Time Technoplast - Outlook upbeat; execution remains key - ICICI Securities

Time Technoplast (TTPL) reported better than expected PAT at Rs385mn (I-Sec: Rs338mn), down 21% YoY largely due to beat in EBITDA margin at 13.4% (I-Sec: 13%), down 110bps YoY. EBITDA margin beat was mainly due to higher VAP mix. Revenues came largely in line with estimates at Rs8.3bn, down 9.6% YoY. VAP revenues continue to do well with lower decline as compared to Established products segment (pipes remain a drag on overall revenue with only 50% utilisation; company expects sharp recovery in FY22). Benefit of shift of chemical business from China to other Asian countries for packaging segment, higher VAP mix, big opportunities in CNG cascade segment along with selling of non-core assets, revocation of pledge and target RoCE of 20% in next three years aid rerating in the stock going forward. Maintain BUY.

- Valuation and outlook: Factoring-in the Q3FY21 performance, we increase our revenue and earning estimates by 1.7%/1.6% and 19.3%/10.0% for FY21E/FY22E respectively. We now expect TTPL to report revenue and PAT CAGRs of 2.1% and 11.2% respectively over FY20-FY22E. We maintain our BUY rating on the stock with a revised target price of Rs93 (earlier Rs84), valuing it at 10x FY22E earnings. Key risks to upside: sustained higher capex, capital allocation, and stagnant debt.

- Revenue decline of 9.6% YoY at Rs8.3bn largely in-line. TTPL reported 9.6% YoY decline in revenues to Rs8.35bn, largely in line with estimates. This was result of faster recovery in VAP revenues while established products were impacted more due to continued Covid impact on the pipe segment. With orderbook remaining strong, the pipe segment is likely to recover sharply in FY22 and clock revenues of Rs4bn-4.5bn as against expected Rs1.6bn-1.7bn in FY21. VAP mix increased to 21% in 9MFY21 vs 20% YoY led by higher focus on increasing VAP sales. With strong orderbook in pipe segment and new opportunities in packaging along with new launches like CNG composite cylinders, TTPL expects demand to recover sharply in FY22E. We expect revenue CAGR of 2.1% over FY20-FY22E.

- EBIDTA margin at 13.4% (I-Sec: 13%), down 110bps YoY, led by superior product mix. EBIDTA margin came in at 13.4% (I-Sec: 13%), down 110bps YoY and up 100bps YoY, led by superior product mix with faster recovery in VAP revenues. Gross margin was down 10bps YoY and up 50bps QoQ. Going forward, we expect EBITDA margin to rebound to 14.7% by FY22E from 13.9% in FY20 on the back of operating leverage, cost-saving initiatives and higher VAP mix.

- Targets RoCE at 20% in next three years led by better mix and selling of non-core businesses/assets: Company targets to achieve an RoCE of 20% in next three years from the current 15-16% led by better mix (higher sales of VAP) and sale of non-core assets / businesses, or restructuring existing processes.

Shares of TIME TECHNOPLAST LTD. was last trading in BSE at Rs.51.75 as compared to the previous close of Rs. 51.9. The total number of shares traded during the day was 64415 in over 246 trades.

The stock hit an intraday high of Rs. 52.6 and intraday low of 51.3. The net turnover during the day was Rs. 3353280.

Source : Equity Bulls

Keywords