Buy This Smallcap Stock For High Return, PAT Up 54%, Board Plans Rs. 180 Cr Capex: ICICI Direct Suggests

Top brokerage firm ICICI Direct recommends investors to buy the stocks of Time Technoplast. Its strong revenue growth was led by the composite product segment; high raw material costs delayed a margin recovery. Its revenues increased 25% YoY to Rs. 945 crore. The company envisages Capex of Rs. 180 crore in FY23, of which Rs. 100 crore will be for capacity expansion and the rest will be maintenance Capex. Only in the past 6 months, its share price has surged by 41.03% on NSE.

Stock To Buy: Target Price & Financial Result

The Current Market Price (CMP) of Time Technoplast is Rs. 103. ICICI Direct has estimated a Target Price for the stock at Rs. 125. This stock has the potential to give a 22% return, in the upcoming 1 year. This is a small-cap stock with a market capitalization of around Rs. 2,396 crore. The company is offering a 0.94% dividend yield.

 

Stock Outlook
Current Market Price (CMP)	Rs. 103
Target Price	Rs. 125
Potential 1 year return	22.00%
52 week high share price	Rs. 117.65
52 week low share price	Rs. 63.00

Favorable base and execution of new orders have helped the company to drive revenue growth in Q1. EBITDA margin down 24 bps YoY (150 bps down from its pre-Covid level), mainly due to higher raw material costs. Its PAT increased by 54% YoY to Rs. 45 crore, tracking higher sales in Q1. The company reported CNG cascade revenue of Rs. 30 crore (vs. Rs. 7 crore in Q1FY22).

ICICI Direct: Why Should You Buy The Stock?

According to ICICI Direct, "Time Technoplast's share price has grown by ~2x over the past 3 years (from ~Rs. 57 in August 2019 to ~Rs. 103 in August 2022). The company has laid out plans to achieve Rs. 5000 crore revenue by FY25 (implied CAGR of 14% in FY21-25) led by value added product segment. Time Techno sees strong revenue traction (Rs. 2200 crore/annum) from its newly launched CNG cascade business (not built in future estimates). The improved product mix is expected to drive EBITDA margin, going forward, (aims to increase EBITDA margin to 15.5% FY25E)."

Mentioning the advantages, the brokerage firm said, "Segment wise, composite product segment revenue increased 36% YoY to Rs. 312 crore led by strong growth in the composite cylinders' segment by 72% YoY. The company has ~Rs. 250 crore order book in the composite cylinder segment. The management has reiterated revenue growth of ~15% in FY23 led by strong growth in the composite product segments. The management is aiming at Rs. 350 crore from the composite cylinder segment in FY23E."

Company portfolio

Time Technoplast is a leading manufacturer of polymer based packaging and composite products with 34 production facilities in 11 countries. Its established products (industrial packaging, PE pipe, battery others) contribute ~80% to the topline, and the value added product category (IBC, composite cylinders, mox films) contribute 20% of revenue. The company is focussing to increase revenue sharing from value added product category in the next five years from 20% to 22%. The company has appointed JP Morgan India and Ernst & Young India as advisors to finalise consolidation/restructuring of overseas business by way of disinvestment of majority stake to Strategic Partner/ Investor Partners.

Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.