Time technoplast

Company came up with good set of numbers, business is back to pre-covid level. They are looking to partly divest their overseas assets and use the proceeds to invest in composite value-added business lines. Concall notes below

  • Polymer prices have increased significantly which has been passed on with a time lag. This has impacted margins by 50-75 bps
  • FY22 capex was 186 cr. (107 cr. for value added + 79 cr. for existing products)
  • Divestment of overseas assets: Will finish divestment of majority holdings in overseas assets (includes all overseas assets including Shajah, USA, etc.) by FY23 end, have appointed 2 merchant bankers who are currently valuing these assets. Proceeds will be used for deleveraging and for capex in value added businesses (including hydrogen cylinders). Company is very bullish on hydrogen cylinders (maybe due to early mover advantage)
  • Have been experiencing buoyant demand in Middle East and USA (part of it is because of China+1)
  • Type-IV CNG cascade: Have started supplies to CGD companies. Water volume capacity is higher for Type-IV cylinders vs Type-I steel cascade because of lighter weight. So if a vehicle can transport 4500 L in Type-I then Type-IV allows carrying 9000 L (2x over Type-1). Cost of Type-IV is 3x of steel Type-I cascade. On a service life of 20 years, payback is 6 months to 1 year
  • LPG capacity: 70% is already booked from current orders
  • Have been slower on CNG expansion for on-board vehicles due to high debt levels, proceeds from overseas divestment will be utilized to grow on CNG. Also, in on-board applications on vehicles, OEMs require a long time before approval and company is currently working with the OEMs. This will take longer
  • Indian business (~2’500 cr. in FY22) should grow by 20% and reach 3’000 cr. in FY23 along with expansion in EBITDA margins
  • Targeting composite business of 1’000 cr. in next-3 years (with 750 cr. from CNG)
  • Tesla battery order of 100 cr. will be executed in FY23. Battery segment can do 300 cr. at full utilization. Expect 60% utilization in FY23 (~180 cr. sales)
  • Projecting 230 cr. sales in pipes business
  • Expect working capital improvement by September 2022 (with higher contribution from value added and lower contribution from pipes)
  • Targeting 19% ROCE in next-3 years (by FY25) with 35% contribution from value added products
  • Fixed assets turns for composite cylinders is 2.5x

Disclosure: Invested (position size here, no transactions in last-30 days)

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