Time Technoplast Ltd. share price target

Time Technoplast’s (TIME) business operations remain broadly stable despite ongoing conflicts in parts of the Middle East (~11% of revenue). Its B2B industrial packaging business (~65% of revenue) has moderate growth but a very stable business profile.

Time Technoplast (TIME) reported a healthy and in-line set of results in 3QFY26. Volume/revenue/EBITDA/PAT grew 16%/13%/16%/25% YoY. EBITDA margin expanded 46bp YoY to 14.9%.

We initiate coverage on Time Technoplast (TIME) with a BUY rating and a target price of INR578 (41% upside potential), based on 22x FY27E P/E (close to sector average).

Time Technoplast holds a dominant market position with over 60% share in
domestic industrial packaging and is recognized as the world’s largest manufacturer of large-size plastic drums.

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Higher contribution of valued added products to drive EBITDA The company has set a target to increase revenue contribution from value added product (VAP) categories from 20% in FY21 to 22% by FY25. Time Techno sees a strong revenue traction (of | 2200 crore/annum) from its newly launched CNG cascade business, going forward. Alongside, new products such as oxygen cylinder, air tanks (for commercial vehicles), hydrogen cylinder for fuel cell and composite water heater are in the approval stage. The increased revenue contribution of value added products...

The CNG cascade cylinder for gas has a significant growth opportunity in India over the next 10 years, supported by increasing use of CNG as an alternate fuel. CNG cascade cylinders are lightweight (25% of steel cylinder), explosion proof and offer long service life (no corrosion/rusting). CNG Cascades are able to carry 2x CNG compared to equivalent cascade of steel cylinders. This will help reduce the operating cost by ~50% for gas distribution companies (due to larger carrying capacity of CNG and overall reduction in weight). Time Technoplast believes the current opportunity size...

Time Technoplast reported an improved QoQ recovery in Q3FY21 supported by improved demand from user industries. While the management expects pre-Covid level sales in Q4FY21 over Q4FY20, the FY21 revenue recovery is likely to be in the range of 75-80%. Going forward, the management anticipates a normalised FY22 with focus on increased revenue contribution from value added product (currently ~21% of topline) and execution of orders in the PE pipe segment (order book is ~| 250 crore). On the balance sheet front, the company is looking at RoCE of ~20% in the...

Focus on increasing contribution from value added products Consolidated revenue fell 15% YoY to | 744 crore, largely due to polymer products (led by pipe segments), which fell 16% YoY to | 510 crore. The composite products segment reported ~10% YoY fall in revenue. Further, revenue contribution from valued added product categories increased to 21.8% in Q2FY21 (vs. 20.8% in Q2FY20). While demand for other products saw a recovery, piping segment demand stayed sluggish due to lower government spending various restrictions amid lockdowns. We expect a...

The company plans to launch new products composite air tanks, DEF (urea) tanks, composite leaf springs and CNG cylinders, CNG GASCADES, etc, for automotive segment. The management guided that revenue potential of...

Volume growth came in at 12% during H1FY20. This was largely led by strong volume growth in the composite cylinder, Mox films and pipes categories by 17%, 18% and 13% YoY, respectively. The management has reiterated the double digit volume growth (~11-12% in H2FY20) with strong order book of composite cylinder and piping divisions. We model revenue...

Volume growth came in at 12% during H1FY20. This was largely led by strong volume growth in the composite cylinder, Mox films and pipes categories by 17%, 18% and 13% YoY, respectively. On the other hand, despite lower industrial activities (including auto industry) the plastic division recorded a volume growth of 12% YoY during H1FY20. The management has reiterated the double digit volume growth in H2FY20 with recovery in demand of plastic division and strong order book of composite...

The lower industrial activities (including auto industry) weigh on performance of plastic division of the company. Though management has guided for a demand recovery in the plastic drums business (shift in Chinese trades towards India due to US-China trade issues, which would benefit domestic packaging companies). Also, apart from pipes, strong order book position in the composite cylinder, IBC business and mox films give revenue visibility for FY20E-21E. We model revenue CAGR of 11% (lower than management guidance of ~15%) for FY19-21E led by 18% growth in the...

Revenue growth of ~15% YoY driven by PE pipes and composite cylinders categories where topline grew 42% and 29% YoY, respectively. The management has reiterated strong order book position in these categories while the growth momentum would continue in FY20E. Plastic product category (contributes ~70% in topline) grew ~12% YoY led by a revival in demand of plastic drums from the chemical sector. We model revenue CAGR of ~13% in FY19-21E (lower than management guidance of 15%) led by ~20% and 10% revenue CAGR in the VAP and established product...

TTL recorded consolidated sales growth of ~16% YoY led by volume growth of ~15% YoY in Q3FY19. Value added product categories (VAPs) recorded sales growth of ~19% YoY led by sharp growth in revenue (1.6x jump) of Mox films. Also, established products (EPs) category (~80% of topline) recorded sales growth of ~15% YoY driven by sales growth (2.7x jump YoY) in PE pipes category while plastic product category grew at ~8% YoY during Q3FY19. We model revenue CAGR of 13% in FY18-21E led by 21% and 11%...

The management expects revenue growth of 15% and modestly higher EBITDA margins in FY20 aided by increasing share of value-added products. At CMP, TTL is trading at P/E of 12.4x and 9.4x FY19E and FY20E earnings respectively, which is attractive as it is at a discount to midcap index valuation. In recent months, the TTL stock has been derated in line with 1) general sell-off in the midcaps and smallcaps universe 2) Weak Q2FY19 results and 3) concerns on promoter stake sales. At the current price, valuations are attractive. Hence, we continue to maintain our positive...

Time Technoplast Ltd (TTL) Q2FY19 net revenue increased by 14.2% YoY in Q2FY19, driven by 9% growth in volumes. However, EBITDA declined by 1.6% YoY, while EBITDA margins contracted 209bps YoY to 13%, impacted by input cost inflation and rupee depreciation. Further, decline in the other income and higher depreciation, interest & tax expense resulted in 24.7% YoY decline in PAT.

Time Technoplast reported weak numbers for the quarter as increase in commodity prices and INR depreciation led to decline in gross margins. Increase in cost of borrowings aided to decline in profits....