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Dalal Street Investment Journal - - RECOMMENDATIONS -

HERE IS WHY Di­ver­si­fied mar­ket pres­ence Ro­bust de­mand in high profit seg­ments Healthy cash flow

Time Techno­plast Lim­ited (TTL) is a lead­ing man­u­fac­turer of poly­mer prod­ucts with oper­a­tions in In­dia, Bahrain, Egypt, In­done­sia, Malaysia, Shar­jah, Tai­wan, Thai­land and Viet­nam. With its 28 man­u­fac­tur­ing units and 10 mar­ket­ing of­fices, TTL has be­come the mar­ket leader in 8 out of the 9 coun­tries in which it op­er­ates. TTL’S con­sol­i­dated rev­enue grew at a CAGR of 13.7 per cent from ₹1,275.7 crore to ₹2,754.6 crore dur­ing FY11-17.

TTL'S portfolio con­sists of grow­ing in­dus­try seg­ments like in­dus­trial pack­ag­ing so­lu­tions, life­style prod­ucts, au­tomo- tive com­po­nents, health­care prod­ucts, con­struc­tion-re­lated prod­ucts, ma­te­rial han­dling so­lu­tions and com­pos­ite cylin­ders. Its dis­tri­bu­tion net­work is spread over 345 cities. In FY17, the com­pany’s plas­tics seg­ment and com­pos­ite cylin­ders gen­er­ated 77 per cent and 3 per cent of the rev­enues, re­spec­tively, whereas in­ter­me­di­ate bulk con­tain­ers (IBC) and pipes gen­er­ated 11 per cent and 9 per cent rev­enues, re­spec­tively. All of its seg­ments have wit­nessed high growth; for in­stance, com­pos­ite cylin­ders have an or­der book of close to 2.5x its cur­rent ca­pac­ity.

The com­pany plans to ex­pand its ca­pac­i­ties for com­pos­ite cylin­ders, HDPE pipes and DWC pipes and also foray into MOX films. In the short term, this will im­pact the com­pany’s work­ing cap­i­tal cy­cle. The com­pany has enough cash in hand to re­pay its long term debts. It might see an in­crease in its short term bor­row­ings re­quired for its busi­ness ex­pan­sion plans. How­ever, we do not ex­pect this to have a sig­nif­i­cant im­pact on the fi­nan­cials.the tech­no­log­i­cal ca­pa­bil­i­ties of TTL are at par with its global peers like Mauser, Schutz & Greif. This pro­vides TTL im­mu­nity from com­pet­i­tive can­ni­bal­i­sa­tion in the mar­kets where it has a strong pres­ence.

On the fi­nan­cial front, TTL posted 9.04 per cent in­crease in its stand­alone rev­enue to ₹378.38 crore in Q1FY18 from ₹347.01 crore in Q1FY17. The com­pany’s PBDT in­creased 15.32 per cent to ₹44.84 crore in the first quar­ter of FY18 on a yearly ba­sis. The com­pany’s net profit rose 4.54 per cent to ₹18.17 crore for the cor­re­spond­ing pe­riod. On an an­nual ba­sis, the com­pany’s stand­alone rev­enue rose 13.42 per cent to ₹1,596.14 crore in FY17 com­pared to the pre­vi­ous fis­cal. The com­pany’s PBDT rose 44.03 per cent to ₹193.32 crore in FY17 from ₹415.64 crore in FY16. The com­pany’s net de­clined from ₹99.15 crore in FY16 to ₹94.90 crore in FY17, reg­is­ter­ing 4.28 per cent de­cline.

On the val­u­a­tion front, the share price of TTL is cur­rently trad­ing at PE ra­tio of 29.64x. The com­pany’s ROE and ROCE stood at 11.887 per cent and 14.86 per cent, re­spec­tively. The scrip has wit­nessed a change of 110.30 per cent in the last one year.

We ex­pect the prof­itable seg­ments-mox film and com­pos­ite cylin­ders-to drive the com­pany’s fu­ture growth and in­flu­ence mar­gins pos­i­tively. The plas­tics seg­ment (77% of to­tal rev­enues) is also ex­pected to have sta­ble oper­a­tions with high free cash flow gen­er­a­tion. We rec­om­mend our reader-in­vestors to BUY the stock.

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