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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)

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