Published on 13/01/2018 11:21:22 AM | Source: Religare Securities Ltd

Buy Time Technoplast Ltd For Target Rs.264.00 - Religare Sec

Beneficiary of shifting preferences

Time Technoplast has a dominant position in the rigid packaging materials industry in 9 countries across South East Asia and Middle East. It is a leading manufacturer of polymer products like drums, barrels, jerry cans and pails used in various packaging requirements. The company caters to varied sectors like chemicals, paints and pigments, food and beverage, petroleum, industrial coatings, agricultural, pharmaceutical, etc.

Investment rationale

* Time offers a wide range of industrial packaging products like drums, containers, pails for varied packaging requirements. It also manufacturers infrastructure related products like HDPE pipes, DWC pipes and storage batteries; technical and lifestyle related products like turfs and matts, disposal bins and auto components.

* The value added portfolio (18% of sales in H1FY18) includes Intermediate Bulk Container (IBC), Composite Cylinder & MOX films. We expect the contribution from value added products to increase in the next 3-4 years considering newly launched products, capacity expansion, robust demand and healthy order book.

* The domestic polymer products industry is expected to perform well driven by increase in penetration of polymer products in India and healthy demand from enduser industries. Factors like lower cost of polymer products and superior properties (such as corrosion resistance, lower weight, higher life and better aesthetics) have led to the replacement of metals, wood and paper by polymers.

* Notably, polymer drums are substituting metal drums in industrial applications such as packaging of chemicals. PVC pipes are substituting galvanised iron (GI) pipes in industries such as housing, irrigation, etc. We expect Time's HDPE and DWC pipes to report robust demand due to properties like anti-corrosive, leak proof, cost effective, low service cost and longer life. Penetration of Polymer Drums in Asia is just 16%, which provides huge potential in the Asian Polymer Drums market (overseas business potential). Time has operational footprints in Middle East and South East Asian countries like UAE, Bahrain, Egypt, Thailand, Vietnam, Malaysia, Indonesia and Taiwan with market leadership in 8 out of 9 countries.

Outlook & Valuation

Time Technoplast is likely to report superior earnings growth driven by enhanced product portfolio with higher room for market penetration, market leadership, focus on innovation and value-added products. MOX films, composite cylinders and IBCs have seen good demand in overseas markets, which would drive the overall revenue growth and margin improvement of the company. Also, we expect consumption to increase in products such as pipes and packaging (FMCG, consumer goods, chemicals, etc.) driven mainly by rise in per capita income, GDP growth, favourable demographics, increase in penetration, new product launches and strong clientele. We expect Time's Revenue and Net profit to increase at CAGR of 16% and 27.2% respectively over FY17-20E. We recommend a Buy on the stock with a target price of Rs. 264.

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