Upside : 29% KEY DATA Time Technoplast...

Time Technoplast Ltd.

Shareholding % 4Q 1Q 2Q

Promoters 62.0 62.0 62.0

MF/Banks/Indian FIs 4.0 4.0 5.0

FII/ NRIs/ OCBs 27.0 24.0 23.0

Indian Public 7.0 10.0 10.0

KEY DATA

Market Cap (INR bn) 11.1

Market Cap (USD mn) 252.0

52 WK High / Low 58 / 33

Avg Daily Volume (BSE) 499147

Face Value (INR) 1

BSE Sensex 20125

Nifty 6063

BSE Code 532856

NSE Code TIMETECHNO

Reuters Code TIME.BO

Bloomberg Code TIME IN

Performance Chart

CMP : INR 53Rating : BuyTarget : INR 68Upside : 29%

Initiating Coverage

Investment Summary

Diversified business model - to drive growthTTL's revenues have grown at CAGR of 36% from FY07-10, mainly led by industrial packaging segment.The company has been continuously innovating new products and ventured into new segments likeautomotive components, infrastructure products and healthcare products. Most of the growth was led byacquisition of facilities in India and abroad. Being industry leader in major segments in which it operates,we believe TTL to continue its growth momentum and expect revenues to grow at CAGR of 29% tillFY12E.

Also, TTL is geographically well diversified with 24 manufacturing facilities and ~350 marketing locationsin India. TTL has set its foot prints abroad by acquiring companies in Europe, Middle East, China andSouth East Asia. Proximity to customers reduces logistics cost and time. We believe diversified businessmodel helps TTL service its clients in a better way and reduce dependence on one single segment orcountry to market its product.

Operating margins to sustain going aheadTTL had been operating at EBITDA margin of ~19% in the past. TTL works on cost plus mark up basiswhere in the absolute margins are maintained and volatility in raw material prices are passed on to theconsumer. TTL, being pioneer in the technology and market leader across segment, is able to commandabsolute margin. Going ahead we expect TTL to maintain and slightly improve EBITDA margin by 70bpsto 20% in FY12E from 19.3% in FY10.

Market leader across product categoriesIn the HDPE drum market, TTL controls c.60-65% of the market. TTL is the only player in India to provideproducts like anti spray flaps for heavy commercial vehicles. In lifestyle products like artificial mats, TTLis the market leader commanding c.99% of the domestic market. We expect TTL to consolidate its leadershipposition in the segment due to research based product line and ability of timely delivery of products dueto manufacturing presence across the country. We expect leadership position and technological innovationto sustain premium valuation of the company.

Composite cylinder - a new innovation with huge potentialTTL has acquired Kompozit Praha, Czech company involved in the manufacture of composite cylinders.Composite cylinders have inherent advantages over conventional metal cylinders like a) light in weight b)fire and explosion proof c) visible level of contents in the cylinder. Currently ~12 mn LPG cylinders areadded every year in India which is a market of approx INR 12,000 mn (~INR 1,000/cylinder). At presentthere are no composite cylinder manufacturers in the country. TTL has envisaged capex of ~INR 500 mnin setting up plant to manufacture 1 mn composite cylinder in Maharashtra.

We believe this is a potential trigger in happening as a) Govt of India's directive to OMCs to graduallymove towards composite cylinders b) technical tie ups already in place c) competitive pricing (~INR1,300/cylinder as compared to import price of ~INR 2,800/cylinder) d) huge potential use as automobileCNG cylinder in future.

ValuationAt CMP of INR 53, TTL is trading at a PE multiple of 10.2x and 6.9x and EV/EBITDA multiple of 6.1x and4.6x of its FY11E and FY12E earnings respectively. TTL has been trading at one year forward PE multipleof ~8.5-9x in the past. We compare it with Balmer Lawrie (2nd largest producer of industrial packaging)as packing is TTL's major revenue contributor. Balmer Lawrie trades at PE of ~8x its FY12 earnings. Wevalue TTL at EV/EBITDA multiple of 5.5x its FY12E earnings. We initiate coverage with BUYrecommendation with target price of INR 68 (29% upside). At INR 68, TTL trades at PE of 8.9x and EV/EBITDA of 5.5x its FY12E earnings resp. We believe any positive surprise on our valuation can comeonce proper understanding of potential market of the new product is discounted.

October 18, 2010

For Private Circulation OnlyFINQUEST research also available on BLOOMBERG FSPL <GO> and REUTERS.

Financials F10 F11E F12E(INR Mn.)

Net sales 10,114 13,000 16,800

EBITDA 1,950 2,535 3,360

EPS 4.3 5.2 7.7

PE (x) 12.2 10.2 6.8

Sameer VedakAnalystTel. : 4000 [email protected]

Chintan MewarVice President - ResearchTel. : 4000 [email protected]

For Private Circulation OnlyOctober 18, 2010 2

PARTICULARS (INR mn) F09 F10 F11E F12E

Valuation RatiosP/E 16.1 12.3 10.2 6.9EV/EBITDA 8.8 7.7 6.1 4.6P/BV 2.2 1.9 1.6 1.3Dividend yield (%) 0.9% 1.0% 1.0% 1.0%

Per share data (INR)EPS (diluted) 3.3 4.3 5.2 7.7Cash EPS (diluted) 4.5 6.0 7.9 10.7BVPS 23.7 27.5 32.1 39.3DPS 0.5 0.5 0.5 0.5

P&L (INR mn)Net sales 7,897.5 10,113.5 13,000.0 16,800.0Operating expenses 6,339.7 8,163.6 10,465.0 13,440.0EBITDA 1,557.8 1,949.9 2,535.0 3,360.0PBIT 1,298.4 1,594.7 1,960.1 2,714.9Interest expense 271.1 332.6 418.3 463.3PBT 1,031.2 1,278.6 1,556.8 2,266.6Tax 269.3 296.0 389.2 566.6PAT 761.8 982.6 1,167.6 1,699.9

Growth rates (%)Net Sales 15.9% 28.1% 28.5% 29.2%EBITDA 7.9% 25.2% 30.0% 32.5%EBIT 5.1% 22.8% 22.9% 38.5%PAT -6.3% 31.7% 20.4% 48.7%

Balance sheet (INR mn)Net worth 4,952.6 5,752.2 6,722.0 8,224.3Total debt 3,196.6 4,398.2 4,898.2 5,398.2Deferred tax balance 223.2 311.6 311.6 311.6Total liabilities 8,372.5 10,462.0 11,931.8 13,934.0Net fixed assets 4,266.8 5,051.6 6,210.4 6,645.3Capital WIP & investments 287.2 608.6 375.0 420.0Cash & cash equivalents 496.6 431.8 477.4 1,120.2Net current assets (net of cash) 2,710.7 3,337.1 3,836.3 4,715.8Total assets 8,372.5 10,462.0 11,931.8 13,934.0

Cash flow (INR mn)PAT 690.0 908.8 1,093.7 1,626.1Depreciation 259.4 355.2 574.9 645.1Others 654.4 472.0 499.1 879.5Operating cash flow 1,075.3 483.2 1,169.5 1,391.7Capital expenses (1,837.8) (1,628.2) (1,500.0) (1,125.0)Investing cash flow (1,837.8) (1,625.4) (1,500.0) (1,125.0)Debt raised/(repaid) 1,100.5 1,201.6 500.0 500.0Dividend paid 110.3 124.1 123.9 123.9Financing cash flow 990.3 1,077.4 376.1 376.1Opening cash balance 268.8 496.6 431.8 477.4Closing cash balance 496.6 431.8 477.4 1,120.2

Profitability / Solvency ratios (%)EBITDA margin 19.7% 19.3% 19.5% 20.0%ROCE 13.5% 13.4% 13.5% 16.1%ROE 17.0% 18.4% 18.7% 22.7%Net debt to equity (x) 0.5 0.7 0.7 0.5Interest coverage ratio 4.8 4.8 4.7 5.9

Company Description

Time Technoplast Limited (TTL) is a technologydriven Innovation Company catering tosegments such as industrial packaging,healthcare, infrastructure, etc. TTL hasmanufacturing facilities spread across 13locations in India and six manufacturing facilitiesspread across four continents worldwide. TTLis the market in almost all the segments that itcaters to. The revenues and PAT of TTL hasgrown at CAGR of 36% and 34% respectivelyfrom FY07 to FY10.www.timetechnoplast.com

Sector

Industrial Packaging

Key Management Personnel

Mr Anil JainManagng Director

Mr Bharat VageriaDirector - Finance

Raghupathy ThyagarajanDirector - Marketing

Mr Naveen JainDirector - Technical

PRICE PERFORMANCE (%)

3 M 6 M 12 M

Absolute 14.3 15.0 19.0

Relative 9.8 6.9 (6.3)

Valuation Thesis

At CMP of INR 53, TTL is trading at a PE multipleof 10.2x and 6.9x and EV/EBITDA multiple of6.1x and 4.6x of its FY11E and FY12E earningsrespectively. TTL has been trading at one yearforward PE multiple of ~8.5x-9x in the past. Wevalue TTL at EV/EBITDA multiple of 5.5x itsFY12E earnings. We initiate coverage with BUYrecommendation with target price of INR 68(29% upside). At INR 68, TTL trades at PE of8.9x and EV/EBITDA of 5.5x its FY12E earningsresp.

Financial Summary


Diversified product portfolio

TTL has an exhaustive product portfolio to cater to different segments of customers. The company

manufactures industrial packaging products like HDPE (High Density Poly Ethylene) drums with

capacity from 20-250 ltr and Intermediate Bulk Carriers (IBCs) with capacity of 1000 ltr. TTL

manufactures lifestyle products like artificial matting where it is the market leader. Other products

include automotive components (anti spray flaps, de-aeration tanks, plastic fuel tanks and air ducts),

health care products (auto disposable syringes, mask) and infrastructure products (HPDE pipes, shelters,

batteries). Well diversified product portfolio reduces dependence on one product segment.

Figure 1: FY10 segment contribution

Source: Company, FQ Research

A. Industrial packaging products

The industrial packaging products division (58% of revenues in FY10) manufactures wide range of

plastic packaging products like drums, containers, Polyethylene Terephthalate (PET) sheets ranging

from 20 to 250 ltr capacity. The company has largest Polyethylene (PE) drums manufacturing capacity

in the country and has manufacturing facilities spread across the geography in the country.

Figure 2a: Manufacturing facilities

State Existing Under Implementation

Andhra Pradesh 1 1

Daman & Silvasa 8 -

Gujarat 2 1

Himachal Pradesh 5 -

Jammu & Kashmir 1 -

Maharashtra 2 -

Tamilnadu 2 -

Uttarakhand 3 -

West Bengal 1 -

Total 25 2



Figure 2b: International facilities

Country Product profile

Bahrain Infrastructure (Batteries Business)

Czec Republic Composite cylinders

Poland Auto compo, lifestyle prod

Romania* Auto components & Matting

Sharjah (UAE) Packaging, lifestyle prod

Tianjin (China) Packaging prod

Thailand Packaging prod

* Recent acquisition of plastic business of Solutia (Europe) with Astroturf Brand


TTL is the market leader (~60% market share) in the plastic drums and container market. Besides

Balmer Lawrie (2nd largest producer of PE drums), the remaining part of the market is unorganised.

Also TTL enjoys better margins (EBITDA margin of ~20%, PAT margin of ~10%) as compared to its

nearest competitor Balmer Lawrie (EBITDA margin of ~8%, PAT margin of ~5-6%)

As a strategy, TTL has manufacturing facilities close to the consumer, thus reducing the logistics cost

and ensures timely delivery of drums to the customers. Innovative and technically superior products

of different sizes and ability to deliver on time has helped TTL garner significant market share in the

domestic drums business.

TTL's clientele for packaged products includes industries in specialty chemicals, petrochemicals,

FMCG, paints, etc. The client base is well diversified and maximum contribution of a single customer

to total revenue is ~4-5%. Hence being a market leader and diversified client portfolio, TTL is able to

maintain its margins by passing on the volatility in raw material prices to its customers. Nearly ~60-

65% of the contracts in packaging business are on monthly basis while ~20-25% are on quarterly

basis. This gives TTL the opportunity to re-price the contracts and maintain margins.

Figure 3: Product profile in industrial packaging

Product Capacity ~ mkt size*

HDPE drums and containers 20-250 ltr 21,000

Plastic conipack pails 5-25 ltr 2,500

Intermediate bulk cont. (IBCs) 1000 ltr 1,000

Steel drums and containesr 210 ltr 7,500

Material handling products NA NA

PET sheets NA 1,500

* Domestic market size in INR mn


Demand drivers

As per industry sources, India's per capita consumption (PCC) of polymer is pegged at 7.4 kg in 2010

as compared to global average of 28.9 kg and Asia's average of 21.6 kg. Even in China the PCC is ~

24.2 kg. Due to inherent characteristics of the HDPE products like light weight, corrosion free, ease of

transportation, etc. these products find edge over traditional metal drums. Steel prices are highly

volatile and are highly influenced by global macro economic factors. Currently, with increase in

prices of raw materials like coke, iron ore, etc., the steel prices are on uptrend. Hence the market is

gradually moving from metal packaging products to polymer products. Low PCC and inclination

towards HDPE products unfolds into huge demand potential for company's packaging products.

Besides the consumer industry, chemical industry and specialty chemicals industry is expected to

grow at a 10% and 15% respectively and should drive volumes for the company in industrial packaging

segment.


B. Auto components

TTL manufactures polymer auto components that are produced through in house innovation and

development. The product portfolio in the automotive components include anti spray flaps, de-aeration/

radiator tanks, polymer fuel tanks and air ducts to be used mainly in the CV segment. The polymer

radiator and fuel tank provide advantages over conventional metal tanks as they are lighter in weight,

corrosion resistant, explosion proof and allow maximum fuel holding capacity with minimum amount

of space.

Major clientele for company's automotive components include major CV manufacturers in the country

like Tata Motors, Ashok Leyland, Eicher Motors. TTL is the only major organised player in the domestic

CV segment with ~90% market share.

Demand drivers

The market for the anti spray flaps (spray suppression system) is estimated to be INR 1,000 mn. The

CV sector is among the fastest growing segment in the automobile segment and is expected to continue

the momentum in the years to come. Do to characteristic advantages over metal substitutes and

technological capability, TTL is well poised to reap benefits of the booming CV segment in India.

TTL.'s anti spray flaps have passed the necessary stringent test and has acquired certificates that

confine to European norms. This opens up European market for TTL. With ~85% of European vehicles

and ~70% of American vehicles today built with polymer fuel tanks, the trend is soon to follow into

India. Time being the front runner in the technology and with existing capacity is well poised to

exploit the opportunity.

C. Lifestyle products

Lifestyle products contribute to ~8-10% of total revenues of TTL and is maximum margins amongst all

segments (~22-25%). In the lifestyle segment TTL manufactures artificial entrance matting, turfs, car

matting and garden furniture like polymer chairs, stools etc. TTL markets its mats under the brand

DuroTurf. Polymer mats find wide application in hotel industry, shops, airports, malls, railway, corporate

offices, etc. DuroTurf mats find edge over traditional mats as they are designed to be anti skid,

waterproof, hygienic and maintenance free. TTL also manufactures products like polymer chairs,

stools etc. However it forms only a minor portion of total revenues (~3%) and the company does not

intend to expand in the plastic furniture business.

The total domestic market size for polymer mats is estimated to be ~INR 1,500 mn with TTL being the

market leader in the segment. As the polymer mats have advantages over traditional mats made from

materials like coir, cloth, rubber etc. TTL should garner additional market share from the other mats

(~3,500 mn).

Figure 4: Mat brands and their applications

Brands Application

Duroturf Passage/household entrance, shops

Durosoft Corporate offices, Hotels, Malls

Durowipes Swimming pools, bathroon shower, health spa

Durorubs Office, hotel, gyms, amusement park

Durosteps Edge of the steps

Durolite Office and household interiors

Duromat Car mats

Meadows Landscapes



D. Infrastructure products

The infrastructure segment of TTL is engaged in production of pipes (HDPE & FRP), netrix, road

barriers, VRLA batteries and prefabs and shelters. The segment is the second highest contributor to

TTL's revenues with c. ~20-22% contribution.

Pipes: TTL manufactures HDPE and Fibre reinforced plastic (FRP) pipes that are used in water supply

and distribution, sanitation and irrigation facilities. These pipes are fast replacing the traditional metal

pipes due to their characteristics such as light weight and non corrosive nature. We expect the foray

into the pipe business to put downward pressure on the overall EBITDA margins as the margin for the

pipe segment (~15-16%) is ~400 bps lower as compared to overall EBITDA margin (~20%).

TTLs clients for the HDPE pipes include L&T ltd, Reliance infra, IVRCL infra, Nagarjuna construction

ltd, etc. The current market for HDPE and FRP pipes is estimated to be ~INR 109 bn growing at an

average CAGR of 10-12%. Also TTL is expected to benefit from the Govt of India's estimated spending

of INR 4,595 bn in five year plan ending 2012.

Battery: TTL acquired Hyderabad based NED energy in 2007 that was involved in manufacturing of

VLRA batteries. TTL also acquired Gulf Powerbeat, Bahrain in FY09. TTL's VRLA batteries are available

in the market under the brand Maxlife. These batteries find wide applications in telecom, railways,

power sector, UPS systems.

The total market for battery industry is estimated to be c. ~INR 40 mn. TTL had been manufacturing

batteries for the telecom sector in India. Acquisition of Gulf Powerbeat gives TTL access to the Middle

East market.

Other infrastructure products: These include products such as nets (used in infrastructure and

construction as safety nets), sound barriers, and road barriers (cones, water filled barriers). TTL also

manufactures prefabs and shelters. Domestic market for prefabs and shelters is c. ~INR 5,000 mn.

This is a fast growing segment and is a preferred alternative to traditional roofs as it is cheap and has

faster installation. TTL's clientele for the prefab and shelter segment include BEST, TMC, Valecha

Engineer's etc.

E. Healthcare segment

Health care segment contributes to c. ~2% total revenues of TTL. The company has introduced

innovative products like single use syringes, auto collect blood samplers and OT safe disposable face

mask.

Demand scenario

The total domestic market size for syringes, blood sampler and mask is estimated to be c. ~INR 4,000

mn. The demand for the healthcare products is expected to shoot up as Govt of India has issued

directive to all govt and to use auto disposable syringes. In the next phase all private hospitals are

expected to be directed to use only auto disposable syringes.


Technology driven company

TTL has been at the frontrunner in implementing technology in its products. Started with JV between

Mauser, Germany and TTL in industrial packaging today, TTL has emerged as India's market leader in

industrial packaging. Mauser holds 51% stake in the JV and balance is held by TTL. TTL benefits

immensely from the JV as TTL get access to Mausers technology at minimum royalty. Over the years

TTL has grown as a technically advanced company with forming JV with pioneers in the segment,

forming subsidiaries in India and abroad or acquiring companies that are established in the segment.

Figure 5: List of JV's and technical tie ups

Source: Company

Robust earnings potential driven by new products

TTL plans to introduce high pressure composite LPG cylinder in the Indian market under technology

from Kompozit, Praha. TTL acquired Kompozit, Praha in Nov 2009 for USD 5.2 mn. Komposite Praha

is among the only three companies in the world that has the technology and expertise to manufacture

composite cylinder. Being light in weight and better resistance to fire and explosion, composite cylinders

find wide applications in the industrial world like transportation of LPG, industrial gases, fire

extinguishers, diving equipment etc.

TTL is setting up a plant in western Maharashtra for the manufacture of composite cylinders that will

be used for transportation of LPG for domestic and commercial purposes. The company has envisaged

capex of INR 500 mn for setting up the facility that will have capacity of 1 mn cylinders per annum.

Joint Ventures

1. Time Mauser IndustriesPvt. Ltd., India (TTL 49%,Mauser 51%)

2. Mauser HoldingAsia Pte. Ltd.,Singapore (TTL 49%,Mauser51%)

2a. Pack Delta Public Co.Ltd., Thailand (99.65% ofMauser Holding Asia)

3. Schoeller Arca TimeMaterial HandlingSolutions Ltd.(TTL 50.10%,Schoeller 49.90%)

Overseas Subsidiaries

1. Elan IncorporatedFZE,Sharjah (100%)

1a. Tianjing 1b. YPAElan, China Thailand(100% (100%of Elan) of Elan)

2. Novo Tech Spl.Z.O.O.,Poland (100%)

3. Kampozit - Praha, CzechRepublic (TTL 99%)

4. Solutia Inc. Europe(Plastic Division)(TTL100%)

5. Yung HsinContainerIndustry Co. Ltd.(TTL 90%)

Indian Subsidiaries

1. TPL Plastech Ltd.(TTL 75%,Other 25%)

2. Ned Energy Limited(TTL 71%, Core 3%,Old Pro. 26%)

2a. Technika CorporationFZE, Sharjah (100% ofNed Energy Limited)

2ai. Gulf Powerbeat WLL,Bahrain (100% ofTechnika Corporation)

Time Technoplast Limited India


Demand drivers: Composite cylinder find significant advantage over conventional metal cylinders.

These are light in weight, can withstand pressure of more than 2x the operation pressure. Also incase

of excessive pressure, composite cylinders leak and do not explode unlike the metal cylinder. Besides

these cylinders are non corrosive and are available in different colours. The domestic market for

composite cylinders is estimated to be ~INR 12 bn.

Recently govt of India has approved OMCs to introduce composite cylinders on pilot basis. The

OMCs are expected to bring ~0.1 mn composite cylinders in circulation by imports on pilot basis.

Further government is keen procuring the composite cylinder domestically. This should benefit TTL

as it has already acquired the necessary technical expertise and is already setting up facility for

manufacturing composite cylinder in India.

Also the imported composite cylinders are expected to be available at price of c. INR 2,800 per

cylinder. TTL has competitively at ~1,300 per cylinder. Being available at lower than half the cost of

imported cylinder, threat from imports is significantly reduced. Even at price tag of INR 1,300 per

cylinder, TTL is expected to earn margins of ~20% at EBITDA level.

India has ~180 mn metal cylinders in circulation with 12 mn added every year. This provides a huge

opportunity for TTL to convert the metal cylinders into composite every year. Also TTL should enjoy

first mover's advantage in the segment as it has already set up facility to manufacture composite

cylinders.

Raw material concerns easing out

The principle raw material required for the manufacture of polymer products in HDPE and LDPE. The

company had been sourcing its raw material from the local manufacturers like Reliance, IOCL, GAIL

and through imports from various suppliers keeping balance procurement plan.

Globally the HDPE capacities were based on feedstock as Naptha. However the capacities are gradually

shifting from Naptha base to Gas base. Gas based capacities are more efficient resulting into reduction

in overall cost of PE. Also PE capacity of ~6.5 mn tonnes is expected to be commissioned by 2012 in

Middle East and capacity of 5.8 mn tonnes is expected to be operational in China by 2011. This will

reduce the concerns on availability of its key raw material in the world market and should keep the

prices subdued. TTL has already started procuring its raw material from the Middle East and contribution

of imports has increased from ~40% in FY07 to ~70% of raw materials by value.

Figure 6: HDPE expansion in Middle East

Company Location Capacity (KT) Status

Arya Sasol PC Bandar Assaluyeh, IR 300 Operational

Jam PC Bandar Assaluyeh, IR 300 Operational

Bandar Assaluyeh, IR 150 Operational

SEPC (Basell) Al Jubail, SA 400 Operational

TKOC Shuaiba, KW 225 Q32010

Yansab (Sabic+Mobil) Yanbu, SA 400 Operational

SHARQ (Sabic+Mitsubishi) Al Jubail, SA 400 Operational

Petro-Rabigh (Aramco+Sumitomo) Rabigh, SA 300 Operational

Mehr, PC Bandar Assaluyeh, IR 300 Operational

Q-Chem II Mesaieed, QA 350 Q42010

Kayan Al Jubail, SA 400 Q12011

Borouge Abu Dhabi, Ruwais, UAE 540 Q42010

Ilam P Ilam, IR 300 2012

SIPCHEM Al Jubail, SA 400 Q32011

Saudi Polymers Al Jubail, SA 550 2012

Al Jubail, SA 550 2012


Kermanshah PC Khermanshah, IR 300 Q32012

Lorestan PC Khorrambad, IR 150 Q32012

Mahabad PC Mahabad, IR 150 Q32012

Total HDPE capacity increase 6465

Source: Company

Figure 7: HDPE capacity expansion in China


Tianjin PC Tianjin, Tianjin 300 Q12010

Tianjin PC Tianjin, Tianjin 300 Q42009

Dushanzi PC Dushanzi, Xinjiang 300 Q12010

Dushanzi PC Dushanzi, Xinjiang 600 Operational

ZRCC Ningbo, Zhejiang 250 Q12010

ZRCC Ningbo, Zhejiang 450 Q12010

Panjin Ethylene Panjin, Liaoning 300 Operational

Fujian/Sinopec Quanzhou, Fujian 400 Q12010

Baotou Shenhua Baotou, Inner Mongolia 300 2011

Fushun PC Fushun, Liaoning 350 2012

Fushun PC Fushun, Liaoning 450 2020

Chengdu PC Chengdu, Sichuan 300 2011

Chengdu PC Chengdu, Sichuan 300 2011

Sinopec Wuhan Wuhan, Hubei 300 2011

Sinopec Wuhan Wuhan, Hubei 300 2011

Daqing PC Daqing, Heilong 550 2011

Total HDPE Capacity increase 5,750

Source: Company

Steady margin business model

TTL has maintained EBITDA margins of ~20% consistently in the past. The key raw material required

for the manufacture of polymer products is poly ethylene (PE) (~66-67% of net sales). However the

company is shielded from the volatility of the raw material prices as the company works on cost plus

markup basis where in the TTL maintains absolute EBITDA margin and change in raw material prices

is passed on to the customer.

Figure 8: Steady margins




Past acquisitions and Capex plan

TTL has grown inorganically in the past and has acquired companies across the globe.

Figure 9: TTL's past acquisitions

Year Acquisition

2006 Acquired TPL Plastech Ltd.,

2006 Acquired Pack Delta, Thailand

2007 Acquired NED Energy, Hyderabad

2008 Acquired Gulf PowerBeat WLL, Bahrain

2009 Acquired YPA, Thailand

2009 Acquired Kompozit Praha, Czech Republic

2010 Acquired Plastic division of Solutia Europe

2010 Acquired largest packaging division in Taiwan


As an empirical co relation TTL generates turnover 2.5x the amount capex done on fully operation of

the new facility. Hence the capex done in FY09 and FY10 is expected to generate additional revenues

in FY11E and FY12E respectively. TTL has planned capex of c. ~500 mn in FY11 and capex of ~ INR

1,800 mn in FY11E.

Net debt to equity to improve from 0.7x to 0.5x: With major acquisitions already done we do not

expect any major capex to be done in FY11E and FY12E. Hence we do not expect TTL to add any

significant debt besides for the working capital requirement. We also expect interest coverage ratio to

improve from 4.8x to 5.9x in FY12E.

Figure 10: Interest coverage and Net debt:equity scenario

Source: FQ Research


Also with no significant capex, we believe ROE and ROCE to improve by 439 bps and 270 bps

respectively from FY10 to FY12E.

Figure 11: ROE and ROCE to improve

Source: FQ Research

Valuation

At CMP of INR 53, TTL is trading at a PE multiple of 10.2x and 6.9x and EV/EBITDA multiple of 6.1x

and 4.6x of its FY11E and FY12E earnings respectively. We value TTL at EV/EBITDA multiple of 5.5x

its FY12E earnings. We initiate coverage with BUY recommendation with target price of INR 68 (29%

upside). At INR 68, TTL trades at PE of 8.9x and EV/EBITDA of 5.5x its FY12E earnings resp. We

believe any positive surprise on our valuation can come once proper understanding of potential

market of the new product is discounted.

Figure 12: One year forward PE chart Figure 13: one year forward EV/EBITDA band

Source: FQ Research Source: FQ Research


Company details

Time Technoplast Limited (TTL) is technology bases innovative polymer product company catering to

segments like packaging, automobiles, healthcare, etc. TTL has 24 manufacturing facilities and

marketing and distribution network spread across the country. The company has set its foot prints

across the globe with acquisition of companies in Middle East, Europe and South East Asia. TTL is

market leader in most of the segment in which it is present. The revenues of the company have grown

at a CAGR of 36% from FY07-FY10.

Corporate History

Year Particulars

1992 Production facility commenced at Daman. Launched internationally acclaimed XL -Ring

Drums

1993 Collaboration with Mauser, Germany

1994 Emerged as pioneers, trend-setters and market leaders in rigid plastic packaging in India

1995 Established strategic production facility in South India (Hosur, Tamilnadu)

1996 Established additional strategic production facility in North India (Baddi, Himachal Pradesh)

1998 Lifestyle products launched-entrance matting (Duro Turf & Meadowz)

1999-2003 Set up additional manufacturing facilities at different location.

2004 Joint Venture with Mauser , Commenced production of IBC

2005 Development and Launch of anti Spray Rainflaps (3S)

2006 Launched Duro soft mattings and health care products

Acquired TPL Plastech Ltd.

Acquired Pack Delta, Thailand under JV with Mauser

2007 Commenced Steel Drum manufacturing at Pen under JV with Mauser

Acquired NED Energy, Hyderabad and entered battery business

Commenced production at Sharjah UAE

2008 Commenced production at Poland for automotive components

Expanded battery capacityAcquired Gulf PowerBeat, Bahrain

2009 Acquired YPA in Thailand- competing business -industrial packaging

Ventured into composite cylinders with acquisition of Kompozit Praha, Czech Republic

Implemented HDPE & FRP/GRP pipes manufacturing unitat Silvassa

Signed JV with Schoeller Arca System for Returnable Transit Packaging

Set up additional facilities in Eastern India- Amta,West Bengal

2010 Setting up Greenfield packaging project in Tianjin(North China) , Commenced manufacturing

facility at Gummidipundi (Tamil Nadu) and Ahmedabad (Gujarat)

Announce setting up of manufacturing facility for hi-tech Composite Cylinders in India

Acquistion of Taiwan"s largest industrial packaging company- Yung Hsin Container Industry

Co. Ltd

Acquired Plastic product Division of Solutia Inc Europe



Profit and Loss StatementParticulars (INR mn) F09 F10 F11E F12E

Net sales 7,897 10,114 13,000 16,800% chg 15.9 28.1 28.5 29.2Total expenditure 6,340 8,164 10,465 13,440Operating profit 1,558 1,950 2,535 3,360(% of net sales) 19.7 19.3 19.5 20.0Other income 4 16 15 15Depreciation & amortisation 259 355 575 645Interest 271 333 418 463PBT 1,031 1,279 1,557 2,267(% of net sales) 13.1 12.6 12.0 13.5Tax 269 296 389 567(% of PBT) 26.1 23.1 25.0 25.0PAT 762 983 1,168 1,700Minority interest 72 74 74 74PAT reported 690 909 1,094 1,626

RatiosParticulars F09 F10 F11E F12E

Valuation Ratio (x)P/E 16.1 12.3 10.2 6.9P/E (Diluted cash EPS) 11.7 8.8 6.7 4.9P/BV 2.2 1.9 1.6 1.3EV / Sales 1.7 1.5 1.2 0.9EV / EBITDA 8.8 7.7 6.1 4.6MCap/Sales 1.4 1.1 0.8 0.7

Leverage Ratio (x)Debt-Equity 0.5 0.7 0.7 0.5Interest Coverage -on EBIT 4.8 4.8 4.7 5.9

Per Share Data (INR)Diluted EPS 3.3 4.3 5.2 7.7Diluted cash EPS 4.5 6.0 7.9 10.7DPS 0.5 0.5 0.5 0.5Book value 23.7 27.5 32.1 39.3

Returns %ROE 17.0 18.4 18.7 22.7ROCE 13.5 13.4 13.5 16.1Dividend payout (%) 13.7 11.7 9.7 6.5

Du-Pont AnalysisOperating margin (EBIT/Sales) (%) 16.4 15.8 15.1 16.2Interest burden (PBT/EBIT) (%) 79.4 80.2 79.4 83.5Tax burden (PAT/PBT) (%) 73.9 76.9 75.0 75.0Asset turnover (Sales/assets) (x) 1.9 2.0 2.1 2.5Gearing (Assets/Equity) 164.5 176.5 172.9 165.6

Margin Ratios(%)EBITDA margin 19.7 19.3 19.5 20.0PBT margin 13.1 12.6 12.0 13.5PAT margin 8.7 9.0 8.4 9.7

Growth Ratios (%)Net Sales 15.9 28.1 28.5 29.2EBITDA 7.9 25.2 30.0 32.5EBIT 5.1 22.8 22.9 38.5PAT -6.3 31.7 20.4 48.7

Operating CycleDebtors days 83 75 75 75Inventory days 69 74 70 70Creditors days 43 49 52 52

Balance SheetParticulars (INR mn) F09 F10 F11E F12E

SOURCES OF FUNDS

Equity share capital 209 209 209 209

Reserves & surplus 4743 5543 6513 8015

Shareholders funds 4,953 5,752 6,722 8,224

Total loans 3,197 4,398 4,898 5,398

Deffered tax liability 223 312 312 312

Total Liabilities 8,372 10,462 11,932 13,934

APPLICATION OF FUNDS

Gross block 5,807 7,110 8,844 9,924

Less: acc. depreciation 1,540 2,059 2,634 3,279

Net block 4,267 5,052 6,210 6,645

Capital work-in-progress 284 609 375 420

Investments 3 - - -

Current assets 4,342 5,399 6,492 8,644

Current liabilities 1,135 1,631 2,178 2,808

Net current assets 3,207 3,769 4,314 5,836

Total Assets 8,372 10,462 11,932 13,934

Cash Flow Statement

Particulars (INR mn) F09 F10 F11E F12E

PAT 690 909 1,094 1,626

Depreciation 259 355 575 645

Chg in working capital 264 626 499 879

Other current assets 390 (154) - -

CF from operations 1,075 483 1,169 1,392

Capital expenses (1,838) (1,628) (1,500) (1,125)

Chg in investments/others - 3 - -

CF from investing (1,838) (1,625) (1,500) (1,125)

Free cash flow (762) (1,145) (331) 267

Debt raised/(repaid) 1,101 1,202 500 500

Dividend(Incl tax) 110 124 124 124

CF from financing 990 1,077 376 376

Net change in cash 228 (65) 46 643

Opening cash bal 269 497 432 477

Closing cash bal 497 432 477 1,120

Standalone Financials


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