Time Technoplast Gets A 'Buy', As Systematix Initiates Coverage; Sees 56% Upside

Systematix Research Report

We initiate coverage on Time Technoplast Ltd. with a Buy rating and a target price of Rs 615 (56% upside potential), based on 22 times FY27E price/earning. We are optimistic on its value-added composite products (LPG and CNG cascade cylinders), stable and long-standing industrial packaging (drums, jerry cans, IBC etc.) business, and focus on improving financials to turn debt free over the next two-three years. Time Technoplast is-

1. a leader in India and among the top three players globally in industrial packaging and composite products, and

2. a market leader and largest manufacturer of large size plastic drums globally, with an impressive 50-60% market share in India and high share in 10 countries present globally.

Post 17%/17%/28% CAGR in revenue/ Ebitda/PAT over FY22-24, we estimate 15%/17%/27% CAGR over FY24-27E, respectively, led by strong performance in its value-added products segment (20% revenue CAGR, 18%+ Ebitda margin).

Despite annual capex of Rs 1.5-1.7 billion, we estimate pre-tax return on capital employed to expand from ~16% in FY24 to ~23% in FY27 on healthy operating performance, improved plant efficiency and lower net working capital cycle (by 10-15 days).

We estimate annual operating free cash flow of Rs 4 billion+ over the next three years, which Time Technoplast will likely use to pare debt and achieve net cash status in FY27E (net debt of ~Rs 6 billion in FY24).

We estimate healthy operating cash flow/Ebitda (60%+) and FCF/PAT (80%+) over the next three years. Management has also identified Rs 2.5-3 billion of non-core, non-performing assets that it intends to disinvest over FY25-FY26 (not in our estimates).

It will likely use the proceeds to fund capex, reduce debt and reward shareholders. Any delay in order inflow of composite LPG cylinders and CNG cascades pose key risks to our estimates.

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