Time Technoplast - Q1FY21 Result Update - ICICI Securities

We believe the Q1FY21 performance was in line with management commentary provided in Q4FY20 wherein the company mentioned a challenging demand scenario in H1FY21E owing to lockdown. The management expects a faster demand recovery in coming quarters post ease in lockdown restrictions. Time Technoplast's (TPL) Q1FY20 volume, value fell ~43%, 45% respectively. While domestic business (~70% of topline) was hit by regional lockdowns, overseas businesses (~30% of topline) were less impacted in Q1FY21. TPL reported ~51%, ~25% YoY fall in volume of domestic, overseas business, respectively. However, gross margin in Q1FY21 was up 54 bps YoY (167 bps QoQ) led by better mix and benign raw material prices. The company's contribution from value added product category increased to 21.3% in Q1FY21 (vs. ~19% in FY20, 18.6% in FY19). However, lower operating leverage dragged overall EBITDA margin down 320 bps YoY (~153 bps QoQ) at 11.4%. Finally, the company reported a net loss of ~ Rs. 12 crore after providing Rs. 25 crore, ~Rs. 37.5 crore for interest, depreciation charges, respectively. With positive cashflow from operation of ~Rs. 36 crore in Q1FY21, TPL is focusing on rationalisation of various fixed costs and improving collections thereby reducing working capital requirements. We believe a recovery in economic activity would help drive revenues, EBITDA margin from FY22E onwards. We also expect a rationalisation of capex plans coupled with comfortable D/E (0.4x in FY20) to help the company to pass through the challenging phase in FY21E.

Valuation & Outlook

We believe EBITDA level profit with better gross margin despite revenue loss for almost a month is encouraging. Further, marginal debt reduction via positive CFO of Rs. 36 crore, curtailed capex in FY21, focus on collection may keep overall D/E below 0.5x. We maintain HOLD rating on the stock with a revised target price of Rs. 47 considering its market leadership position in the industrial packaging segment and a strong client base.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_TimeTechno_Q1FY21.pdf

Shares of TIME TECHNOPLAST LTD. was last trading in BSE at Rs.42.35 as compared to the previous close of Rs. 41.1. The total number of shares traded during the day was 27849 in over 446 trades.

The stock hit an intraday high of Rs. 43 and intraday low of 41.15. The net turnover during the day was Rs. 1175801.

Source : Equity Bulls

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