Time Technoplast is SBI Securities’s ‘top pick of the week’ after a 121% surge in 2024 YTD; 6 reasons why

After 3 straight months of positive returns and an over 121 percent surge just in 2024 YTD, brokerage house SBI Securities has picked multibagger stock Time Technoplast as its top picks of the week. This comes on the back of its attractive valuations, healthy financials, and strong volume growth outlook.

The brokerage has a buy recommendation on the stock with a target price of ₹464, implying an upside potential of almost 19 percent.

Stock Price Trend

The stock has rallied 183 percent in the last 1 year and over 121 percent in 2024 YTD, giving positive returns in 6 of the 8 months so far.

Just in August so far, the stock has gained 16 percent, extending gains for the third straight month. It rose 4.6 percent in July and 17 percent in June. Before that, it was flat but in the red, down 0.2 percent in May. The scrip was also positive in the 3 months prior to that, rising 10.5 percent in April, 15 percent in March and 24.4 percent in February. In January, however, the stock shed 1.2 percent.

Currently at ₹391.50, the stock is just around 3 percent away from its peak of ₹402.90, hit in the previous session, August 19, 2024. Meanwhile, it has soared 185 percent from its 52-week low of ₹137.40, hit on August 25, 2024.

Overview

Time Technoplast Ltd, a leading manufacturer of technology-based polymer and composite products, has been selected as SBI Securities' pick of the week. The company’s diverse product portfolio includes industrial packaging products like drums, containers, and pails, as well as auto components and HDPE pipes. Additionally, it offers a range of value-added products, including Intermediate Bulk Containers (IBCs) for chemical storage and composite cylinders for storing LPG, CNG, and other industrial gases. Here’s why Time Technoplast stands out as a compelling investment opportunity:

Six Reasons to Buy

Healthy GDP Growth to Drive Double-Digit Volume Growth: According to the brokerage, Time Technoplast is well-positioned to benefit from growth across infrastructure, automotive, energy, and consumer sectors. These industries are key end-users of the company’s products, and Time Technoplast expects double-digit volume growth in FY25. Notably, the company recorded a robust 19 percent volume growth in FY24. As of June 2024, the order book for PE pipes and composite cylinders stands at ₹200 crore and ₹175 crore, respectively, underscoring strong demand prospects, it said.

Increasing Share of Value-Added Products: The brokerage also pointed out that the share of value-added products, which includes IBCs, composite cylinders (LPG, Oxygen, & CNG), and MOX Films, reached 25 percent in 1QFY25. This segment is crucial as it is margin accretive. In particular, the CNG composite cylinders segment saw 100 percent year-on-year growth in FY24, driven by rising demand from the City Gas Distribution sector for CNG cascades, it noted. As the share of value-added products continues to grow, Time Technoplast is expected to see improved margins, forecasted by SBI Securities.

Large Addressable Market in Composite Cylinders: The brokerage also noted that Time Technoplast manufactures a wide range of cylinders across the Type 1-4 categories for various applications. The company recently received certification from the Petroleum and Explosives Safety Organisation (PESO) for manufacturing High Pressure Type-IV Composite Cylinders. This certification marks Time Technoplast as the first company in India to receive approval for manufacturing these advanced cylinders, positioning it well to capture a significant share of the growing market, it said.

Sale of Non-Core Business: Time Technoplast is in the process of divesting its 50 percent stake in its Middle East operations. The sale is expected to be completed within the next 45-60 days, including the receipt of sale proceeds. The due diligence process is complete, and legal formalities are underway. The stake will be sold to the local JV partner, with expected proceeds of approximately ₹90 crore. This strategic move will allow the company to focus on its core businesses while strengthening its balance sheet, added the brokerage.

Healthy Financials: The company reported strong financial performance in 1QFY25, with volume, revenue, EBITDA, and PAT growing by 16 percent, 14 percent, 18 percent, and 40 percent year-on-year, respectively, state SBI sec. Additionally, the company further reduced its debt by ₹38 crore, reflecting prudent financial management.

Attractive Valuation: At the current market price (CMP), Time Technoplast trades at a trailing twelve-month (TTM) price-to-earnings (P/E) ratio of 27.3x and a forward P/E ratio of 20.8x for FY25E. This valuation, coupled with the company’s strong growth prospects, makes it an attractive investment, as per the brokerage.

Key Risks

Volatility in Polymer Prices: Fluctuations in raw material costs could impact margins.

Slowdown in Value-Added Products: A slowdown in demand for value-added products could affect revenue growth and profitability.

Time Technoplast Ltd stands out as a robust investment opportunity, backed by healthy growth prospects, increasing contributions from high-margin value-added products, and a strategic focus on core businesses. With strong financials and an attractive valuation, the company is well-positioned to capitalise on the growth in its key end-user sectors.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.