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TIME TECHNOPLAST LTD (TTL)
RECOMMENDATION: BUY
TARGET PRICE: RS.85
CONS. FY12E P/E: 6.8X
q TTL reported numbers though strong but are lower than our estimates
both on revenues and on profitability front
q Maintain FY12 earning estimates with EPS of Rs.6.9
q We are positive on the medium to long term growth prospects of TTL
q Due to attractive valuations and 79% upside potential from current levels
we continue to recommend BUY on TTL with unchanged DCF based price
target of Rs.85.
Consolidated quarterly results table
n For Q3FY11 the company reported revenues of Rs.3.2 bn, up strong 30% YoY.
This was primarily due to increased contribution from the HDPE pipes, auto components,
battery and international operations.
n The operating margins during Q3FY11 were up by 20 bps YoY. In absolute terms
EBIDTA for Q3FY11 is up 32% YoY to Rs.634 mn.
n The depreciation is up 40% on YoY on account of commissioning of new
projects like high pressure pipes, battery and prefabricated shelters.
n PBT for Q3FY11 was up 31% YoY to Rs.401 mn.
n NPAT for the Q2FY11 was at Rs.282 mn up 25.7% YoY thereby translating into
quarterly EPS of Rs.1.34.
n For 9MFY11 EPS stands at Rs.3.9. We have tweaked our earnings for FY11 since
Q3 FY11 numbers were lower than our estimates.
Stable raw material price positive for TTL
n The company uses both high density (90%) and low-density (10%) polyethylene
as its key raw material. The company imports 65% of its raw materials requirements
while the balance 35% is procured locally. Although polyethylene is a
derivative of crude its co-relation with the crude prices is ~20%
n In view of the additional gas based polymer manufacturing capacities coming on
steam gradually, we believe that the average raw material prices in the next
three to four years would remain at a lower levels than that existed in the earlier
years.
n This would make polymer packaging far more competitive than its alternatives
like metal packaging which would help expanding its market and demand. Also
higher economics of scale and efficient centralized procurement of raw material
would enable the Company to consistently maintain its operating margins.
Maintain FY12 earning estimates
We maintain FY12 earning estimates and expect TTL to report cons. EPS of Rs.6.9
and CEPS of Rs.9.3.
Maintain price target of Rs.85
We continue to value TTL on DCF method of valuation with 13.0% WACC and
4.0% terminal growth rate (no change). We maintain our price target of Rs.85.
Valuation and recommendation
n At the current market price of Rs.47.5, TTL trades at attractive valuation of 1.5x
book value, 8.5x earnings and 6.8x cash earnings based on FY12E.
n We feel the valuation is attractive due to high margin businesses with innovative
applications of polymers, foray into battery business, high pressure HDPE pipes,
Prefab shelters, JV for material handling solutions and systems, foray into composite
LPG and CNG cylinders and acquisition in Europe and Taiwan This is expected
to lead to significant growth in revenues and profitability, going forward.
n Due to good growth prospects, attractive valuations and 79% upside potential
from the current levels we continue to recommend BUY on TTL with unchanged
price target of Rs.85
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
TIME TECHNOPLAST LTD (TTL)
RECOMMENDATION: BUY
TARGET PRICE: RS.85
CONS. FY12E P/E: 6.8X
q TTL reported numbers though strong but are lower than our estimates
both on revenues and on profitability front
q Maintain FY12 earning estimates with EPS of Rs.6.9
q We are positive on the medium to long term growth prospects of TTL
q Due to attractive valuations and 79% upside potential from current levels
we continue to recommend BUY on TTL with unchanged DCF based price
target of Rs.85.
Consolidated quarterly results table
n For Q3FY11 the company reported revenues of Rs.3.2 bn, up strong 30% YoY.
This was primarily due to increased contribution from the HDPE pipes, auto components,
battery and international operations.
n The operating margins during Q3FY11 were up by 20 bps YoY. In absolute terms
EBIDTA for Q3FY11 is up 32% YoY to Rs.634 mn.
n The depreciation is up 40% on YoY on account of commissioning of new
projects like high pressure pipes, battery and prefabricated shelters.
n PBT for Q3FY11 was up 31% YoY to Rs.401 mn.
n NPAT for the Q2FY11 was at Rs.282 mn up 25.7% YoY thereby translating into
quarterly EPS of Rs.1.34.
n For 9MFY11 EPS stands at Rs.3.9. We have tweaked our earnings for FY11 since
Q3 FY11 numbers were lower than our estimates.
Stable raw material price positive for TTL
n The company uses both high density (90%) and low-density (10%) polyethylene
as its key raw material. The company imports 65% of its raw materials requirements
while the balance 35% is procured locally. Although polyethylene is a
derivative of crude its co-relation with the crude prices is ~20%
n In view of the additional gas based polymer manufacturing capacities coming on
steam gradually, we believe that the average raw material prices in the next
three to four years would remain at a lower levels than that existed in the earlier
years.
n This would make polymer packaging far more competitive than its alternatives
like metal packaging which would help expanding its market and demand. Also
higher economics of scale and efficient centralized procurement of raw material
would enable the Company to consistently maintain its operating margins.
Maintain FY12 earning estimates
We maintain FY12 earning estimates and expect TTL to report cons. EPS of Rs.6.9
and CEPS of Rs.9.3.
Maintain price target of Rs.85
We continue to value TTL on DCF method of valuation with 13.0% WACC and
4.0% terminal growth rate (no change). We maintain our price target of Rs.85.
Valuation and recommendation
n At the current market price of Rs.47.5, TTL trades at attractive valuation of 1.5x
book value, 8.5x earnings and 6.8x cash earnings based on FY12E.
n We feel the valuation is attractive due to high margin businesses with innovative
applications of polymers, foray into battery business, high pressure HDPE pipes,
Prefab shelters, JV for material handling solutions and systems, foray into composite
LPG and CNG cylinders and acquisition in Europe and Taiwan This is expected
to lead to significant growth in revenues and profitability, going forward.
n Due to good growth prospects, attractive valuations and 79% upside potential
from the current levels we continue to recommend BUY on TTL with unchanged
price target of Rs.85
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