June 12, 2017 | PM Securities
Time Technolpast ltd. is a fairly innovative company with robust management and market leadership in quite a few segments, and has registered a good 10 year PAT CAGR of ~20% but in the recent past PAT level growth has not been promising and 5 year CAGR stands at ~10.38%. Currently with addition of new products namely MOX films & Composite cylinders growth can be envisaged but alongside sizeable CAPEX and lumpy nature of this business. At current valuations ~25 times trailing P/E (FY17) we do not expect re-rating of the stock.
Time Technoplast Ltd. is a global market leader in manufacturing of plastic drums, currently manufactures ~22% of global production. Ever since inception company has been instrumental in development and rapid commercialisation of new products. Currently business categorised based on product life-cycle and business strategy for each of them is as under:
1) Mature products (86.6% of fy17 revenues): Industry Packaging (Except IBC’s) , Auto Components, Lifestyle products, PE Pipes, Infrastructure products. Management expect a steady growth rate of 13-14% on these products although in our view margins shall remain volatile due to volatile input cost matrix.
a) Plastic Drums (Industry Products): have a high penetration of ~55% in indian markets but overseas they stand very under-penetrated at 6-9%. Change in geographic focus to increase sales of these drums shall pave the way for this flagship product of time technoplast.
b) Others: An array of products (Exhibit 1) under categories Industry Packaging, Auto Components, Lifestyle products, PE Pipes, Infrastructure products cumulatively contributes under 25% of top-line has been growing due to geographic diversification and is expected to grow at a higher single digit to lower double digit growth rates.
2) Value-add Products (13.3% of fy17 revenues): Management is optimistic about both the launches although composite cylinders may take some time and maybe lumpy in nature but can potentially be a game changer for the company, although objectively, management is more confident about top-line contribution from MOX films.
a) Composite Cylinders: Replacement for metal LPG cylinders are the latest innovation of the company although these have been prevalent overseas for some years now. Company claims that these are explosion proof and are half the weight of conventional metal cylinders and are available in 16 different sizes uptil cylinders that can hold upto 21 kgs although all of this comes at a cost of 30% premium pricing to metal cylinders. Currently pune city has initiated use of these cylinders, also HPCL has initiated an order of 1500 cylinders until now for 2kg/5kg/10kg cylinders. Current capacity to produce around 700,000 units but are planning to double the production. Current Order book stands at 1.8 million units and margins at around 17 – 18 % with higher utilisation levels 20 % margins are attainable. Current top line contribution is Rs.800 Mn., management expects to contribute upto 150 Crores to top line by next financial year. Although due to failure of such product by certain other countries has led to a ban on composite cylinders in North-America & Thailand.
b) MOX Films (Multi layer Multi axis Oriented Cross Laminated Film) (Tarpaulin/Talpatri): Launched on 1st April 2017 Can orient the films in 16 different directions Capacity of production of 6000 tonnes, planning to increase the production to 12000 tonnes by next year Can expect in FY 2018 -19 turnover of 200 Crores and margins at around 20%.
c) IBC’s (Intermediate Bulk Containers): Introduced 4-5 years ago IBC’s contribute approximately 6% to the top-line. IBC segment witnessed a good demand pickup overseas making time technoplast the 3rd largest manufacturer although penetration in india remains at low and can be further exploited. Currently 6 out of 9 countries in which the company has presence have IBC manufacturing capability, by the end of the year all 9 are expected to have IBC capacities.
Time Technoplast was founded in 1992. The company has 28 manufacturing locations spread across the globe, of which 14 are in India. The company has its operations in India, UAE, Bahrain, Egypt, Thailand, Vietnam, Malaysia, Indonesia and Taiwan.
This document has been prepared and compiled from reliable sources. While utmost care has been taken to ensure that the facts stated are accurate and opinions given are fair and reasonable, neither the Company nor any of its Directors, Officers or Employees shall in any way be responsible for the contents. The Company, its Directors, Officers or Employees may have a position or may otherwise be interested in the investment referred in this document. This is not an offer or solicitation to buy, sell or dispose off any securities mentioned in this document.
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