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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

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