Recommendation from Plastic Products Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

CAPTAIN POLYPLAST : REAPING A GREEN HARVEST

HERE IS WHY
✓ Company’s micro-irrigation systems the need of the hour
✓ Well-positioned to capitalise on its domain expertise
✓ Diversification into solar products yielding good dividends

I ndia’s micro-irrigation market is poised for significant growth, projected to reach USD 1.08 billion by 2029, according to Mordor Intelligence. This expansion is fuelled by the country’s urgent need for water efficiency in agriculture and heavy reliance on monsoons. Micro-irrigation systems, delivering water directly to plant roots, offer a crucial solution to minimise wastage. Government support, including subsidies, further encourages adoption, particularly in water-stressed regions. A shift towards open-field micro-irrigation and greenhouse cultivation, especially for horticulture, is also driving the demand due to increased yields and yearround production.

The combined pressures of water scarcity and the need to increase food production underscore the importance of smart irrigation methods like micro-irrigation. Owing to this, our low-price recommendation is Captain Polyplast Ltd. The company is a manufacturer and exporter of high-quality HDPE pipes and irrigation equipment. Its product range includes drip and sprinkler irrigation systems, along with essential components like disc, screen, hydro-cyclone, sand, and gravel filters.

The company’s ambition is to become a global leader in providing top-tier irrigation solutions. It operates across three core business segments. The micro-irrigation systems division focuses on the complete lifecycle of micro-irrigation, encompassing manufacturing, sales, installation, and agronomic support. The polymer business acts as a distributor for Indian Oil Corporation Ltd. (IOCL), handling the sales and distribution of its polymer products. Finally, the solar EPC services division provides turnkey solutions for solar power projects.

In Q3FY25, on a consolidated basis, the revenue of company increased by 9.25 per cent YoY to ₹90.25 crore compared to ₹82.6 crore from the previous year’s same quarter. On a sequential basis, its revenue increased by 69.45 per cent. The net profit stood at ₹6.73 crore compared to ₹4.97 crore, a YoY increase of 35.45 per cent, while sequentially it decreased by 58.26 per cent from ₹16.12 crore. The company is experiencing strong demand for its micro-irrigation systems, a trend expected to continue. A new Ahmedabad plant, with construction underway and anticipated completion in Q1FY26, will significantly increase manufacturing capacity and boost profitability

The company is strategically focusing on expanding commercial sales, encompassing non-subsidy microirrigation, PVC pipes and exports, while simultaneously growing its domestic and international network. These efforts are projected to improve capacity utilisation and profitability. Diversification into the rapidly expanding solar EPC market, including empanelment under the PM Surya Ghar Yojna in several states, offers another avenue for revenue growth.

The company has also successfully reduced its short-term borrowings from ₹82 crore to ₹65 crore. At TTM, the share of company is trading at a PE of 34.1 times, which is higher than its three-year median PE of 22.6 times and also higher than the industry PE of 32 times. The stock appears overvalued based on its PE ratio, but its strong financial performance and moderate debt level present a positive outlook. The company has debt-to-equity ratio of 0.72 times. Considering the aforementioned factors, we recommend BUY.