Partner With Us NRI
Time Technoplast Ltd>
  • CMP : 106.2 Chg : 0.70 (0.66%)
  • Target : 0.0 (-100.0%)
  • Target Period : 12-18 Month

01 Jun 2022

Composite product drives revenue growth in Q4…

About The Stock

Time Technoplast is a leading manufacturer of polymer based packaging & composite products with 34 production facilities in 11 countries.

  • Established products (industrial packaging, PE pipe, battery others) contribute ~80% to the topline while value added product category (IBC, composite cylinders, mox films) contribute 20% of revenue
  • Focus is to increase revenue sharing from value added product category in the next five years from 20% to 22%
Q4FY22 Results

Revenue growth led by composite products segment, savings in other expenses limits the EBITDA margin fall.

  • Revenues increased ~9% YoY to ₹ 1039 crore led by ~18% growth in the composite product to ₹ ~₹ 312 crore
  • Gross margin was down ~110 bps YoY due to higher raw material prices. However, savings in other expenses restricted the overall fall in EBITDA margin at 22 bps YoY to 13.3%
  • PAT up ~6% YoY to ₹ 57 crore, tracking higher sales in Q4
What should Investors do?

Time Technoplast’s share price has grown by ~2.3x over the past one year (from ~₹ 35 in August 2020 to ~₹ 78 level in February 2021).

  • We maintain our HOLD rating on the stock
Target Price & Valuation

We roll over valuation on FY24E. We value the stock at 5x EV/EBITDA on FY24E EBITDA and revise our target price to ₹ 115/share.

Key Triggers for future price performance
  • The company has laid out plans to achieve ₹ 5000 crore revenues by FY25 (implied CAGR of 14% in FY21-25) led by value added product segment
  • Time Techno sees strong revenue traction (of ₹ 2200 crore/annum) from its newly launched CNG cascade business (not built in future estimates)
  • Improved product mix is expected to drive EBITDA margin, going forward, (aims to increase EBITDA margin to 15.5% FY25E)
Alternate Stock Idea

We like Supreme Industries in our coverage universe.

  • Supreme is the market leader in the plastic piping segment with ~14% market share. Robust b/s with average RoE, RoCE of 24%, 27%, respectively
  • BUY with a target price of ₹ 2320

Key Financial Summary

(Rs# Crore) FY19 FY20 FY21 FY22 5 Year CAGR(FY17-FY22) FY23E FY24E 2 Year CAGR (FY22-FY24E)
Net Sales 3,563.7 3,578.0 3,004.9 3,649.8 0.1 4,076.2 4,706.3 0.1
EBITDA 523.5 498.9 387.1 505.8 0.0 572.0 666.0 0.1
EBITDA Margin (%) 14.7 13.9 12.9 13.9 - 14.0 14.2 -
PAT 202.7 169.1 107.8 192.2 0.1 226.9 279.3 0.2
EPS (|) 9.0 7.5 4.8 8.5 - 10.0 12.4 -
P/E(x) 11.5 13.8 21.6 12.1 - 10.3 8.3 -
Price /Book Value (x) 1.4 1.3 1.2 1.1 - 1.1 1.0 -
EV/EBITDA (x) 5.7 6.0 7.5 6.1 - 5.1 4.5 -
RoE (%) 12.1 9.3 5.7 9.3 - 10.6 11.9 -
RoCE (%) 15.0 12.5 8.7 11.3 - 12.8 14.1 -
Source: Company, ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

Q4FY22 Results:

  • Time Techno reported revenue growth of ~9% YoY to | 1039 crore supported by volume growth of 7%
  • Segment wise, composite product segment revenue increased 18% YoY to | 311 crore led by strong growth in the composite cylinders’ segment by 39% YoY. The company has ~| 250 crore order book in the composite cylinder (Type IV) segment
  • The polymer products revenue grew albeit at a slow pace of ~6% YoY to
    | 727 crore supported by improved demand for plastic products (largely plastic drums/jerry cans, pails, etc). However, PE pipe business remained a laggard with revenue de-growth of 15% YoY
  • Despite strong revenue growth in the composite product category (relatively high margin business), gross margins saw ~112 bps drop on a YoY basis, mainly due to a delay in price hikes. However, savings in other expenses helped partially negate the adverse impact of higher RM costs and limited the EBITDA margin fall at 22 bps YoY to 13.3%
  • PAT increased ~6% YoY to | 57 crore tracking higher sales in Q4

Q4FY22 Earnings Conference Call highlights

  • The company aims to grow volume at 15-18% CAGR in the next three to five years led by strong growth in the composite product segment
  • The composite product segment commands EBITDA margin of ~18% vs. ~14% of company level margin. Hence, rising contribution of composite products in the topline will drive EBITDA margin up, going forward
  • Composite cylinders for Type IV CNG cascade: The company is seeing a good response to its Type-IV composite cylinders for CNG cascade. The current order book is at | 250+ crore and revenue from this segment is
    | 56 crore currently
  • Composite cylinders for LPG: The company received an order of 0.75 million Type-IV LPG composite cylinders from Indian Oil Corporation, which is to be supplied over the coming 12 months. The company also expects more traction from this segment on account of the Pradhan Mantri Ujjwala Yojana of the Government of India. Time Technoplast is also seeing good traction from overseas in this segment. Currently, it exports composite cylinders to other countries to keep up with the demand. The company plans to add additional 1 million-cylinder manufacturing capacity with a capital outlay of ~ | 90 crore in the period of next 12-15 months
  • According to the management, there is a growing market in Asia, Middle-East due to China+1 policy adopted by several countries. Demand in US is led by chemical segment and agricultural chemical market. Time Techno expects growth in revenue due to increased demand of composite products
  • Capacity utilisation in Q4FY22 was at 75%. The company expects the same to improve in the coming quarters
  • Volume offtake in pipes business is still under pressure due to unprecedented hike in raw material prices resulting in delay in procurement by EPC contractors
  • Volatility in raw material prices, supply chain disruption and delay in taking price hikes has put pressure on margins
  • The management maintained its guidance for normalisation of working capital to 90 days supported by stabilisation in polymer prices. In the next few years, Time Techno expects value-added products to contribute ~35% to the topline (compared to 21% currently) which will lead to improvement in working capital as well as RoCE
  • The company incurred a capex of ~| 186 crore in FY22 towards brownfield expansion, maintenance, re-engineering and automation. Major part of its capex was towards value added products at ~| 107 crore
  • In the next phase of expansion, the company will make investments on manufacturing cylinders for automotives for OEM and onboard cylinders
  Q4FY22 Q4FY21 YoY (%) Q3FY22 QoQ (%)   Comments
Revenue 1,039.0 951.2 9.2 942.0 10.3   Revenue growth of ~9% YoY supported by 7% volume growth
Other Income 1.4 2.2 -36.8 0.7 97.2    
Raw Material Exp 740.7 667.5 11.0 663.4 11.7   The gross margin down by 112 bps YoY mainly due to higher raw material costs
Employee Exp 49.6 47.3 4.9 45.9 8.1    
Other expenditure 109.9 107.3 2.5 96.9 13.5    
EBITDA 138.7 129.1 7.4 135.8 2.1    
EBITDA Margin (%) 13.3 13.6 -22 bps 14.4 -107 bps   Saving in other expenses and employee costs restricted the EBITDA margin fall at 22 bps YoY
Depreciation 40.4 38.3 5.4 39.4 2.4    
Interest 22.7 23.7 -4.6 22.9 -1.2    
PBT 77.1 69.3 11.3 74.2 3.9    
Total Tax 20.3 17.5 15.9 19.4 4.7    
PAT 56.8 53.8 5.7 54.9 3.6   PAT came in higher by ~6% YoY, tracking topline growth in Q4
Key Metrics              
Polymer products 727.0 687.6 5.7 645.0 12.7   Plastic divsision revenues growth was partiall offset by lower revenues from the Pipe business (down by ~15% YoY), which restricted overall segment revenue growth at 5.7% in Q4
Composite products 311.9 263.6 18.3 297.0 5.0   New order inflows in the Type-IV composite cylinders drive overall segment revenue growth at ~18% YoY

Terms & conditions and other disclosures


I/We, Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products.

ICICI Securities is Sebi registered stock broker, merchant banker, investment adviser, portfolio manager and Research Analyst. ICICI Securities is registered with Insurance Regulatory Development Authority of India Limited (IRDAI) as a composite corporate agent and with PFRDA as a Point of Presence. ICICI Securities Limited Research Analyst SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities and its analysts, persons reporting to analysts and their relatives are generally prohibited from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities and ICICI Securities as a entity are engaged in various financial service businesses, they might have financial interests or actual / beneficial ownership of one percent or more or other material conflict of interest in various companies including the subject company/companies mentioned in this report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction





Read More