Sales of the Company has increased from Rs 2755 Cr (FY 2016-17) to Rs 3650 Cr ( 2021-22) whereas CAPEX incurred during the same period was 212 Cr, 244 Cr, 231 Cr, 138 Cr, 102 Cr ,179 Cr.
In-spite of significant CAPEX done by the Company there is no significant improvement in Sales. With this kind of CAPEX (Rs 1106 Cr during last 5 to 6 years) expenditure , the Company should have build up significant capacities. Can any body advise comparative capacities of the Company as on 31/03/2016 & 31/03/2022.
Capacities for that year should be available from the annual reports, can also be cross-checked with the gross/net block and depreciation. Some of these may also be maintenance capex which will happen every year (not sure of quantum, will be available from the presentations and ARs).
Of the top of my head I can think of:
The LPG line (1.4m capacity but only 1M throughput)
All CNG related capex
Atleast half the US expansion if not full
There were irregular if no conf calls in 2018 till 20-21, improved a lot with regular conf calls in last 2 years with an additional 3 year plan detailed call in June 2021.
A 3-4 years promoters pledge of shares to hold on to some land in Mumbai (and build a business center) was released recently, with an imminent announcement promised about selling that land.
I feel the mgmt is course-correcting and doing a lot of things right now - not getting distracted by land for office HQ and trying to disposing it off, conservative with debt, looking for partners/equity in only lower profitable overseas investments, investing mostly in only higher profit areas etc., they’re willing to sell off the battery unit too (only 20-30% utilized) which surprisingly has a 100cr order book for FY23.
As per management 1 Million LPG capacity cost around Rs 85 Cr and they have spend Rs 1106 Cr during last 5 -6 years. My observation is that inspite of spending Rs 1106 Cr in CAPEX, substantial capacities have not been build up. Last year also they have spend around Rs 179 Cr in CAPEX and still there was no increase in LPG capacity because of which they did not bidded for LPG tender.
This can be treated as a “red flag”. Capex is regularly used by companies to divert money as per seen in few of my bad investee companies like Talwalkars and Manpasand Beverages.
Not saying there is necessarily fraud over here but any company, doing regular large capex without commensurate increase in capacity, calls for deep dive analysis for sure.
It seems Company is capitalising its Expenses to show improved EBDITA margins. This may also be the reason of higher amount under CAPEX without any meaningful capacity addition and also resulting in higher deprecation amount every year.
In last 3 years, cumulative fixed asset purchases was ~427 cr. and cumulative depreciation was ~464 cr. In this time period, company achieved higher overall capacity (e.g. added LPG capacity). Thus, depreciation figure is actually in excess of maintenance capex, thereby penalizing net income. This is a common phenomena in a growing company, where depreciation figure may not actually represent true nature of maintenance capex.
If you need clarifications, let me know. I don’t see how company is capitalizing its expenses.
Disclosure: Invested (position size here, bought shares in last-30 days)
Read some of above post, many people are concerned about where did the amount spent over the years on capex is gone?
as per my knowledge this company’s business requires high maintenance capex in the range of 80-100cr every year, so most of that amount is gone into maintenance capex, nothing to worry about it.
TTPL
MARKET CAP 2300CR
RESTUCTURING OF OVERSEAS BUSINESS–(1/3)
Business is around 1200cr.
Valuation Deal around 2000cr.
Indian business (2/3)
Valuation must be 4000cr.
Cash deal of overseas business is around2000cr.
Rerating of comapny is on card. Market cap should be around 4000cr…
Video link is attached.
Value added products (21% contribution vs 20% in FY21): Composite IBCs (11% vs 10% in FY21), composite cylinders (6% same as FY21), MOX films or techpaulin (4% same as FY21)
R&D team comprises of 30
Time Techno is third largest manufacturer of IBCs globally
Overseas business contributed 32% of sales (vs 31% in FY21). EBITDA margin for domestic operations was ~14.0% and for overseas operations was 13.7%
Company is restructuring overseas business through strategic divestment, proceeds of which will be used for repayment of debt, capex for composite cylinders and for core Indian business
Has manufacturing facilities at 31 locations across the globe (including 21 within India)
Received single largest for Type-IV LPG Composite Cylinders to IOCL of 0.75 mn LPG cylinders to be supplied over 12-months
CNG cascade order book is 250 cr.
Total capex incurred was 185.7 cr. (vs 103.5 cr. in FY21). Capex for established products was 78.5 cr. (vs 67 cr. in FY21), and was 107.2 cr. (vs 36.5 cr. in FY21) for value added products
Key raw material is PE granules (derivative products of oil and natural gas) which are largely imported
KMP and director remuneration: 1.96 cr. (vs 1.64 cr. in FY21)
Number of employees: 2’521 (vs 2’423 in FY21) (no increase in salary of employees or key managerial personnel)
Statutory auditor fee: 40 lakhs (vs 45 lakhs in FY21)
Number of shareholders: 73’356 (vs 37’672 in FY21), price (low): 60.2, price (high): 94.5
Disclosure: Invested (position size here, bought shares in last-30 days)
Good Q2 results. Margins a little down but sales on track. Margins will improve coming quarters with decline in crude prices.
Their strategy of improving product mix is working well. At expected EPS of 12 price should be 150.
Just an additional observation - the cash flow from operations has improved to ~175 Cr vs ~110 Cr last year on account of better management of working capital. Going forward the key monitorable has to be the debt reduction and finance cost.
As they have the pass through mechanism of raw material inflation, believe raw material reduction will also be passthrough to customers. Also the raw material they directly related to crude prices but the price is more to do with supply - demand.
Company came out with decent nos, with 12% YOY sales growth and flat PAT. Concall notes below.
FY23Q2
Packaging product order book is monthly
Growth was driven by overseas business (21% YOY vs 8% for India)
Pipe business target is 200 cr.+ in FY23
LPG cylinder: 80% domestic + 20% exports. In recent quarter, export mix increased to 40% due to higher rainfall resulting in changing demand schedule from IOCL. Running at 85% capacity utilization. No planned expansion until they get order from other OMCs
Guiding for 1%+ improvement in EBITDA margins and 20%+ revenue growth in H2FY23
Generally, H2 is 55% of business
Expansion of Supreme Industries in LPG composite cylinders is because they don’t have enough capacity to service current order book. Even after their expansion, Time’s capacity will be higher
CNG on-board cylinder marketing will start only after expansion is complete
Disclosure: Invested (position size here, bought shares in last-30 days)
If they can crack LPG market this company can triple its sales… and price can reach 500… CNG cylinder market is very small compared to LPG. but it takes a lot to get the PSU oil marketing companies to move… in so many years they have managed to get one order from IOCL!
I think after IOCL it will happen sooner than later…
Company is going to show best ever results in q3 and q4 FY 23. They should expand composite capacity faster and launch composite for cars.
2 big triggers
composite cylinder for cars
composite cylinders for LPG - they need to get larger orders from IOC and also other OMCs.
In order to meet growing demand for Type - IV Composite Cylinders for CNG Cascades, Management is undertaking capex in a phased manner:
Phase - I (FY 2022-23)
The Company is increasing the manufacturing capacity by 300 cascades (18,000 cylinders) in FY 2023 with a capital outlay of INR 55 Crores.
With the above expansion, the total cascade manufacturing capacity will increase from 180 to 480 cascades (28,800 cylinders) by March 2023.
Phase - II (FY 2023-24)
Under Phase-II, Management has already undertaken expansion program to increase the capacity by further 600 cascades (36,000 cylinders) and the same will be completed in Q4 FY 2024 with an outflow of INR 125 Crores. Total cascade manufacturing capacity after completion of Phase-II will be 1,080 cascades (64,800 cylinders) per year from March 2024.
Time Techno came with very good results when compared with other packaging cos. Sales grew by 20% and EPS by 14%. Company is on track of exceeding 350 cr. in composite CNG and LPG cylinders in FY23 and can do 500+ cr. in FY24. Concall notes below.
FY23Q3
Received 134 cr. order for CNG cascade from Maharashtra Natural Gas Limited
Divestment will be announced in 3 months, process is a bit delayed as International business did very well in 2022 and valuations will be driven by CY22 nos (& not on CY21 nos)
CNG cascade expansion: FY22 capacity was 180 cascades (10’800 cylinders). By March 2023, capacity should increase to 480 cascades (@55 cr. capex; 18.33 lakhs/cascade). This should further expand to 1080 cascades (64’800 cylinders) by March 2024 (@125 cr. capex; 20.83 lakhs/cascade)
Pipes and Mox film business have grown slower in FY23 vs other businesses. Pipe business has revived with cooling off PVC prices
CAPEX: 169 cr. in 9M, includes 53 cr. towards capacity expansion, re-engineering automation for established product + 116 cr. towards value-added product
Expect 1200 cr.+ revenues in Q4FY23 and 15% growth in FY24 (established products should grow at 10-12%, and value added at 25%+)
IOCL has renewed their LPG cylinder order
CNG + LPG revenues will be over 500 cr. in FY24 due to limited capacity
In a normalized scenario, working capital for established products is 110 days and is 70 days for value added products
Have applied to PESO for approval of oxygen cylinders
Disclosure: Invested (position size here, no transactions in last-30 days)
Wonder why valuation of company is so low inspite of very good numbers.
Low debt and good credit rating.
Demand more than supply in high margin composite business.
