Hold Time Technoplast Ltd For Target Rs.85 - ICICI Direct
Revenue growth on favourable base…
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) contributes 20% of revenue
* Focus is to increase revenue sharing from value added product category in the next five years from 20% to 22%
Q3FY22 Results: A favourable base and improved demand of composite products drives topline in Q3FY21
* Revenues came in higher by ~13% YoY to | 942 crore on a favourable base of Q3FY21 (wherein revenues were down 10% YoY) Improved operating leverage drove EBITDA margin up ~100 bps YoY to 14.4%
* PAT up 37% YoY to | 55 crore tracking higher sales & EBITDA in Q3
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 revise our rating from BUY to HOLD
Target Price & valuation: We value Time Technoplast at 4x EV/EBITDA on FY23E EBITDA and revise our target price to | 85/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 will drive EBITDA margin, going forward (aims to increase EBITDA margin to 15.5% FY25E)
Alternate Stock Idea: We like MoldTek Packaging in the packaging space.
* Strong volume growth of ~18% in FY21-24E led by capacity expansion and client additions in the high margin product categories
* BUY with a target price of | 850
To Read Complete Report & Disclaimer Click Here
https://secure.icicidirect.com/Content/StaticData/Disclaimer.html
Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer