PPAP Automotive - Margin Recovery Holds Key, Wait Gets Longer: ICICI Direct

ICICI Direct Report

PPAP Automotive Ltd. is a passenger vehicle-focused ancillary manufacturing automotive body sealing parts and various interior and exterior plastic moulded parts.

PV segment forms bulk of sales at ~90% with two-wheeler and commercial vehicle comprising the rest. It counts Maruti Suzuki India Ltd. as its anchor client, with share in revenues at ~50%.

Key triggers for future price performance:

• With fundamental levers in place for double digit volume growth in domestic PV space over FY22-25E, market share gain ambition at Maruti Suzuki, new initiatives at PPAP Automotive, we build in 17.4% sales compound annual growth rate in FY22-25.

• With raw material prices on decline (crude led), negotiations underway with key clients for raw material related product price adjustments and operating leverage benefits at play, we bake in 11% operating margins by FY25E.

• Profit after tax is expected to substantially improve amid margin recovery as well as trimming of losses at joint venture. Profit after tax is seen at Rs 23 crore by FY25E.

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