Time Technoplast Ltd has been highlighted by SBI Securities as its top stock pick of the week, reflecting its outstanding performance and future potential. This recommendation comes on the back of a significant rise in the company’s stock price, which has surged by an impressive 183% over the past year and 121% in 2024 Year-To-Date (YTD). The stock has delivered positive returns in six out of the eight months this year, with recent gains of 16% in August, 4.6% in July, and 17% in June.

As of August 19, 2024, Time Technoplast's stock price stands at ₹391.50, approaching its peak of ₹402.90. The stock has also rebounded 185% from its 52-week low of ₹137.40, hit on August 25, 2023. SBI Securities has set a buy recommendation for Time Technoplast with a target price of ₹464, suggesting a potential upside of almost 19% from the current levels.

Stock Price Trend Analysis

The stock’s performance has been robust, with consistent positive returns throughout the year. After a flat period in May, the stock bounced back in the following months, demonstrating resilience and strong investor confidence. Notably, the stock's performance in earlier months of 2024 was also impressive, with increases of 24.4% in February, 15% in March, and 10.5% in April, followed by a minor decline of 1.2% in January.

Company Overview

Time Technoplast Ltd is a prominent manufacturer of technology-based polymer and composite products. Its diverse portfolio includes industrial packaging products like drums, containers, and pails, as well as auto components and HDPE pipes. Additionally, the company offers Intermediate Bulk Containers (IBCs) for chemical storage and composite cylinders for storing LPG, CNG, and other gases.

Reasons for Investment

Healthy GDP Growth and Volume Expansion: The company is well-positioned to capitalize on growth across multiple sectors, including infrastructure, automotive, energy, and consumer goods. Time Technoplast has reported a strong 19% volume growth in FY24, with robust demand in its order book, particularly for PE pipes and composite cylinders.

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Increasing Share of Value-Added Products: The proportion of value-added products, which include IBCs and composite cylinders, has reached 25% in 1QFY25. This segment is margin-accretive, and the CNG composite cylinders segment alone saw a 100% year-on-year growth in FY24. As this share increases, the company is expected to benefit from improved margins.

Large Addressable Market in Composite Cylinders: Time Technoplast is a leading player in the composite cylinders market and recently received certification from the Petroleum and Explosives Safety Organisation (PESO) for manufacturing High Pressure Type-IV Composite Cylinders. This positions the company to capture a significant share of the growing market.

Sale of Non-Core Business: The company is divesting its 50% stake in its Middle East operations, expected to be completed within the next 45-60 days. This strategic move is projected to bring in approximately ₹90 crore, allowing Time Technoplast to focus on its core businesses and enhance its financial position.

Strong Financial Performance: In 1QFY25, Time Technoplast reported impressive growth across key financial metrics, with volume, revenue, EBITDA, and PAT increasing by 16%, 14%, 18%, and 40% year-on-year, respectively. The company also reduced its debt by ₹38 crore, reflecting effective financial management.

Attractive Valuation: At its current market price of ₹391.50, 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, combined with the company’s growth prospects, makes it an appealing investment opportunity.

Key Risks

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

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

Overall, Time Technoplast Ltd emerges as a compelling investment choice with its strong growth prospects, expanding market presence, and strategic business moves. The company’s solid financial performance and attractive valuation further enhance its appeal to investors.

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