This small cap plastic colouring company reports record profits, but can it sustain the momentum?

Strong demand and expanding capacity drive Q2FY24 results.

Plastiblends India Limited, a leading manufacturer of Masterbatches, has been on a tear in recent months. The stock traded at a new 52-week high of Rs. 276.15 on October 12, 2023, and has seen a spurt in volume by more than 19.40 times in the last six months.

The company is among the largest manufacturers of masterbatches in India, accounting for 10-12 per cent of the organized domestic masterbatch industry It also has a strong presence in Middle East and African markets.

This meteoric rise in Plastiblends' stock price can be attributed to a number of factors, including:

1.      Strong financial performance: Plastiblends has reported strong financial results in recent quarters. In the second quarter of FY24, the company's revenue grew 16.73 per cent YoY to Rs. 213.04 crore, while its PBT more than doubled to Rs. 12.78 crore (YoY). PAT was also up 126 per cent at Rs. 9.52 crore.

2.      Favourable industry trends: The Indian plastics industry is expected to grow at a CAGR of over 6 per cent in the next five years. Plastiblends is well-positioned to benefit from this growth, given its market leadership position and strong brand recognition.

3.      Capacity expansion: The company's Roorkee manufacturing unit has already started commercial sale of Black masterbatch, and additional capacity is being set up in Palsana, which will be functional from Q3. Black masterbatch is used in the production of a wide range of black plastic products, including packaging, consumer durables, and infrastructure.

4.      Consistent profitability and dividend payout: Net profit is growing at 7 per cent CAGR (10 years) and the company has maintained a consistent dividend payout ratio of 26 per cent (average 10 years). 

Disclaimer: The article is for informational purposes only and not investment advice.