Broker’s call: DDev Plastiks Ind (Buy)

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Target: ₹477

CMP: ₹343.15

DDev Plastiks Industries (DPIL) is strategically shifting its focus from low-margin PVC products towards higher-margin products. This strategic pivot includes increasing its share of high-margin XLPE compounds and we expect this shift to enhance profitability in the future. XLPE cable (cross-linked polyethylene) is a type of electrical cable commonly used for power transmission and distribution.

DPIL plans to launch XLPE compound suitable for insulation for cables up to 132kv in the next few months with subsequent plans to scale up to 220kV. We anticipate EBITDA margins to increase by 60 bps and 110 bps in FY25 and FY26, driven by the company’s focus on high-value products.

DPIL plans to invest ₹300 crore in a staggered manner over the next three years with allocated amounts of ₹125 crore in FY25, ₹70 crore in FY26 and the balance in further years. This capex includes development of new greenfield sites in the East and West in FY25, expansion of HFFR compounding capacity from the current 5,000 tpa to 20,000 tpa by FY26.

Our valuation accounts for the company’s anticipated expansion projects including development of new greenfield sites in the east and west, debottlenecking of existing manufacturing facilities and expansion of HFFR compounding capacity .