Buy This Small Cap Plastic Products Scrip For 24% Gains In Short Term: HDFC Securities

Time Technoplast Ltd

Buy| Target price-Rs. 150| Stop loss-Rs. 92| Horizon-6 months

The brokerage has recommended the scrip as its Tehno-Fund pick. Other than the above it has also given the buying range -Rs. 112-116 and also the adding range- Rs. 103-105. The target price set would result in a potential upside of 24% from the stock's LTP of Rs. 121

Technical Observations

The weekly timeframe chart of Time Technoplast Ltd reflects an intermediate term uptrend in the stock price over the last many months.

We observe a formation of larger degree of higher tops and bottoms over the period of time, which indicates a strength of an uptrend.

After shifting into a consolidation type pattern in the last two months, the stock price has witnessed a decisive upside breakout of the consolidation at Rs 116 levels in the last week and closed higher. This is positive signal and one may expect continuation of upside momentum in the near term.

The immediate supports of weekly 10 and 20 period EMAs have offered supports during minor downward corrections and that has resulted in a decent upside bounces in the stock price.

The last weeks upside breakout of the consolidation in the stock price was accompanied with record average volume. This could be an early sign of bull's participation.

The weekly 14 period RSI has moved above the crucial upper 60 levels, which suggests continuation of upside momentum in the stock price ahead.

The overall chart pattern of Time Technoplast Ltd indicates long trading opportunity. One may look to create positional buy as per the levels mentioned above.

Brokerage's take on the stock

"Time Technoplast Limited (TTL) is one of the leading manufacturers of technology based polymer and composite products with 30+ production facilities having presence across 11 countries. The company's portfolio consists of products catering to industry segments like industrial packaging solutions, lifestyle products, automotive components, infrastructure related products, intermediate bulk containers (IBCs), material handling and composite cylinders. TTL has strong operational track record and established market presence in the plastic packaging industry. The company enjoys a leading market position for most of its product segments in the domestic & global markets with varied product mix and exposure to diverse end-user industries.

Time Technoplast would be a big beneficiary from faster replacement from metal to polymer and composite products. The company reported revenue/ PAT CAGR of 5.8%/5% over FY17-22 with its operating margins remaining steady 13.5-15% aided by increased revenue from new, higher-margin products; despite competition in established products and intervening slowdown due to Covid. It is focused on increasing the share of value added products to improve its margins. TTL has laid out plans to achieve Rs 5000cr revenue by FY25E (from Rs 3650cr in FY22) led by value-added products segment. Strong demand from end-user industry especially specialty chemicals due to planned expansion projects and FMCG would support healthy volume growth in industrial packing business in the coming years. Shift of chemical manufacturing base from China to India and other Asian countries, has provided a significant growth opportunity. Government's focused spend on Infra projects and development of smart cities would benefit HDPE pipe business going forward. Also, the composite IBCs is likely to see healthy growth due to gaining popularity due to cost effectiveness, easier handling and high durability.

The next phase of expansion would come from its investments in manufacturing of composite cylinders - LPG & CNG (cascade and onboard applications). We see a huge potential for its Type-IV CNG Composite Cylinders (management estimates: Rs 2200cr per year business potential from Type IV composite cylinders). Strong demand for composite LPG cylinders from oil marketing companies in India and healthy order book for CNG cascade business would drive the value-added segment going forward. The company has started works for hydrogen cylinder for fuel cell which has greater applications. TTL will continue to benefit from its dominant market position, diversified product and client profile, better economies of scale and wide geographical reach. Strong order book of composite cylinders (LPG & CNG) coupled with its leadership position in IBC would improve the share of value-added products. In the next 3 years, the company plans to gradually increase value-added share to 35% (from the current 21%). Increase in revenue contribution of value-added products will improve overall EBITDA margin and RoCE (due to lower working capital requirement). It is aiming at RoCE of 20% in the next three years through improving mix and disposing its non-core business (medical equipments, furniture business and battery division). Moreover, the company also plans to reduce debt by divesting/ restructuring its overseas business. The company also has plans to divest its valve-regulated lead-acid (VRLA) Batteries business under its subsidiary NED Energy Ltd (97.04% holding). Better valuation (consideration) for this business would make a case for rerating of the stock. The company would use the proceeds to fund their high growth potential composite cylinder business and bring down the debt levels

The stock is currently trading at 13.3x TTM EPS. The company is well positioned on the back of established market position in industrial packing segment and huge growth potential in composite cylinder business. Given the proposed restructuring exercise of its overseas business and divestment of its battery business, we believe there is a scope for re-rating of this stock in a shorter time horizon", notes the brokerage.

About Time Technoplast

Time Technoplast Limited (TTL) is one of the leading manufacturer of technology based polymer and composite products with 30+ production facilities globally (including 20 within India) and has presence across 11 countries. It has overseas footprints in the UAE, Bahrain, Egypt, Saudi Arabia, Indonesia, Malaysia, Thailand, Taiwan, Vietnam and the US. TTL has 8 strategic business units (SBUs), serving both institutional and retail clients. The company's portfolio consists of products catering to industry segments like industrial packaging solutions, lifestyle products, automotive components, infrastructure related products, intermediate bulk containers (IBCs), material handling and composite cylinders.

Disclaimer

The above stock recommendations based on the technical analysis are that by the brokerage HDFC Securities. Readers should not construe the article as a recommendation into buying the stock.