Buy This Small Cap Packaging Stock, Shares Likely To Jump 20% In 12 Months: ICICI Direct

ICICI Direct in its recent report maintains its positive outlook on Time Technoplast Limited (TIMTEC) with a "buy" call for a target price of Rs 125 per share. According to the brokerage, if investors buy the stock at the current market price, considering the given target price they can expect 20% potential gains in 12 months. TIMTEC is a packaging sector small-cap company with a market capitalisation of Rs 2,363.23 crore.

Business Overview

Time Technoplast is a leading manufacturer of polymer-based packaging & composite products with 34 production facilities in 11 countries.  Established products (industrial packaging, PE pipe, battery others) contribute ~80% to the topline while value-added product category (IBC, composite cylinders, mox films) contribute 20% of revenue.  Focus is to increase revenue sharing from value-added product category in the next five years from 20% to 22%.

Stock Outlook & Returns

On NSE, the stock of Time Technoplast last traded at Rs 104.50 per share, up 2.20% from its previous close of Rs 102.25 per share. The stock in 1 week surged by 1.41%, in 1 month surged by 2.15% and in 3 months surged by 1.85%, respectively. Over the past 1 year, the stock suregd by 22.22%, and in 3 years the sstock gave 67.6% positive returns. Whereas, in the past 5 years, the stock has fallen 44.41%. 

On September 02, 2022, the stock recorded its 52 week high level at Rs 125.90, and the 52-week low is Rs 63 recorded on February 24, 2022, respectively. Its ROE is 9.07%. 

Q2FY23 Results

Strong growth in the valued added segment drives revenue. The company reported revenue growth of 12% YoY to Rs 1024 crore, led by 9% volume growth. Segment wise, value added product (VAP) revenue increased 17% supported by new order execution in the composite cylinder segment. The polymer product segment revenue grew ~10%. EBITDA margin declined 127 bps YoY to 13% dragged by higher raw material costs and delay in price hikes. Lower EBITDA margin restricted PAT growth in Q2 at ~Rs 51 crore.

Buy for a target price Rs 125/share

Time Technoplast's share price has grown by ~2x over the past three years (~Rs 53 in November 2019 to ~Rs 100 in November 2022). "We maintain our BUY rating on the stock. We maintain our target price at Rs 125/share valuing the stock at 5x EV/EBITDA on FY24E EBITDA," the brokerage has said.

Key triggers for future price performance

• 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).
• Improved product mix is expected to drive EBITDA margin, going forward, (aims to increase EBITDA margin to 15.5% FY25E).

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.