Accumulate Time Technoplast; target of Rs 75: Motilal Oswal

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Accumulate Time Technoplast; target of Rs 75: Motilal Oswal

Motilal Oswal is bullish on Time Technoplast and has recommended accumulate rating on the stock with a target of Rs 75 in its June 1, 2011 research report.

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Motilal Oswal is bullish on Time Technoplast and has recommended accumulate rating on the stock with a target of Rs 75 in its June 1, 2011 research report.

"Time Technoplast, Q4FY11 results were in-line with our estimates with positive surprise on sales front. This is the first quarter of consolidation of the Solutia acquisition with a quarter's lag. Revenue growth of 24% was driven by 21% rise in polymer products segment whereas composite products grew by 52% during the quarter. Revenues have benefitted from the consolidation of the Solutia business, which is likely to have a run rate of Rs. 70-75 cr on an annual basis. Margins have been stable y/y despite integration of Solutia business. Rise in interest cost as a result of investmentscapex has kept profit growth muted at 11%. For FY11, revenues were up by 26%, EBITDA by 21% and profits by 19%. Margin pressure has been predominantly on account of higher raw material costs and partly due to integration of low margin business of Solutia."

"Inorganic and organic growth initiatives taken during FY11 that will yield positive results in FY12 and beyond include: Acquisition of plastic product division of Solutia Europe with a facility in Romania and AstroTurf & Clear Pass brands. Acquisition of Yung Hsin Contain Industry Co. Ltd. (90%), a industrial packaging company in Taiwan at 1xsales and 6-7xEBITDA. Set up a greenfield project in Tianjin, North China for the manufacturing of Industrial packaging products. Commissioning of greenfield projects in Jammu & Pantnagar for the manufacturing of Industrial packaging products. Started commercial production in May'11at greenfield plant for Industrial packaging products at Hyderabad. Acquired majority stake in a mid size company in Bangalore manufacturing specialized Batteries for Power Sector and Solar Industry. The stock trades at 6.7xFY12 EV/EBITDA vs. a ~5 year historical average of 8.7x. However, the stock has run up sharp run-up since our last update. We maintain our target of Rs 75 but change our rating from BUY to Accumulate," says Motilal Oswal research report.

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To read the full report click on the attachment