TIME Technoplast

is India’s leading manufacturer of drums and containers used in transportation of chemicals with nearly 4 million units per annum and 75% market share in India. The company derives nearly 58% of its annual revenues from industrial packaging, with lifestyle products contributing 9%, and the rest coming from infrastructure products.

GROWTH DRIVERS

The company recently commissioned its greenfield battery unit at Panoli and high pressure HDPE pipe and pre-fabricated structures at Silvassa. It is setting up another plant to manufacture drums and containers near Kolkata to commission by September 2009 and planning to enter China with a greenfield unit. The government has recently made the usage of auto-disable syringes mandatory in India to improve public health. This is set to help Time Technoplast, which is a leading producer of such syringes from its plant in Baddi.
It has started supplying plastic fuel tanks for export variants of Tata’s commercial vehicle ‘Ace’ from its Pantnagar plant. Thanks to their low weight, which can improve an automobile’s mileage, the plastic fuel tanks have a substantial growth prospects in India. The company’s new capacities are coming up tax free zones and this is likely to reduce its effective rate of tax to around 20% in FY10 from 28.7% in FY09. The company is also working on other innovative products such as green batteries, fuel cells, polymer composite LPG and CNG cylinders, sound barriers as part of its various product lines. All these products have great growth potential in Indian as well as exports markets. Most of these products will be rolled out over next few quarters. At a macro level, with the natural gas based polymer capacities come up in the Middle East, it is expected that the global polymer prices will remain depressed in coming 2-3 years. This bodes extremely well for a plastic product manufacturer like Time Technoplast.

FINANCIALS

The company has always maintained its operating profit margin around 18% - 20% over last five years, which signifies its ability to command premium for its products. During the same period the company’s net profit grew at a cumulative annual growth rate (CAGR) of 109% as against 44% CAGR in net sales. Its performance for the December 2008 quarter was weakened due to the crash in commodity prices necessitating a write off in inventory value. At the same time, higher interest rates and longer working capital cycle pushed up the interest cost. As a result, the company’s consolidated profit fell 32% to Rs 14.5 crore

VALUATIONS

At current price, the scrip is trading at a P/E of 11.2 times based on trailing twelve month profits. We expect the company to end FY09 with earnings of Rs 3.9 per share, which discounts the current market price 9.8 times. During FY 2010 the company will have full benefit of its various new capacities, which are likely to boost its EPS to Rs 5.3. At its current market price, the stock is trading at just 7.3 time the forward EPS for FY10.

CONCERN

Several of the company’s products such as the plastic fuel tanks, fibre coated CNG / LPG cylinders, duro-turf, pre-fabricated structures, roadside sound barriers are new to Indian market and need government approvals as well as customer acceptance, both of which are time-consuming.