Motilal Oswal initiates coverage on Time Technoplast with ‘buy' rating, Rs 578 target price; stock up 9%
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Backed by the company's strong growth prospects, improving return ratios, and attractive valuation, domestic brokerage firm Motilal Oswal has initiated coverage on smallcap company Time Technoplast (TIME). The brokerage has given a 'buy' rating and a target price of Rs 578 to the company, implying a nearly 41% upside potential from the stock's closing price on Friday.Following this update, the shares of Time Technoplast zoomed 8.8% to their intraday high of Rs 446.45 on the BSE.Between FY21 and FY25, TIME delivered a CAGR of 16% in revenue, 19% in EBITDA, and 39% in PAT, while its EBITDA margin improved by 150 basis points to 14.4%. Going forward, the brokerage projects a CAGR of 15% in revenue, 16% in EBITDA, and 23% in PAT over FY25–28E, with EBITDA margin expected to expand further to approximately 15%.'Our robust outlook is backed by moderate but stable growth in the established products segment (12% revenue CAGR, 13-14% EBITDA margin) and an anticipated strong results in VAP (20% revenue CAGR, 18%+ EBITDA margin),' Motilal Oswal said in its report.The brokerage firm noted that TIME has consistently built capacity ahead of demand, strengthening its position as a reliable supplier. Between FY19–25, it invested Rs 11.7 billion (Rs 1.7 billion annually) in capacity expansion—35% of its current gross block—funded through internal accruals. Under VAP, it has diversified beyond LPG and CNG cylinders into hydrogen and oxygen cylinders.Despite an annual capex of Rs 1.7 billion, TIME's pre-tax RoCE/RoIC is expected to rise from 18.2% in FY25 to 23–26% by FY28, driven by higher operating results, improved efficiency (sales/gross block rising from 1.6x to 2.1x), and a tighter working capital cycle (down by 15 days). The company also aims to generate Rs 4 billion in annual FCF, helping pare debt and shift from net debt of ~Rs 6 billion in FY24 to net cash by FY27.Additionally, TIME is undertaking asset monetization, business restructuring, and cost reduction initiatives to boost operational efficiency and strengthen its balance sheet. It plans to monetize non-core and underperforming assets worth Rs 1.25 billion—Rs 740 million of which has already been realized over the past two years, with the remainder targeted in FY26. TIME also intends to divest its stake in NED Energy once it scales adequately.Also read: MCX shares rise 4%, hit lifetime high on Sebi's nod for launch of electricity derivatives Through restructuring, the company aims to merge inefficient small units into larger, more efficient facilities.On the cost front, it will install solar panels across plants in various states to save over Rs 250 million annually in power and fuel costs. Additionally, it plans to invest Rs 1.2 billion in polymer recycling plants across regions to improve raw material sourcing.These measures are expected to enhance RoCE and generate stronger cash flows.Time Technoplast is the world's largest manufacturer of large-size plastic drums, with an impressive 50-60% market share in India and a significant share in 10 other countries. It was the first company to launch intermediate bulk containers (IBC) in India and is now the third largest IBC manufacturer worldwide. Additionally, TIME ranks as the second largest global manufacturer of Type-IV composite LPG and CNG cylinders.The company's Value-Added Products (VAP) segment is a high-growth (20–30% CAGR) and high-margin (18%+) business, comprising IBCs (13% of revenue), composite cylinders (11%), and MOX films (3%).Motilal Oswal also showed confidence in the company as its management sees strong potential in the composite cylinder segment due to its wide industrial applications and is actively developing new, high-margin products.In FY25, VAP contributed 27% to total revenue, with a target to increase this to 35% over the next three years, growing at a 20–25% CAGR—well above the 12% CAGR for established products. A higher revenue share from VAP is expected to support margin expansion and boost overall profitability.Also read: Momentum Alert! June 10–11 to offer big moves, eyes on June 16 for trend shift: Harshubh Shah (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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