in wires and cables segment, company is expected to cross revenues of Rs. 2400-2500 crores during the full fiscal 2023 and grow at 10-12% annually thereafter over the medium term. Business overall will be supported by extensive experience of the promoters, wide product range, and strong clientele, disciplined inventory management and comfortable capital structure.

Shares of Ddev Plastiks Industries Ltd was last trading in BSE at Rs. 86.54 as compared to the previous close of Rs. 87.38. The total number of shares traded during the day was 20033 in over 332 trades.

The stock hit an intraday high of Rs. 89.95 and intraday low of 85.50. The net turnover during the day was Rs. 1750928.00.

Source : Equity Bulls

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