Look at Time Technoplast, says Prakash Diwan

Prakash Diwan of Altamount Capital Management told CNBC-TV18, "Time Technoplast is one of the institutional favourites. It has been with most institutions particularly some very good asset managers, mutual funds since the long time. It hasn’t done too well. It is one of those rarest stocks where you don’t see 3X, 4X already in the last one year that you get worried about in terms of valuations. In fact, one of the reasons why I liked this stock now is that it is on the cusp of improvement and profits and particularly return ratios. Why in the last four years they have increased their capacity significantly, they have about USD 10 billion, the capacity is not yet under-utilised and if there is any growth in volume particularly thanks to the benign raw material environment, I think they will start getting some very decent utilisation rates. So I expect sales to grow at about 10 percent compounded annual growth rate (CAGR) for the next couple of years.”

“International packaging business is the one very lucrative and that could grow at about 19-20 percent and that impact the bottomline significantly. So that could grow at 25 percent CAGR. So it is a company where entry barriers are quite a bit, it is extremely difficult for companies to think of getting into the same product segment and given the institutional holding that is going up since the last three quarters from about 14.5 percent, it has moved all the way to about 18-19 percent. So there is a lot of institutional interest that is building on,” he added.

“The management side is sounding confident after a couple of years in fact and this stock needs to get re-rated, so even if you take FY16-FY17 numbers at a decent P/E multiple that you would acquire which is much below its average - for FY17, if you give a P/E multiple of about 6.5, we would probably value it at about Rs 75-80, right now it is Rs 50. So it is not stretching too much and the first time the management is sounding confident that they are seeing sales grow, the volumes grow and the utilisation rates are suddenly changed, there is no capex, they have reduced debt. So a lot of other things are falling in positively. So my sense is institutions will find it justified to have held this for the last three years very patiently.”

“Time Technoplast is into packaging -- container of various sizes especially speciality chemicals which is very difficult to handle and they are also doing composite cylinders which some day could replace your gas cylinders, the metallic ones. If that happens, you can imagine the kind of book they are sitting on. That is not yet started but they have those capabilities but I am predicating their growth more on the international packaging business volumes,” he said.