Buy Time Technoplast Ltd for the Target Rs 280 by Motilal Oswal Financial Services Ltd
Many levers for robust growth and margin expansion Healthy in-line operating performance in 1QFY27
Time Technoplast (TIME) reported a healthy and in-line set of operating results in 1QFY27, despite ongoing geopolitical tensions in West Asia. Volume/revenue /EBITDA/PAT grew by a healthy ~11%/25%/15%/22% YoY. Strong revenue growth of 25% YoY was driven by a healthy 11% YoY volume growth and improved realizations, supported by a rise in key polymer prices. EBITDA margin at 13.3% contracted 115bp YoY, impacted by gross margin. The Indian business recorded volume/revenue growth of 10%/30% YoY. Established Products’ volume/revenue grew 10%/25% YoY, with a low EBITDA margin of 11.7% (down 150bp YoY). Value-added Products’ volume/revenue grew ~12%/25% YoY, with a stable EBITDA margin of 17.9% (flat YoY). CFO of INR1.55b in 1Q was utilized in debt reduction (by INR897m) and capex (INR751m)
Key highlights from the management commentary
* A 15% EBITDA growth in 1QFY27 over 11% volume growth reflects healthy operating performance. TIME operates on an absolute EBITDA/t basis; thus, margins appear optically lower in an inflationary scenario.
* Composite cylinders continued to grow at a robust pace (up 29% YoY in 1Q).
* Despite geopolitical tensions in the Middle East, TIME has managed to grow its overseas volume/revenue by 14%/17% YoY.
* Management has guided for overall volume CAGR of ~15%, with Packaging Products at 11–13%, Composite at 25–30%, and PE Pipes at 20–25%.
* Revenue growth might differ based on key polymer prices.
* Key margin levers include efficiency improvements, manufacturing consolidation, reduction in power and manpower cost through automation.
* Capex intensity is expected to rise to INR3.5b in FY27 and ~INR2.5b over the subsequent 3-5 years, supporting TIME’s healthy volume CAGR guidance.
* RoCE is expected to cross 20% in FY27 and expand 1.5–2% annually.
* The outlook for the LPG composite cylinder business has improved with its availability on e-commerce platforms.
* TIME’s decision to acquire an FIBC company in still under review.
* It has identified non-core assets worth ~INR1.34b for monetization. It disposed of assets worth INR90m in 1Q, while the remaining INR1.25b is expected to be monetized over the next 18–24 months.
* Capex plans across product lines are progressing well.
Valuation and view: reiterate BUY
We broadly maintain our earnings estimates following healthy operating results in 1QFY27. After clocking a 15%/18%/35% CAGR in revenue/EBITDA/PAT over FY21-26, we estimate a 17%/16%/21% CAGR over FY26-28. Despite a QIP-led equity dilution, RoE/RoCE (pre-tax) are expected to expand to ~14%/19% in FY28 (FY24: ~12%/17%), driven by healthy operating results, improved efficiency, and better working capital cycle. The robust outlook and attractive valuation (~15x FY28E P/E) warrant a healthy rerating, in our view. Thus, we reiterate our BUY rating with an unchanged TP of INR280 (20x FY28E P/E).
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
