27 November 2017
Initiating Coverage I Sector: Plastic Products
Nilkamal Limited
BSE SENSEX
33,680
S&P CNX
10,390
CMP: INR1,680
TP: INR2,215 (+32%)
Buy
We recommend BUY on Nilkamal for target price of INR2,215 (20x
September FY19E EPS).
Market leader in moulded furniture (chairs) in India, with strong brand:
Nilkamal is a market leader with ~32% share in the moulded furniture
segment and sells ~1.4 million plastic moulded chairs per annum (one
of the largest in India). The plastics division is the largest revenue
generator for the company at 89% in FY17. The company has been able
to grow this business consistently (8.3% CAGR over FY12-17) on the
back of new products, designs and innovation (ex. Hybrid chairs
combining metal and plastics).
NILK IN
14.9
2275 / 1210
1 /-23 / -1
25.1
0.4
503
36.0
MAXIMUM BUY
PRICE: INR1,780
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
12M Avg Val (INR M)
Free float (%)
Beneficiary of shift from unorganised to organised:
Market size of
Furniture Industry is ~INR750bn. Of this 85% is unorganized - mainly
carpentered products and there is an accelerated shift towards
organized Ready Furniture sector due to better aesthetics, design,
quality, scalability in manufacturing, paucity of labour and time.
Nilkamal offers ~450 different products in Ready Furniture category
with pan India distribution network. Further GST implementation
would also aid shift from unorganized to organized, where Nilkamal
is a market leader and is best suited to benefit from this shift.
Financials Snapshot (INR b)
Performance of @home to improve:
Nilkamal's retail division, @home,
Y/E Mar
2018E 2019E 2020E
which had been sluggish over the years, is now witnessing a revival as
Net Sales
21.1
23.1
25.8
well as turnaround at EBIT level. From negative EBIT is the past, the
EBITDA
2.5
2.8
3.2
segment reported INR32mn EBIT profit in FY17 with margin of 1.4%.
PAT
1.3
1.5
1.8
EPS (Rs)
87.3 100.9 120.6
The company is undertaking various initiatives like closing down the
EPS Growth (%)
6.3
15.5
19.5
non-profitable stores, product standardization, improving supply chain
BV/Share (INR) 571.0 651.6 747.4
process, foray into customised kitchens, wall units and wardrobes,
P/E (x)
19.2
16.7
13.9
etc. We believe that the retail business is now at an inflexion point
P/BV (x)
2.9
2.6
2.2
and would pick up pace with the improvement in consumer spending.
EV/EBITDA (x)
10.3
9.1
7.8
We expect Revenue of INR3bn with EBIT margins of 3.2% in FY20.
Div payout (%) 15.5
20.1
20.5
Earnings to grow 14% with stable ROE of 17%:
Over FY12-17, Nilkamal's
RoE (%)
16.3
16.5
17.2
revenue and PAT grew at 7%/17% as EBITDA margin expanded by
RoCE (%)
15.3
15.7
16.6
~110bps. We expect margins to further improve by 110bps over FY17-
Shareholding pattern (%)
20E on the back of better product mix, operational efficiencies and
As On
Sept-17
Jun-17 Mar-17
cost optimization on account of rationalization in the low margin
Promoter
64.1
64.1
64.1
@home division. Going ahead, we expect revenue and PAT CAGR of
MFs
9.6
7.2
5.3
8.4% and 13.7%, respectively, over FY17-20E and EBITDA margins of
FPIs
3.6
4.0
4.9
Others
22.7
24.7
25.7
12.6% in FY20E. RoE is expected to remain largely stable around 17%
over FY17-20E.
Valuation and view:
The company has free cash flows with very low
Investors are advised to refer through
leverage (D/E of 0.14x FY17). Return ratios (RoE) improved from 10%
disclosures made at the end of the Research
in FY15 to ~18% in FY17. Despite steady growth, healthy balance sheet
Report.
and stable RoE the stock is trading at 17x our FY19E EPS. We believe
that with improving product mix and market share shift to organized
players, Nilkamal could command higher valuations. We initiate
Siddhartha Khemka
siddhartha.khemka@MotilalOswal.com
coverage with TP of INR2,215 (20x Sept'FY19 P/E) and recommend Buy.
Tel: +91 22 3010 2452

Nilkamal Limited
Company background
Nilkamal is an industry leader in the moulded furniture and material handling products with
diversified product portfolio catering to different industries and a diversified base of customers
including household customers, industrial customers and retail buyers. It also has presence in
the retail business of lifestyle furniture, furnishings and accessories under its brand '@home' &
Nilkamal Mattresses.
The company has two major business verticals viz; 1) Plastic division and 2) Lifestyle Furniture,
furnishings and accessories division. In FY17, Plastics division contributed ~89% to the total
revenues while the retail division ('@home') contributed ~11% to the revenue. The plastic
division comprises of verticals like Material Handling, Moulded Furniture and Mattresses.
Material handling accounts for ~57% of the total revenues of Plastics division while Moulded
Furniture contributes ~41% and balance 2% comes from Mattress business (new business, which
the company ventured in 2012).
Exhibit 1: Nilkamal business snapshot
Business Segments
Sub Segments
Year Started
FY17 Revenue (INR mn)
Revenue Contribution
Major Products
Material
Handling
1984
10300
50%
Moulded
Furniture
1990
7600
37%
cabinets, tables
2011
480
2%
Foam Mattress
Pillows
Plastics
Mattress
Bubble
guard
2018
-
-
Nilkamal Bubble
GUARD is a multi-
player polyproplyne
board used for
protection, packaging,
printing and paneling
Lifestyle
Retail
(@home)
2005
2340
11%
Wide range of
home décor
products inc.
furniture, soft
furnishings,
accessories &
modular kitchens
*Broad estimate; Source: Company, MOSL
Crates, pallets Home & Office Chairs, Coir, Spring &
Exhibit 2: Strategic tie-ups with international players
Source: Company, MOSL
27 November 2017
November 2017
2

Nilkamal Limited
Journey since Inception
Exhibit 3: -----
2018
Launches Nilkamal
BubbleGUARD
2011
Enters mattress
business
Exhibit 4: Auditors
Name
B S R & Co LLP
Vora & Associates
Pratik M Shah
B F Modi
Type
Statutory
Statutory
Secretarial Audit
Cost Auditor
Source: Capitaline
Exhibit 5: Segmental Contribution
Source: Company, MOSL
27 November 2017
November 2017
3

Nilkamal Limited
Investment argument
Market leader in moulded furniture in India, with strong brand recal:
Nilkamal is a market leader with ~32% share in the moulded furniture segment and sells ~1.4
million plastic moulded chairs per annum (one of the largest in India). The moulded furniture
division which is a part of plastics division contributed ~32% of the revenue in FY17. The product
portfolio includes range of chairs from premier chairs, baby chairs, chair shells, dining tables,
center tables, stools, racks, trolleys, school benches to planters. The company has been able to
grow this business consistently on the back of new products, designs and innovation (Hybrid
chairs combining metal and plastics). In order to maintain the strong foothold in this segment
the company introduced 9 new models in moulded furniture segment in FY16-17 mainly in
premium range which would be margin accretive. In order to improve the market share of the
company going forward and stay ahead of the competition Nilkamal has planned to launch 10
new products in the value added segment.
The ready furniture vertical (offering a range of 450 different products) comprising of office
and home segment Home & office furniture segments like bedroom, living, desking and storage,
dinning etc. offers a huge opportunity in future. The overall market size of furniture industry is
estimated to be INR750bn and is largely catered by unorganised players (~85%) mainly through
carpentered products. The recently implemented GST is likely to benefit organised players like
Nilkamal to gain market share form the unorganized players. Also, due to better aesthetics,
design, quality, scalability in manufacturing, paucity of labour & time as regards the end
consumer; the ready furniture industry is expected to gain going ahead. The two pronged
growth drivers of GST and industry shift puts Nilkamal in a sweet spot to gain significantly over
time.
Exhibit 6: Sharp increase in advertisement spend to create brand awareness
Source: Company, MOSL
27 November 2017
November 2017
4

Nilkamal Limited
Mattress segment on the cusp of growth
The size of the organized mattress industry is ~ INR32bn and is expected to grow at 12-15% p.a.
for the next few years. The company's mattress vertical (started in FY12) is relatively at the
nascent stage (commanding 2% of FY17 revenue). Until now the main focus of the company for
the mattress segment has been to improve reach, enhance the product offering and increase
awareness of the Nilkamal mattress brand. The integration of mattress vertical with the furniture
business helped the company to register a growth of 44% in FY17 vs. industry growth of ~10%.
Currently Nilkamal has mattress manufacturing facilities at Southern and Eastern part of the
country, and has plans to set up production units in North and West during FY18. The future
strategy for the division is to leverage the existing pan India network of distributors and dealers
to accelerate the growth of the mattress segment. The management expects the mattress
division to contribute ~INR2bn of revenue in FY20 registering a CAGR of 60% over FY17-20E. This
will largely be driven by increasing per capita income, increasing literacy across states triggering
"The Wellness Theme" would in-turn help shift from unorganized to branded players.
Market leadership in material handling equipment
Material handling division is one of the largest business segments of the company (56% of FY17
revenue). In India, Nilkamal had pioneered the use of plastic crates and today the company is
the largest manufacturer of plastic crates for various industries ranging from Automobile,
Pharmaceutical, Engineering, Electrical, Logistics, Textiles, Supermarkets, Electronics, Retail,
Food & Beverages, Agriculture, Seafood, Hospitality & Catering and other allied business.
Performance of @home likely to improve
Nilkamal's retail division, '@home', has 17 large format stores, one Go-to-Market (GTM) store
and 8 shop-in-shop stores (Shoppers Stop), spread across 14 cities, covering a retail space of
over 2.87 lakh sq. ft. The division contributes 10.7% to the total revenues of Nilkamal and has
grown by 3.4% CAGR over FY13-17. The company is undertaking various initiatives like closing
down the non-profitable stores, product standardization, improving supply chain management
using auto replenishment systems, foray into customised kitchens, wall units and wardrobes,
etc. These cost optimization steps by management coupled with improving penetration of
organized retail in furniture is likely to help improve sales/sq. feet for the company.
Exhibit 7: No. of @home stores
Exhibit 8: Revenue per sq.ft for @home
Source: Company, MOSL
Source: Company, MOSL
27 November 2017
November 2017
5

Nilkamal Limited
Financial Analysis
Healthy performance track record :
Over FY12-17, Nilkamal's revenue grew at a CAGR of 7.4% to INR21.6bn. EBITDA and net profit
grew by 9.3% and 17.3% respectively during the period. Nilkamal's EBITDA margin expanded by
~110bps to 11.4% over the last 5 years and we expect it to further improve by another 110bps to
12.6% by FY20E on the back of better operational efficiencies, cost optimization on account of
rationalization in the low margin @home division, better product mix. In FY17, the company
had a healthy balance sheet with net debt free.
Expect PAT growth of 14% over FY17-20E :
Going ahead, we expect revenue and PAT CAGR of 8.4% and 13.7%, respectively, over FY17-20E
and EBITDA margins of 12.6% in FY20E. We model a gradual debt repayment over FY17-20E
owing to internal accruals which could improve the gross debt/equity from 0.11x in FY17 to
0.03x by FY20E. RoE is expected to remain largely stable around 18% over FY17-20E.
Valuation
With sharp improvement in margins and on the back of high growth the stock had seen sharp
rerating during FY16-17 leading to 1-year forward P/E reaching 24x. However the stock has seen
some correction from its recent highs. Despite steady growth, healthy balance sheet and
stable RoE, (FY19 RoE of 17%, OPM of 12.6%) the stock is trading at ~17x FY19E P/E. We believe
that with improving product mix and market share shift to organized players, Nilkamal could
again command higher valuations.
Exhibit 9: Peer comparison
MKT CAP
Company
Supreme Industries
Astral Poly
Finolex Industries
Time Techno
Nilkamal
(INR bn)
144
96
78
42
25
OPM (%)
FY18E
15.3
14.6
17.7
14.8
11.7
FY19E
15.9
15.2
18.1
15
12.1
RoE (%)
FY18E
23.6
18.9
16.6
12.7
16.3
FY19E
25.8
20.5
17.8
13.6
16.5
P/E (x)
FY18E
34.2
52.7
22.9
23.4
19.5
FY19E
27.2
39.2
19.3
18.5
16.9
Sales CAGR PAT CAGR
FY17-19E
15%
20%
9%
15%
8%
FY17-19E
19%
30%
7%
21%
14%
Source: Bloomberg, Company, MOSL
Exhibit 10: Nilkamal 1-year forward P/E (x)
Source: Company, MOSL
27 November 2017
November 2017
5

Nilkamal Limited
Story in Charts
Exhibit 11: Improving Revenue growth
Exhibit 12: Margin improvement likely to continue
Source: Company, MOSL
Exhibit 13: Expect 17% CAGR in PAT over FY17-20E
Exhibit 14: ROE to remain stable
Source: Company, MOSL
Exhibit 15: Plastic segment PBIT to remain steady
Exhibit 16: Turnaround expected in Lifestyle PBIT
Source: Company, MOSL
27 November 2017
November 2017
6

Nilkamal Limited
Key Risks
Volatility in raw material prices :
Nilkamal's major segment being plastics - its raw material prices are closely linked to global
crude oil prices. Further, given that the plastic furniture segment is largely unorganized and is
price sensitive - Nilkamal has low pricing power despite having a brand presence. Hence any
sharp volatility in crude oil price could impact the company's margins in case of its inability to
pass on the input cost inflation to its customers.
Inability to ramp-up new businesses in near future :
Nilakmal entered the retail lifestyle and furniture business in 2005 and is now witnessing a
recovery and turnaround in this business. The losses in the retail segment impacted the
company's overall financials for the past several years. The company also entered the mattress
business in 2011 which is yet to contribute meaningfully and has now entered into the building
material segment (bubble guard). The overall financials could be impacted in case the company
is unable to significantly ramp-up these businesses in near future.
Increasing Competition from organised and unorganised players :
The plastic business is highly fragmented with a large unorganized segment. However, the GST
implementation is expected to bring in a level playing field, favoring the organised and branded
players. Other organised players include Supreme Industries, Wimplast (Cello), Prima Plastics.
While Nilakmal is the market leader in the organised plastic furniture industry, the company
needs to continuously spend on advertising and brand promotion to maintain its leadership.
Further, increasing competition from the organized players could result in pricing pressure and
impact operational performance of the company.
27 November 2017
November 2017
7

Nilkamal Limited
Management Overview
Mr. Vamanrai V. Parekh, Chairman
Mr. Parekh, co-founder and promoter of Nilkamal Group has 60 years of experience
in the plastics industry. His leadership has steered Nilkamal to become a prominent
company in India and abroad. He has been a part of several prestigious committees
in the plastic industry. After serving as chairman of the Plastics Export Promotion
Council, he was on the board of the National Advisory Board of Plast India. He is
also a trustee in various educational and charitable institutions, including the
illustrious Shree Vile Parle Kelavni Mandal.
Mr. Sharad V. Parekh, Managing Director
Mr. Sharad is the Managing Director of the Nilkamal Group. Co-founder and promoter
of the Group, he is Mr. Vamanrai's younger brother and has oversees marketing and
administration of the group since its inception. He has been innovative in developing
and selling customized material handling solutions to all industries. He pioneered
the material handling business in India.
Mr. Hiten V. Parekh, Joint Managing Director and Promoter
Mr. Hiten is the Joint Managing Director and Promoter. With an undergraduate
degree in Commerce from Mumbai University and a Diploma in Quality Systems &
Management from NMIMS University, he plays a pivotal role. With over 30 years of
experience in the manufacturing sector, he oversees operations of several factories
and drives new project developments. He took the company to the forefront of the
furniture retail sector with the inception of @home and also launched the brand
Mattrezzz, the group's foray into manufacturing mattresses. Most recently, he
introduced the JIT Inventory Management System resulting in smooth availability
of products, streamlined operations, release of cash and space at Factories and
Depots across India
Mr. Manish V. Parekh, President and Executive Director (Furniture)
Mr. Manish is associated with Nilkamal for past 25 years. He oversees the furniture
business of the company and is the pillar behind the enormous dealer network,
which is responsible for catering to requirements of the most remote regions of
the country. He has helped the company to become one of the largest producers of
molded plastic furniture in the world. He is also responsible in conceptualizing and
launching @home - the home retail division of the company. He initiated E-
commerce arm of the company by conceptualizing & launching the E-com portal of
@home and in tying up with major E-tail players to strengthen the digital presence
of the furniture and the @home division.
Mr. Nayan S. Parekh, President and Executive Director (Material Handling)
Mr. Nayan is a Promoter of the Group and has a Bachelor's degree in Plastics
Engineering from the University of Massachusetts, USA and monitors the
manufacturing, operations and sales of the material handling division of the Group.
The division has seen expansion with a huge range of verticals. He is the brain
behind NilkamalBito Storage Systems P Ltd. (JV with BITO LagertechnicBittmann
GmbH to manufacture metal storage systems) and CambroNilkamal Pvt. Ltd. (JV
with Cambro, USA to manufacture products for the hospitality industry).
27 November 2017
November 2017
8

Nilkamal Limited
Financials and valuations
Income Statement
Y/E March
Net Sales
Change (%)
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
Extraordinary Items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
PAT
Change (%)
Margins (%)
2014
17,418
1,571
9.0
522
1,049
425
36
0
659
183
27.8
5
470
2.7
2015
18,946
8.8
1,536
8.1
574
962
299
46
0
708
196
27.6
8
505
7.3
2.7
2016
19,265
1.7
2,300
11.9
550
1,750
182
33
0
1,601
516
32.2
-55
1,141
126.0
5.9
2017
20,240
5.1
2,317
11.4
505
1,811
117
33
0
1,728
536
31.0
-34
1,225
7.4
6.1
2018E
21,053
4.0
2,463
11.7
547
1,916
88
66
0
1,894
625
33.0
-34
1,303
6.3
6.2
2019E
23,150
10.0
2,790
12.1
653
2,137
60
119
0
2,196
725
33.0
-34
1,505
15.5
6.5
(INR Million)
2020E
25,778
11.4
3,235
12.6
731
2,504
46
176
0
2,635
870
33.0
-34
1,799
19.5
7.0
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Accum. Depriciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash and Bank Balance
Loans and Advances
Curr. Liability & Provisions
Current Liabilities
Other Long Term Liab. & Provs.
Net Current Assets
Appl. of Funds
2014
149
4,718
4,868
54
2,709
250
7,880
7,735
4,161
3,573
22
18
6,799
3,158
2,357
256
1,029
2,532
1,897
635
4,267
7,880
2015
149
5,181
5,331
62
1,692
166
7,250
7,694
4,694
3,000
12
325
6,285
2,825
2,369
147
944
2,373
1,768
604
3,913
7,250
2016
149
6,126
6,275
72
832
103
7,283
3,265
538
2,728
45
435
6,769
3,046
2,691
159
874
2,694
1,966
728
4,075
7,283
2017
149
7,270
7,419
72
826
68
8,386
3,702
994
2,707
320
416
7,488
3,360
3,010
141
977
2,546
1,727
818
4,943
8,386
2018E
149
8,371
8,521
90
626
65
9,302
4,721
1,542
3,180
300
1,058
7,483
3,236
3,032
211
1,005
2,718
1,926
793
4,765
9,302
2019E
149
9,574
9,723
109
426
65
10,323
5,321
2,194
3,127
200
1,725
8,277
3,591
3,357
231
1,098
3,006
2,118
888
5,271
10,323
2020E
149
11,004
11,153
127
326
65
11,671
5,921
2,925
2,996
100
2,669
9,187
3,963
3,738
258
1,229
3,282
2,296
986
5,906
11,671
27 November 2017
November 2017
9

Nilkamal Limited
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
Working Capital Ratios
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
2014
31.5
66.5
326.2
4.0
14.7
53.3
25.3
5.2
1.6
17.5
0.2
86.3
9.7
10.3
2.2
66
49
21
2015
33.8
72.3
357.2
4.5
15.5
49.7
23.2
4.7
1.4
17.3
0.3
91.8
9.9
10.0
2.6
54
46
18
2016
76.4
113.3
420.5
7.0
10.3
22.0
14.8
4.0
1.3
11.2
0.4
94.9
19.7
17.1
2.6
58
51
21
2017
82.1
116.0
497.2
11.0
15.1
20.5
14.5
3.4
1.3
11.1
0.7
18.5
17.9
16.6
2.4
61
54
20
2018E
87.3
124.0
571.0
12.0
15.5
19.2
13.5
2.9
1.2
10.3
0.7
76.0
16.3
15.3
2.3
56
53
20
2019E
100.9
144.6
651.6
18.0
20.1
16.7
11.6
2.6
1.1
9.1
1.1
75.8
16.5
15.7
2.2
57
53
20
2020E
120.6
169.6
747.4
22.0
20.5
13.9
9.9
2.2
1.0
7.8
1.3
87.7
17.2
16.6
2.2
56
53
20
Consolidated - Cash Flow Statement
Y/E March
Adjusted EBITDA
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Operations
(Inc)/Dec in FA & CWIP
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Inc/(Dec) in Net Worth
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Add: Opening Balance
Closing Balance
2014
1,571
265
-143
-11
1,681
-393
1,288
-71
77
-387
0
-814
-434
-65
0
-1,312
-18
274
256
2015
1,536
250
-238
6
1,554
-185
1,369
-21
52
-155
0
-1,112
-328
-69
0
-1,508
-109
256
147
2016
2,300
-45
-515
105
1,845
-430
1,416
-123
139
-414
0
-1,021
-208
-191
0
-1,419
12
147
159
2017
2,317
-660
-578
9
1,088
-812
276
12
104
-696
0
-185
-145
-79
0
-409
-18
159
141
2018E
2,463
247
-625
49
2,134
-1,000
1,134
-642
66
-1,576
0
-200
-88
-202
0
-489
69
141
210
2019E
2,790
-485
-725
52
1,632
-500
1,132
-668
119
-1,049
0
-200
-60
-303
0
-562
21
211
231
(INR Million)
2020E
3,235
-609
-870
52
1,809
-500
1,309
-944
176
-1,267
0
-100
-46
-370
0
-515
26
231
258
27 November 2017
November 2017
10

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" Analyst ownership of 1% or more securities
Nilkamal Limited
No
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* Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
November 2017