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Tarsons Products Ltd (TPL) is a leader in India in the production and supply of laboratory plasticware with more than three decades of experience. TPL is engaged in the design, development, manufacturing and marketing of consumables, reusables and others (including benchtop equipment & instruments). Its products are used by key end user markets like Academic/Research Institutes, Pharmaceutical companies/CROs, Diagnostic players etc. The company has a diversified product portfolio with over 1,700 SKUs across 300 products. The company’s products are made from high-quality medical grade DMF registered resins which are heat resistant and specifically selected to minimize additives & reduce potential leachables. TPL’s product range includes disposable plastic labware, centrifuge ware, cryo labware, liquid handling system and instruments. The company possesses the expertise in plastic moulding and has a sound knowledge of latest and inventive laboratory techniques. TPL has a pan-India distribution network with long standing relationships with its key distributors and is one of the few players in India to have a global reach in the labware market with products being supplied to over 40 countries.

With strong growth and capex (?1.9bn in FY23) , we are expecting a significant improvement in its ROCE/ROE as the company ramps up its capacities. With current RoCE/RoE of 15.3%/14.2% in FY23 (from peak of 35.3%/28.2% in FY21) we are anticipating the same to increase to 19.8%/17.4% respectively by FY25E. The company’s asset turnover will continue to remain low at around 0.8x by FY25E as it aims to double its gross block by FY25E vs FY22. At full capacity the new plant is expected to generate revenue of ?5,000 Mn as a result along with improvement in return ratios we are expecting Tarsons Revenue/EBITDA/ PAT to grow at 25.9%/28.6%/32.3% CAGR over FY23-25E with Gross/EBITDA/PAT margins gradually improving to 79.2%/47.8%/31.5% by FY25E owing to a) broadening addressable market owing to strong domestic growth, b) market share gains amidst rebound in its end-user markets (diagnostics, pharma/CROs, academia), c) enhanced product mix post capex particularly in fastest growing PCR/Cell culture segment, d) pricing and distribution advantage over large MNCs players. We initiate BUY on Tarsons Products with a one year target price of ?770.

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