Buy Time Technoplast Ltd for the Target Rs. 280 by Motilal Oswal Financial Services Ltd
Robust outlook and attractive valuation warrant a re-rating Healthy in-line 3QFY26 - revenue/EBITDA/PAT grow 13%/16%/25% YoY
* Time Technoplast (TIME) reported a healthy and in-line set of results in 3QFY26. Volume/revenue/EBITDA/PAT grew 16%/13%/16%/25% YoY. EBITDA margin expanded 46bp YoY to 14.9%. Volume growth was led by both the Overseas (up 17%) and Indian businesses (up 15%).
* Value-added products (VAP) revenue grew 18% YoY, with an 18.8% EBITDAM. Established product revenue up 10% YoY with a 13.4% EBITDAM.
* For 9M, revenue/EBITDA/PAT grew 11%/14%/21% YoY.
Key highlights from the management commentary
* VAP sales grew 18% YoY; focus remains on driving higher margin VAP sales.
* Despite INR1.8b capex in 9M, debt reduced INR3.8b, aided by QIP money and healthy CFO (INR3.3b). Gross debt now stands at INR2.6b.
* TIME aims to be debt-free in the next six months. ? Revenue growth guidance: Overall 15%+, Packaging Products 11-13%, Composite 25-30%, PE Pipes 20-25%.
* Margin levers are efficiency improvement, manufacturing consolidation, manpower cost reduction, automation, and adoption of solar solutions.
* RoCE expansion of 20% in FY26E is on track; it stood at 18.6% in 9M.
* 4Q generates roughly 30% of annual revenue.
* Working capital targeted to reduce to 90 days from 100+ days currently.
* It targets completion of due diligence for the FIBC acquisition by Mar’26.
* The company sees a large market opportunity for hydrogen and fire extinguisher composite cylinders.
* The use of solar power at select plants is likely to save INR100m in FY27.
* Plant consolidation of CNG composite cylinder and capex (from 480 to 1080 cascades) is on track for commissioning in 4QFY26.
* The first recycling plant is expected to be operational by Apr’26.
* Phase 1 of plant automation is expected to be completed by FY27.
* Expanding PE pipe capacities at various locations to meet strong demand.
* It has received 3 acres of land from the Gujarat government for the future expansion of packaging product capacities.
Valuation and view: Reiterate BUY
* We maintain our earnings estimates after an in-line result in 3QFY26.
* After clocking a 16%/19%/39% CAGR in revenue/EBITDA/PAT over FY21-25, we estimate a 14%/15%/22% CAGR over FY25-28, to be fueled by its strong performance in the VAP segment (20% revenue CAGR, 18%+ EBITDAM).
* Pre-tax RoCE and RoIC are expected to expand from ~18.2% each in FY25 (FY24: 16-17%) to ~23% and ~25% in FY28, respectively, led by healthy operating results, improved efficiency, and working capital management.
* Robust outlook and attractive valuation (~14x FY28E P/E) warrant a rerating, in our view. Reiterate BUY and a TP of INR280 (20x FY28E P/E).
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