Hold Time Technoplast; target of Rs 125: ICICI Direct

ICICI Direct's research report on Time Technoplast

TTL recorded consolidated sales growth of ~14% YoY led by volume growth of ~9% YoY in Q2FY19. Value added product categories (VAPs) recorded sales growth of ~21% YoY led by sharp growth in revenue (1.8x jump) of Mox films. Also, established products (EPs) category (topline contribution ~80%) recorded sales growth of ~12% YoY driven by sales growth of ~11% and ~27% YoY in the plastic product and PE pipes category, respectively. Under the established product category, the performance of the piping segment recorded strong revenue growth after a settlement of GST related issues with clients. According to the management, there is strong traction in demand for piping products (backed by government orders) and Mox films Higher raw material prices (polymer prices up ~7% YoY in H1FY19) coupled with depreciation in rupee value (by ~7%YoY) had impacted gross margins negatively by ~250 bps YoY. As a result, PAT declined ~24% YoY. According to the management, margin recovery is possible, going forward, supported by passing on the inflationary pressure to customers coupled with stability in the currency movement.

Outlook

We revise the rating from BUY to HOLD and ascribe an EV/EBITDA multiple of 6x FY20E EBITDA to arrive at a revised target price of Rs 125/share.