November 27, 2017
Initiating Coverage
ICICI Securities Ltd | Retail Equity Research
Strong play in polymer product category...
Time Technoplast (TTL) is the largest manufacturer of polymer based
industrial packaging products (with volume market share of ~70%) and
composite cylinders in India. During FY15-17, TTL divested its stake in less
profitable geographies and did a capex of over ~| 300 crore for expansion
of various product lines. Being largely in the B2B category, TTL plans to add
more value added products (VAPs) to reduce its dependence on
established products (EPs). We believe VAPs contribution to the topline
would increase sharply from 13% in FY17 to 23% by FY20E, led by revenue
CAGR of ~40% in FY17-20E. Additionally, with sales growth in the EPs
segment (~11%), we believe consolidated sales would record a CAGR of
~16% in FY17-19E. Strong volume growth (due to new product launch),
higher utilisation of overseas business and stable raw material prices are
expected to result in elevated EBITDA margin by FY20E. Further, no major
capex on the cards and saving in interest cost (due to reducing debt/equity)
would result in better return ratios, going forward (RoCE, RoE of ~18%,
~15% by FY20E). We initiate coverage on TTL with a BUY rating.
Aggressive capacity addition to drive VAPs revenue contribution
The VAPs category commands ~300 bps higher EBITDA margin compared
to EPs category. Historically, rising contribution of the VAPs category to the
topline (from 11% in FY15 to 13% in FY17) was also one of the reasons for
an increase in consolidated EBITDA margin by 100 bps in FY15-17. We
believe an expansion in existing VAPs category and new launches would
help drive TTL’s consolidated revenues and earnings, going forward.
Better utilisation, stable raw material prices to help drive profitability
Lower penetration of polymer drums in the APAC region coupled with TTL’s
plan to increase the utilisation of overseas plants (from average ~67% to in
line with utilisation of Indian operation of ~80%) would benefit the
company in the long run. Further, stable raw material prices and rising
contribution of VAPs in the topline would benefit the company in terms of
rising EBITDA margin, going forward. Also, lower interest outgo would help
drive PAT CAGR of ~25% in FY17-20E. Going forward, that would help
bring back the return ratios to elevated level.
Possible re-rating backed by strong growth prospects
We believe TTL will record strong earning CAGR of ~25% in FY17-20E
supported by improvement in margin and lower interest outgo. A further
improvement in asset turnover would result in lower debt/equity, going
forward. We expect a major government infrastructure push and
replacement demand to be key catalysts and lead to a further re-rating of
the stock. We value the company on an EV/EBITDA basis by ascribing
EV/EBITDA multiple of 9x FY20E EBITDA. We initiate coverage on the stock
with a BUY rating and a target price of | 230/share.
Exhibit 1: Financial summery
(| Crore) FY16 FY17 FY18E FY19E FY20E
Net Sales 2,422.7 2,754.6 3,092.8 3,689.0 4,311.5
EBITDA 347.8 404.2 464.9 552.6 646.4
Net Profit 138.1 147.1 182.3 236.7 287.6
P/E (x) 30.8 28.9 23.3 18.0 14.8
Price / Book (x) 3.6 3.2 2.9 2.5 2.2
EPS (|) 6.1 6.5 8.1 10.5 12.7
EV/EBITDA (x) 13.8 11.9 10.4 8.6 7.2
RoCE (%) 13.3 14.2 15.4 17.0 18.0
RoE (%) 10.5 11.1 12.5 14.1 14.8
Source: Company, ICICIdirect.com Research
Time Technoplast (TIMTEC)
| 188
Rating Matrix
Rating : Buy
Target : | 230
Target Period : 12 months
Potential Upside : 22%
YoY Growth (%)
FY17 FY18E FY19E FY20E
Net Sales 13.7 12.3 19.3 16.9
EBITDA 16.2 15.0 18.9 17.0
EBIT 15.9 15.0 20.8 15.9
Net Profit 6.5 23.9 29.8 21.5
Current & target multiple
FY17 FY18E FY19E FY20E
P/E 28.9 23.3 18.0 14.8
Target P/E 35.3 28.5 22.0 18.1
EV / EBITDA 11.9 10.4 8.6 7.2
P/BV 3.2 2.9 2.5 2.2
RoNW 11.1 12.5 14.1 14.8
RoCE 14.2 15.4 17.0 18.0
Stock Data
Particulars
Bloomberg/Reuters code TIME:IN/TIME.BO
Nifty 10365
Average Volume (Year) 261280
Market Capitalization | 4252 Crore
Total Debt (FY17) | 631 Crore
Cash and Investments (FY17) | 56 Crore
EV | 3677 Crore
52 week H/L (|) 212/85
Equity capital | 12.0 Crore
Face value | 1
MF Holding (%) 9.1
FII Holding (%) 19.4
Comparative return matrix (%)
Returns (%) 1M 3M 6M 12M
Essel Propack 13.7 17.6 17.5 33.4
Mold Tek Tec -3.3 8.0 11.7 70.7
Time Techno -1.1 7.4 44.2 110.9
Price movement
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TIME Nifty 50
Research Analyst
Sanjay Manyal
Hitesh Taunk
Page 2 ICICI Securities Ltd | Retail Equity Research
Company background
Started in 1992, Time Technoplast (TTL) is engaged in manufacturing a
diversified range of polymer products in India & overseas mainly for
industries like speciality chemicals, petrochemicals, agriculture,
infrastructure & household items. TTL manufactures plastic products,
intermediate bulk containers (IBCs), pipes, composite cylinders & multilayer
multi axis oriented cross laminated (MOX) films. These products can mainly
be divided into 1) established products (EPs) and 2) value added products
(VAPs). EPs mainly include plastic products & pipes in their portfolio. These
two products together contribute ~87% to TTL’s topline and command
EBITDA margin of ~14%. The plastic product category can be further
segregated into different product lines of industrial packaging, energy
storage, automotive component, technical & lifestyle products. Industrial
packaging products (excluding IBCs) include drums, jerrycans, pails that
contribute ~62% to the consolidated topline. TTL is the largest
manufacturer of industrial packaging (polymers) in Asia, Middle East &
North Africa (MENA) region with a presence in nine countries (market
leader in eight).
The domestic industrial packaging segment is a largely organised business
(~90% organised) wherein TTL is a market leader with ~70% volume
market share followed by Balmer Lawrie (15% market share). On the other
hand, composite cylinder, IBCs, MOX films are in the VAPs category, which
contributes ~13% to consolidated revenue and command EBITDA margin
of ~17%, ~300 bps higher than EPs. In the composite cylinder category
TTL is the second largest players globally (after Hexagon Ragasco) and
largest in India with total production capacity of 1.4 million units per annum.
Further, TTL has recently added MOX films and double wall corrugated
(DWC) pipes under the VAP category. Besides, overseas operations (largely
Middle East, South Asian countries) contribute ~30% to the consolidated
topline. Under the restructuring process, TTL has divested its stake in South
Korean and Chinese operation during FY16. Currently, TTL operates with 28
manufacturing locations across the globe of which 18 are in India. In FY17,
the company did a capex of | ~200 crore to increase the capacity of HDPE
pipe (includes addition of DWC capacity) and IBCs by ~70% and 39% YoY,
respectively. It doubled the manufacturing capacity of composite cylinders.
TTL recorded sales CAGR of ~6% during FY15-17 (~11% adjusted with
discontinued operations) led by the strong performance of VAPs, which
recorded sales CAGR of ~25%. Rising contribution of VAPs helped the
company to increase its EBITDA margin by 200 bps in FY15-17 to 14.7%.
Further, a reduction in debt/equity from 0.8x in FY15 to 0.5x in FY17 helped
save interest outgo by 13%, leading to PAT CAGR of 16% in FY15-17.
Exhibit 2: Revenue break-up of Time Technoplast
IBCs
11%
Composite
Cylinder
3%
Pipe
9%
Plastic
77%
Source: Company, ICICIdirect.com Research
Exhibit 3: Geographical revenue break-up
Overseas
29%
Domestic
71%
Source: Company, ICICIdirect.com Research, FY16
Shareholding pattern (Q2FY18)
Shareholding Pattern Holdings (%)
Promoters 52.6
Institutional investors 28.5
Others 19.0
Institutional holding trend (%)
26.224.3
19.5 19.4
8.7 8.1 8.7 9.1
0
5
10
15
20
25
30
Q3FY17 Q4FY17 Q1FY18 Q2FY18
(%
)
FII DII
Page 3 ICICI Securities Ltd | Retail Equity Research
Exhibit 4: Company’s milestone
1992-2000
1.Incorporated private limited
company
2. Production facilities of plastic
drums started in India
3. Launched lifestyle products
(industrrial/retial mats)
4. Expanded in North and
South India
2001-2006
1. Launched automotive related products
2. Started facilities in East India
3. Ventured in Thailand
4. Acquisition of TPL Plastech
Ltd
Pre IPO (Prior to 2007)
2007-2010
1. Entered the battery business
2. JV with Mauser for
manufacturing steel drums
3. Entered Sharjah (UAE)
4. Launched new products plastic fuel
tanks, prefab shelters & disposal bins
5.Acquisition of Kompozit Czech Republic,
to enter composite cylinder segment
Post IPO (from 2007)
2011-2017
1. Acquisition in industrial packaging
segment – Thailand & Taiwan. Expansion
in other overseas geogrpahies
2. Started PE pipe manufacturing
3.Exit from China and South Korea
4.Started MOX films business
Revenue
1999 2008 2010 2011 2017
| 100 crore | 500 crore | 1000 crore | 1500 crore | 2500 crore
Source: Company, ICICIdirect.com Research
Exhibit 5: Established and valued added product range
Source: Company, ICICIdirect.com Research
Page 4 ICICI Securities Ltd | Retail Equity Research
Exhibit 6: Product specifications and related customers
Products Specifications Customers
Turf & mattings
Duro Turf/Soft: Matts used to scrape off dirt
•Duro Wipe: Matts for wiping water
•Duro Mat: Matts for car use
•Meadows: Artificial grass turf
Manufacturing locations: India(2)
Household, Hotels, Hospital, Multiplex, Etc.
Disposal Bins
Range: 120 & 240 Ltr capacity
Manufacturing Location: India(1)
Household, Commercial, Industrial, Municipal
Corporation, Etc.
Auto Components
Anti Spray Flaps, Plastic Fuel Tanks, De-aerating tanks and air duct
Manufacturing Locations: India(3)
IBCs
Intermediate Bulk Containers (IBCs)
Range: 1000 Ltrs
Brand: GNX bulktainers
Manufacturing Locations: India(3) & Overseas(4)
Capacity:240000 MT
Petrochemicals, Foods, Solvents, Etc
Pipes
HDPE pipes
Range: 20 mm to 1400 mm of pressure range
Brand: Max’m PE Pipes
Manufacturing Locations: India(5)
Capacity: 30000 MT
Irrigation, Sewage, Effluent Treatment,
Desalination Plant, Power Plant , Etc.
Composite
Cylinders
Composite Cylinders
Range: 2kg – 22 kg capacity
Brand: Life Safe
Manufacturing Location: India(1)
Capacity: 1400000 units
Household, Industrial, Trawlers, Caravans, BBQ,
Street Cooking, Etc
MOX Films
Range: 35 to 320 GSM thickness
Manufacturing Location: India(1)
Agriculture, Infrastructure, Packaging,
Commercial Vehicles and many more
Rigid industrial packaging: HDPE Drums, Jerry-cans, Pails
Capacity Range: 5 Ltrs to 250 Ltrs
Manufacturing location: India (15) overseas (10)
Chemicals, Petrochemicals, Paints, Etc
Plastic Divisions
Mox Films
Products/Division
Automotive
Source: ICICIdirect.com Research
Page 5 ICICI Securities Ltd | Retail Equity Research
Exhibit 7: Geographical presence in India and other countries
Source: Company, ICICIdirect.com Research
Exhibit 8: Time Technoplast industrial packaging presence
Company Country Products
Nile Egypt Plastech Industries SAE Egypt IBCs/ Drums and Jerry-cans
Gulf powerbeat WLL Bahrain IBCs/ Drums and Jerry-cans
Elan incorporated FZE UAE IBCs/ Drums and Jerry-cans
Pack Delta Public company Ltd
YPA (Thailand) Ltd
PT Novo Complast Indonesia IBCs/ Drums and Jerry-cans
Yung Hsin contain industry Taiwan IBCs/ Drums and Jerry-cans
Exel plastech Vietnam IBCs/ Drums and Jerry-cans
Q Pack industries Malaysia IBCs/ Drums and Jerry-cans
Thailand IBCs/ Drums and Jerry-cans
Source: Company, ICICIdirect.com Research
Exhibit 9: Global presence through subsidiaries and joint ventures
Enterprises
Subsidiaries/joint
venture
Country of incorporation
Proportion of
ownership
interest
TPL Plastech Subsidiaries India 75.0%
NED energy Subsidiaries India 94.0%
Elan Incorporated Fze Subsidiaries Sharjah, UAE 100.0%
Kompozit Praha SRO Subsidiaries Czech Republic 96.2%
Ikon investment Holding Ltd Subsidiaries Mauritius 100.0%
GNXT Investment Holding PTE Ltd Subsidiaries Singapore 100.0%
Schoeller Allibert Time Holding PTE Ltd Subsidiaries Singapore 50.1%
Time Mauser Industries Pvt Ltd Joint Venture India 49.0%
Source: Company, ICICIdirect.com Research
Page 6 ICICI Securities Ltd | Retail Equity Research
Investment Rationale
Banking on higher margin valued added products…
TTL’s products can be sub-divided into two categories a) established
products (EPs) and b) value added products (VAPs). The categorisation of
products is based on their margin profile wherein VAPs commands ~300
bps higher EBITDA margin vs. EPs. VAPs category includes composite
cylinders, MOX films, IBCs and DWCs wherein MOX films and DWC are
newly introduced products for the domestic market. TTL is one of the
largest manufacturers of composite cylinders and IBCs in India and
overseas markets. Revenue contribution of VAPs in consolidated sales has
increased to 13% in FY17 against 11% in FY15. During the same period of
FY15-17, VAPs category recorded revenue CAGR of ~25% vs. consolidated
revenue CAGR of ~11% (excluding divested business).
The sharp revenue growth in VAPs category was mainly due to ~4x jump in
revenue of composite cylinders to | 72 crore in FY15-17. On the other hand,
IBCs products saw ~17% revenue CAGR in FY15-17 supported by a strong
domestic performance. We believe VAPs category contribution to
consolidated sales will increase further from current 13% to 23% by FY20E
on the back of a sharp revenue CAGR of ~40% in FY17-20E. Revenue
growth would largely be supported by a) capacity addition of composite
cylinder and IBCs by ~34% and ~12% in FY17-20E & b) launch of new
products such as DWC pipes and MOX films in FY18. We believe increase
in revenue contribution of VAPs would also help drive consolidated sales,
earning CAGR of ~16%, ~25%, respectively, in FY17-20E.
Exhibit 10: Revenue contribution of EPs Vs VAPs in FY15
VAPs
11%
EPs
89%
Source: Company, ICICIdirect.com, Research
Exhibit 11: VAPs contribution in consolidated revenue increased in FY17
EPs
87%
VAPs
13%
Source: Company, ICICIdirect.com, Research
Exhibit 12: Consolidated sales CAGR 16% in FY17-20E
2476 2423
2755
3093
3689
4311
0
1000
2000
3000
4000
5000
FY15 FY16 FY17 FY18E FY19E FY20E
(|
crore)
CAGR ~6%
CAGR ~16%
Source: Company, ICICIdirect.com, Research
Exhibit 13: VAPs to drive consolidated EBITDA margin
13.7
14.4
14.7
15.0 15.0 15.0
12.5
13.0
13.5
14.0
14.5
15.0
15.5
FY15 FY16 FY17 FY18E FY19E FY20E
(%
)
Source: Company, ICICIdirect.com, Research
Revenue contribution of VAPs in consolidated sales has
increased to 13% in FY17 against its contribution of 11% in
consolidated sales of FY15
Page 7 ICICI Securities Ltd | Retail Equity Research
…with established products segment recording moderate growth
TTL’s established products (packaging, pipe and technical & lifestyle)
categories recorded segment revenue CAGR of ~10% in FY15-17 (adjusted
with discontinued operations). This was largely due to the better-than-
expected performance of the company’s piping division, which recorded
segment revenue CAGR of 25% in FY15-17. Plastic product segment
recorded revenue CAGR of 8.4% in FY15-17 owing to ~15% growth in
revenue of overseas subsidiaries. However, the domestic business
recorded muted sales CAGR of ~6% in FY15-17 owing to below expected
performance of energy storage device and technical & lifestyle product
categories. Further, the overseas business contributed ~30% to the plastic
product category in FY17 (largely industrial packaging) with three year’s
average plant capacity utilisation of ~67%. Against this, the Indian business
(with revenue contribution of ~70% in the plastic segment) is operating at
three year average capacity utilisation of 80%. Hence, we believe there is
substantial scope for an increase in utilisation of overseas business given
the lower penetration of polymer based industrial packaging products. This,
along with ~47% YoY increase in piping capacity in FY18 would also help
drive a revenue CAGR of ~11% in established product in FY17-20E. On the
margin front, we believe there would be limited upside in the EBITDA
margin of EPs owing to rising contribution of lower margin piping business
into the category.
Exhibit 14: Higher utilisation, capacity addition to drive EPs revenue
19822073
23872505
2886
3307
0
500
1000
1500
2000
2500
3000
3500
FY15* FY16* FY17 FY18E FY19E FY20E
(|
crore)
CAGR ~10%
CAGR ~11%
Source: Company, ICICIdirect.com, Research, * revenue from continued operations
Exhibit 15: New product launch to help driving revenue of VAPs
237288
370
587
803
1004
0
200
400
600
800
1000
1200
FY15* FY16* FY17 FY18E FY19E FY20E
(|
crore)
CAGR ~25%
CAGR ~40%
Source: Company, ICICIdirect.com, Research,* revenue from continued operations
Exhibit 16: Historical revenue, margin trend of EPs categories
19822073
2387
14.3
14.214.2
0
500
1000
1500
2000
2500
3000
FY15* FY16* FY17
(|
crore)
14.1
14.2
14.2
14.3
14.3
14.4
(%
)
Revenue EBITDA Margin
Source: Company, ICICIdirect.com, Research, * revenue from continued operations
Exhibit 17: Historical revenue and margin trend of VAPs categories
237
288
370
16.9
17.6
17.2
0
50
100
150
200
250
300
350
400
FY15* FY16* FY17
(|
crore)
16.4
16.6
16.8
17.0
17.2
17.4
17.6
17.8
(%
)
Revenue EBITDA Margin
Source: Company, ICICIdirect.com, Research, * revenue from continued operations
We believe there is substantial scope for an increase in
utilisation of the overseas business given the lower
penetration of polymer based industrial packaging
products. This, along with ~47% YoY increase in piping
capacity in FY18 (excluding DWC) would also help drive
established product revenue CAGR of ~11% in FY17-20E
Page 8 ICICI Securities Ltd | Retail Equity Research
Leader in industrial packaging segment
The global packaging industry can generally be classified into two
segments i.e. rigid and flexible packaging. Rigid and flexible packaging can
be differentiated on the basis of use. Rigid packaging is suitable for
bulk/bigger packaging whereas flexible packaging is largely used for
packaging small goods. Under rigid packaging, polymers are largely used
as raw material (51% polymer based rigid packaging) followed by metal and
glass. High polymers demand for packaging is mainly due to rising demand
from speciality chemical, FMCG, food and beverages, pharmaceuticals, etc.
Globally, the industrial packaging (largely rigid packaging like drums,
jerrycans, pails and IBCs) industry is estimated to be ~| 38500 crore in 2016
(grown at ~3% CAGR in 2013-16). Further, global industrial packaging (IP)
industry is likely to grow at 3-4% CAGR till 2020. Growth is expected to be
largely driven by sharp growth in demand of packaging products from
speciality chemicals, petrochemicals, pharmaceuticals, etc. Also, growth
would largely be driven by China, India and other regions in Asia Pacific
due to rising demand from speciality chemical companies.
In volume terms, global demand for industrial packaging (steel + polymer)
grew at ~6% CAGR of which polymer drums recorded ~11% growth in
FY11-16. This was largely led by Asian countries wherein demand for
polymer drums increased rapidly at 14% CAGR in the same period. The
penetration of polymer drums in India is at 55% vs. 10% in rest of Asia. The
Asia Pacific region (excluding India) recorded strong growth in polymer
demand by ~19% vs. ~10% growth in demand from India. This was largely
due to gradual replacement of steel drums with polymer based drums. We
believe, in future demand growth of polymer drums will be largely driven
by Asian countries due to rising demand for polymer drums from speciality
chemical companies in the Asia Pacific region. Also, sacks are gradually
losing market share (due to manual handling process). This will be directly
beneficial for other segment like IBCs and drums.
Exhibit 18: Industrial packaging industry trend
2011 2016 2011 2016 2011 2016
Steel Drums 7.5 10 5.9 90.5 121 6.0 98 131 6.0
Polymer Drums 7.5 12 9.9 5.5 13 18.8 13 25 14.0
Total 15 22 8.0 96 134 6.9 111 156 7.0
IBCs 0.06 0.2 27.2 0.94 1.6 11.2 1 1.8 12.5
Penetration
Steel Drums 50% 45% 94% 90% 88% 84%
Polymer Drums 50% 55% 6% 10% 12% 16%
2011 2016 2011 2016 2011 2016
Steel Drums 98 131 6.0 100 117 3.2 198 248 4.6
Polymer Drums 13 25 14.0 16 23 7.5 29 48 10.6
Total 111 156 7.0 116 140 3.8 227 296 5.5
IBCs 1 1.8 12.5 8 10.2 5.0 9 12 5.9
Penetration
Steel Drums 88% 84% 86% 84% 87% 84%
Polymer Drums 12% 16% 14% 16% 13% 16%
Packaging Products
CAGR %
Packaging Products
CAGR %CAGR %CAGR %
Rest of Asia TotalIndia
CAGR %
Asia
Asia Rest of World Total
CAGR %
Global
Source: Company, ICICIdirect.com Research
Globally, the industrial packaging (largely rigid packaging
like drums, jerrycans, pails and IBCs) industry is estimated
to be ~| 38500 crore in 2016 (grown at ~3% CAGR in
2013-16). Further, the global industrial packaging (IP)
industry is likely to grow at CAGR of 3-4% till 2020
In volume terms, global demand for industrial packaging
(steel + polymer) grew at ~6% CAGR of which polymer
drums recorded growth of ~11% during FY11-16
Global IP market percentage share by 2020
Crates
25%
Drums
21%IBCs
15%
Sacks
25%
Pails
14%
Source: Company, ICICIdirect.com Research
Page 9 ICICI Securities Ltd | Retail Equity Research
India’s rigid packaging industry to grow at 25% in FY15-20E
India being one of the fastest growing nations in the Asia Pacific region
coupled with various demographic advantages will be a direct beneficiary
of a shift in the manufacturing base from China. Also, the country is the
fourth largest producer of the agrochemicals and fertilisers and supplies
finished goods to other parts of the world. India’s industrial packaging
(steel/polymer drums) is pegged at | 2860 crore of which the polymer
drums industry is at | 1445 crore while the rest is contributed by steel
drums. Industrial packaging products demand in India has grown (volume
CAGR of 8% in last five years) on the back of rising demand from the agro-
chemical sector due to an increase in crop yield.
In India, TTL is the largest producer of rigid industrial packaging and
commands ~75% market share along with its subsidiary TPL Plastech. TTL
offers a wide range of products such as HDPE drums, jerrycans, pails and
IBCs, which largely find application in industries like chemicals, paints and
pigments, food & beverages, petroleum, industrial coating, pharmaceutical
etc. According to Ficci, the Indian packaging industry is pegged at US$32
billion (bn) and has grown at 16% CAGR in FY10-15. Of this total size, the
share of the flexible packaging industry is at ~73% (grew at 14% CAGR in
FY10-15) while the contribution of rigid packaging is at ~27% (grew at 21%
CAGR in FY10-15). Further, the Indian packaging industry is expected to
grow at 18% CAGR in FY15-20E to cross the ~US$72-bn mark. Of this,
flexible packaging is expected to grow at 15% CAGR while rigid packaging
is expected to grow at 25% CAGR in FY15-20E.
Exhibit 19: Indian packaging industry to grow at 18% CAGR in FY15-20E
3.38.5
25.912.1
23.3
46.8
15.3
31.71
72.7
-10
10
30
50
70
90
110
FY10 FY15 FY20E
(U
S$ b
n)
Rigid Flexible
CAGR 18%
Source: FICCI, ICICIdirect.com Research
Intermediate bulk container - Big growth opportunity
Global intermediate bulk containers (IBCs) are pegged at | 10,000 crore
while India’s IBC market is at ~10% of the global size. IBCs are large plastic
vessels largely used to store/transport liquid and other materials in bulk. In
capacity terms, IBCs are 4x in size (as big as 1000 litre) compared to normal
polymer drums (that has capacity between 50 litre and 250 litre). Bigger
size, lower manual intervention and durability in transport helps customers
save cost and time. Also, IBCs have a built-in faucet/tap (that is absent in
polymer and steel drums) at the base of the container through which the
liquid content can be withdrawn into smaller containers by attaching pipes.
Further, reusability of IBCs is another factor of rising demand as it is very
easy to clean and store other chemicals. Major clients for this product are
pharmaceuticals, FMCG and solvent companies across the globe.
Historically, demand for IBCs has grown at 27% CAGR (though on a lower
Industrial packaging products demands in India have grown
(volume CAGR of 8% in last five years) on the back of rising
demand from the agro chemical sector to increase the yield
of crop.
In India, TTL is the largest producer of rigid industrial
packaging and commands ~70% volume market share
along with its subsidiary TPL Plastech
The Indian packaging industry is expected to grow at 18%
CAGR in FY15-20E to cross the ~US$72-bn mark. Of this,
flexible packaging is expected to grow at 15% CAGR while
rigid packaging is expected to grow at 25% CAGR in FY15-
20E
Page 10 ICICI Securities Ltd | Retail Equity Research
base) in 2011-16 to 0.2 mn units in India. Demand growth of IBCs is at a
very nascent stage in Asia, India, clearly visible in terms of penetration of
IBCs Asia, India of 15%, 11%, respectively, compared to global average of
85% (excluding Asia). TTL recorded IBCs sales CAGR of ~17% in FY15-17
led by ~19 volume growth. The growth was largely led by domestic
business (grew at ~23% CAGR in FY15-17) while overseas also recorded a
decent sales CAGR of ~12% led volume growth of ~14% in FY15-17. The
company is likely to increase its total IBCs manufacturing capacity by 40%
to 9.6 lakh units by FY18 (largely overseas). We believe capacity addition
coupled with demand from chemical, FMCG and pharmaceutical companies
remaining intact would help drive segment sales CAGR of ~14% to | 443
crore by FY20E. As IBCs are value added products and command EBITDA
margin of ~18%, rising contribution of IBCs in overall sales would drive the
EBITDA margin, going forward.
Exhibit 20: India has great opportunity for IBCs business
Asia
15%
Rest of the
world
85%
10.2 mn
units
1.8 mn
units
India
11%
Rest of
Asia
89%
1.6 mn
units
0.2 mn
units
Source: Company, ICICIdirect.com Research
Growth in speciality chemicals industry across APAC region to drive
industrial packaging segment demand
The speciality chemical industry has remained a key growth driver for
industrial packaging products demand in the APAC region. The global
chemical industry, pegged at US$3.9 trillion in 2015, grew at 3.5% CAGR in
2010-15. Post the economic slowdown in 2006-09, the Asia Pacific region
has become a favourite manufacturing destination for most global chemical
players. According to E&Y, the Asia Pacific region contributed ~61% to
total global chemical sales in 2015 and is pegged at ~US$2.4 trillion.
Further, Asia’s global market share is expected to reach ~65% in 2030 with
average growth rate of 4.2%. Growth will largely be driven by capacity
expansion coupled with rising consumer purchasing power in the Asia
Pacific region.
From 2014 onwards, major chemical manufacturers have shifted their
manufacturing base from China to other South East Asian regions due to
rising labour, transportation & other production costs in China. As a result,
other Asian countries like India, Indonesia, Vietnam, Malaysia and Thailand
are emerging as strategic manufacturing centres with competitive export
positions. If the current trend continues, these countries are likely to
assume an increasingly important role in the global chemical industry,
which will be a key growth driver for the industrial packaging industry.
TTL has recorded IBCs sales CAGR of ~17% during FY15-
17 led by ~19% volume growth. The growth was largely
led by domestic business (grew at CAGR of ~23% during
FY15-17) while overseas have also recorded a decent sales
CAGR of ~12% led volume growth of ~14% during FY15-
17
According to E&Y, the Asia Pacific region has contributed
~61% to total global chemical sales in 2015 and is pegged
at ~US$2.4 trillion. Further, Asia’s global market share
may reach ~65% in 2030 with average growth at 4.2%
From 2014 onwards, major chemical manufacturers have
shifted their manufacturing base from China to other South
East Asian regions due to rising labour, transportation and
other production costs in China
Page 11 ICICI Securities Ltd | Retail Equity Research
Exhibit 21: Global chemical industry market share (country-wise)
RoW
1%
Asia
61%
Europe
17%
Latin America
4%
North America
17%
Source: Company, ICICIdirect.com, Research
Exhibit 22: Asia Pacific region likely to grow at 4.2% CAGR in 2015-19
2344
4387
0
1000
2000
3000
4000
5000
2015 2020F 2025F 2030F
(U
S$ b
n)
CAGR 4.2%
Source: Company, ICICIdirect.com, Research
IP industry highly concentrated among limited players across globe
Globally, the industrial packaging market is highly concentrated with the
presence of only four players viz. TTL (India), Mauser (Germany), Schütz
(Europe), Greif (US). In the global ranking, TTL is in the top position in terms
of polymer drums category while under the IBCs category it is the third
largest player in the world. In India, TTL, along with its subsidiary TPL
Plastech, is a dominant player with ~70% volume market share. The
company has been leveraging 25 years of its existence in the industry by
creating strong relationships with multinational companies over the years.
Exhibit 23: Time Technoplast ranks top in industrial packaging business
Company Polymer Drums IBC
Time Tech 1 3
Mauser 2 2
Schutz 3 1
Greif 4 4
Source: Company, ICICIdirect.com Research
Page 12 ICICI Securities Ltd | Retail Equity Research
Technical, lifestyle & energy storage devices business to grow moderately
Technical, lifestyle & energy (TL&B) business of TTL includes turf & matting,
disposable bins, auto components and energy storage devices. These
businesses contributed ~14% to the consolidated topline in FY17.
Revenues from this segment declined from | 611 crore in FY15 to ~| 392
crore during FY17 as the company sold wholly-owned subsidiary Novotech
Spzoo Poland and Grass Tech SRL Romania (due to lower profitability). This
coupled with a sharp decline in revenue of batteries was due to lower
demand from the telecom sector.
Technical & lifestyle: The technical & life style product category contributed
~9% to consolidated topline in FY17. The products under this division
include automotive component, plastic entrance mats and artificial grass
products, which find application in poultry nest pads, artificial snow slopes,
etc. Apart from this, TTL in collaboration with Netherlands based Schoeller
Allibert is producing pallets, crates and other containers. Through this
service, the company assists customers reduce their supply chain costs
through improved storage efficiency, handling savings and freight cost
reduction. The growth in sales of mats & storage products is largely driven
by economic growth, improved discretionary spending (especially among
middle class) and increasing penetration of organised retail.
Automotive component: TTL manufactures value added plastic auto
components such as anti-spray flaps, plastic fuel tank (PFTs), de-aerating
tanks (DAT), air ducts, etc for use of commercial and passenger vehicles.
The company serves major auto players like Tata Motors, Ashok Leyland,
Eicher Motors, etc in this segment. We believe demand for TTL’s product
would largely be driven by growth in the Indian commercial vehicle market.
The outlook on the domestic CV industry continues to remain stable in the
near-term as a series of measures by the government to revive economic
growth have started yielding results in some key sectors. These include a
pick-up in execution activity in road & highway projects along with cement
consumption and other allied sectors.
Energy Storage Devices: TTL entered the battery business in 2007 by
acquiring Hyderabad based NED Energy to focus on telecom batteries.
Later, the company entered other battery segments like solar battery,
industrial battery and UPS battery as part of the diversification to reduce
dependence on one sector. TTL has signed an agreement with an Indonesia
based company for supply of automobile battery. Currently, telecom battery
contributes ~50% to total battery revenue (reduced from ~80% in FY15)
while the remaining 50% is contributed by solar and other batteries. The
company is also supplying batteries for e-rickshaw and betting on strong
demand from this segment, going forward. We believe the solar battery
business will drive sales of the battery segment supported by
unprecedented growth of renewable energy in India. The Government of
India plans to increase solar based power capacity to 175 GW by the end of
2022 from ~36 GW in FY15. For the first time, India is also planning to
include energy storage (batteries) as a requirement when a solar project is
tendered. The government has made policies easy and friendly to
encourage and implement generation of solar energy, which will boost
solar battery demand, going forward.
Lifestyle product category
Automotive component
Energy storage devices
Page 13 ICICI Securities Ltd | Retail Equity Research
Government infra push to drive PE pipe demand for TTL
TTL is one of the largest players in the high pressure pipe segment, which
contributes ~9% to the topline. The company sells these pipes with the
brand name of Max’m PE pipes with the pressure range of 20-1400 mm.
HDPE pipes are capable of handling semi solid & gaseous effluents and has
unmatched resistance to corrosive chemicals. It is lighter and easy to
handle and install compared to heavier metallic or concrete pipes. Further,
these pipes are 100% leak proof. Therefore, these are preferred over
galvanized, ductile iron (DI) and cement. These pipes are largely used in
industries like irrigation, sewage, effluent, treatment, desalination plant and
power plant.
TTL has expanded its pipe manufacturing capacity by 18000 MT to 30000
MT in FY15-17 due to continuous strong demand from various
infrastructure projects. As a result, sales grew at ~25% CAGR in the same
period owing to a sharp volume CAGR of ~28%. However, the company
recorded a decline in realisation by ~3% during the same period as it has
passed on the benefit of lower raw material prices to its customers. Further,
TTL plans to increase the share of the business by adding more value
added products (VAPs) under the construction and industrial category. This
would help drive the profitability of the business. TTL has recently entered
new product categories in the piping segment called double wall
corrugated (DWC) pipe (up to 800 mm diameter). These products are
technically superior and cost effective solutions for drainage and sewerage
systems over conventional DI & reinforced cement concrete (RMC) pipes.
Exhibit 24: Continuous expansion in piping capacity…
18000
30000
53000
0
10000
20000
30000
40000
50000
60000
FY15 FY17 FY20E
(tonnes/annum
)
CAGR 29%
CAGR 21%
Source: Company, ICICIdirect.com, Research
Exhibit 25: …leads to sharp volume growth
12412
15905
20347
26968.8 34012.5
35897.5
0
5000
10000
15000
20000
25000
30000
35000
40000
FY15 FY16 FY17 FY18E FY19E FY20E
CAGR 28%
CAGR ~21%
Source: Company, ICICIdirect.com, Research
TTL has set up three plants for DWC pipes at Silvassa, Pantnagar and
Hyderabad with a combined capacity of 9000 MT. We believe demand from
the DWC pipe segment would largely be driven by government expenditure
in the water & sewerage industry. There are several ongoing and upcoming
projects in Rajasthan, Karnataka, Uttar Pradesh, Madhya Pradesh,
Telangana, etc, for which tenders are afloat and TTL secured major orders.
As on H1FY18, TTL’s PE and DWC pipes order book is at 12,500 MT (~| 150
crore) and 800 MT (~| 9.2 crore), respectively, which will be executed by
the end of FY18. We believe the piping segment will record revenue CAGR
of 21% in FY17-20E entirely driven by volume growth. Since DWC pipes are
in the initial phase of launch, we believe there would be some pressure on
the realisation front. However, a gradual pick-up in demand, going ahead,
would help the company play on the pricing front. Going forward, DWC
pipes would command a premium of ~300 bps on the EBITDA front
compared to normal PE pipe due to its superior quality.
Page 14 ICICI Securities Ltd | Retail Equity Research
Exhibit 26: Revenue growth to be driven by volume…
151 1
85
235
311
398 422
0
50
100
150
200
250
300
350
400
450
FY15 FY16 FY17 FY18E FY19E FY20E
(|
crore)
CAGR ~25%
CAGR ~22%
Source: Company, ICICIdirect.com Research
Demand driver of pipe segments
Water and sewerage infrastructure development in India has been the key
engine of growth acceleration for the pipe industry. With only ~31% of
India’s population currently urbanised and high population density, India’s
urbanisation trends have significant scope to accelerate. Further, the
country faces immense problem of drinking water supply and has poor
transmission & distribution networks for water. According to government
estimates, the Indian water and sewerage (W&S) market is growing at 10-
12% annually.
Future growth in the W&S segment would largely be driven by th4e
government’s thrust to push various social schemes like Housing for All,
Swachh Bharat Mission, Smart Cities and Atal Mission for Rejuvenation and
Urban Transformation (AMRUT). Further, the Government of India has
allotted over | 1 lakh crore to its ambitious water supply projects both for
drinking and sewage on priority through AMRUT and Smart Cities Mission.
Housing for All: To overcome housing shortage, the government aims to
build six crore houses under its twin schemes: - ‘Pradhan Mantri Gram
Awas Yojana’ for rural areas – four crore houses & ‘Pradhan Mantri Awas
Yojana’ for urban areas – two crore houses. We believe housing shortage
along with lack of proper water management system (sewage/drainage) in
slums creates ample opportunity for Indian piping industry.
Swachh Bharat Mission: Under the scheme, the government has mandated
to provide sanitation and household (urban) toilet facilities in all 4041 towns
with total population of ~38 crore. Further, SBM Gramin (rural mission)
aims to make village Panchayats free of open defecation by 2019. Under the
scheme, the government plans to build ~11 crore toilets at a cost of
~| 1,34,000 crore. We believe lack of sanitation and drinking water facility
at rural and urban households creates a huge opportunity for pipe
manufacturers.
AMRUT: Under the scheme, the government plans to develop basic
infrastructure in select ~500 cities & towns. Total project outlay of funds for
five years (FY16-20) will be | 50,000 crore, to be provided by the central
government. The project would help improve existing basic infrastructure
services like extending clean drinking water supply, improve sewerage
networks, develop seepage management, lay storm water drains, improve
public transport services and create green public spaces like parks, etc.
Page 15 ICICI Securities Ltd | Retail Equity Research
Exhibit 27: Government thrust to push infrastructure to drive demand of PE pipe industry (Budget
allocation)
14008
24130
85969
124107
20010
34211
107757
161978
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
W&S Urban Dev Rural Dev Total
(|
crore)
2016-17 2017-18
43%
42%
25%
31%
Source: Srikalahasti pipes, ICICIdirect.com Research
Focus to increase pie of value added products
Composite cylinder: Driver for future revenue growth
TTL manufactures composite cylinders for distribution of LPG under its
brand “LiteSafe’. It is exporting the same to over 26 countries globally. An
increased focus on safety, ease of use and high corrosion resistance is
strengthening demand for composite LPG cylinders globally. Though steel
cylinders dominate markets due to low price (half the price of composite
cylinders), steel products are susceptible to corrosion, especially in areas
with high levels of humidity, impacting the safety and useful life of
cylinders. Over the years, TTL has received a good response from users
across the world. Hence, it received repeated orders from existing clients.
Though at present the company is exporting cylinders to 26 countries, it
has approval to supply composite cylinders from over 50 countries.
As of now, this product is exported to various overseas markets like Middle
East, Africa and Southeast Asian nations. TTL entered this segment way
back in 2009 by acquiring a controlling stake in Czech Republic based
Kompozit Praha SRO and launched its first product in 2013. The company
has leveraged the manufacturing technology and started production of
composite cylinder in India. Within five years, the company increased its
manufacturing capacity by ~5x to ~14 lakh per annum and, thus, became
the world’s second largest player after Norway based Hexagon Ragasco
[capacity of 2 million (mn) cylinders per annum]. In India, the closest
competitor for TTL is Supreme Industries that has a manufacturing capacity
of ~5 lakh cylinder per annum.
Further, the company has recently completed trial production and testing of
carbon fibre based composite cylinders for CNG for automotive
applications. This has been done for the first time in India. The company
has developed 60 litre & 30 litre non-metallic Type4 composite cylinders.
These LiteSafe composite cylinders offer numerous technical and
operational advantages over steel cylinders. They are explosion proof, less
than one-fourth the weight of steel cylinders, corrosion & rust proof, etc. In
the initial phase of testing, automotive companies have shown an interest in
replacing metal cylinders with composite cylinders to reduce the weight
and improve upon fuel efficiency. These cylinders are likely to find their way
both in the OEM as well as aftermarket. It also has a huge export potential.
TTL is in the process of getting approval from independent third party and
PESO. The company is likely to launch this product by H2FY19 after taking
necessary approval. In India, though oil marketing companies have
recognised the use of composite cylinders, they have not yet come out with
full-fledged tenders as the product is still in the trial phase.
In the last five years, TTL has increased its composite
cylinder manufacturing capacity by ~5x to ~14 lakh per
annum and, thus, became the world’s second largest
player after Norway based Hexagon Ragasco
The company has recently completed trial production and
testing of carbon fibre based composite cylinders for CNG
for automotive applications
Page 16 ICICI Securities Ltd | Retail Equity Research
Globally, ~250 crore metal cylinders are in circulation with average
replacement of ~24 crore cylinders every year. This suggests a market size
of ~US$6.7 billion (bn). In India, there are 16.4 crore LPG consumers who
uses steel made LPG cylinders. Recently, TTL secured an order of
composite cylinder from Reliance Gas, which has for the first time launched
LPG in composite cylinders of 10 kg and 5 kg capacity in Pune,
Maharashtra. This implies a significant addressable opportunity for the
company like TTL in India and abroad.
Exhibit 28: Composite cylinder to replace existing metal cylinder globally
Advantage over steel cylinders Other specifications
Light weight & ergonomic:
Cylinders are designed for easy handling and are 1/3rd lighter then
traditional metal cylinder
Transparent:
cylinders that will make it almost impossible for vendors to deliver lower-
than-promised quantity
Explosion proof:
100% explosion proof. Withstands three times higher pressure than
traditional ones
Non-corrosive:
It does not corrode or have rust marks like steel cylinders
Eco-friendly:
Majority of materials used are recyclable
Range: 2kg-22kg (largest in the world)
Position: Second largest capacity in the world
Users: Household, Industrial, Trawlers, Caravans,
BBQ, Street Cooking
Exporting to: South East Asia, Middle East & Africa
Composite LPG cylinders
Source: Company, ICICIdirect.com Research
Exhibit 29: Capacity addition on strong overseas demand
700000
700000
1400000
1400000
1680000
300000
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
FY15 FY16 FY17 FY18E FY19E FY20E
(unit
s)
CAGR 41%
Source: Company, ICICIdirect.com, Research
Exhibit 30: Strong volume growth in near future owing to fresh demand
102857156279
322494
629000
1015000
1470000
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
FY15 FY16 FY17 FY18E FY19E FY20E
(unit
s)
CAGR 77%
CAGR ~66%
Source: Company, ICICIdirect.com, Research
Exhibit 31: Healthy volume growth to drive revenue in coming future
18.0
34.0
72.0
140.0
222.9
329.0
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
FY15 FY16 FY17 FY18E FY19E FY20E
(|
crore)
CAGR 100%
CAGR 66%
Source: Company, ICICIdirect.com Research
TTL has doubled its composite cylinders manufacturing
capacity to 14 lakh, which would aid the financials of the
company by FY18. We believe doubling the capacity
would drive the volume at a CAGR of 66% in FY17-20E.
However, we believe realisation growth remain muted
owing to the change in product mix
Page 17 ICICI Securities Ltd | Retail Equity Research
Launch of MOX films to benefit TTL in long run
TTL has launched multi layer multi axis oriented cross laminated (MOX)
films under the brand ‘Techpaulin’ during Q1FY18. The company has
appointed over 27 distributors/dealers in Kerala, Andhra Pradesh,
Karnataka, Telangana and Maharashtra in the initial phase while it is in the
process of appointing distributors and dealers in other states. MOX films
find application in various industries like agriculture, infrastructure,
packaging, commercial vehicles, etc. We believe agriculture and related
industry is the main opportunity area for such products. This product
protects food items in grain storage and pond lining. Techpaulin is used to
cover products, thereby protecting them from moisture and dust.
According to the company, the size of the agriculture films market is
pegged at US$8.6 bn in 2015 and is estimated to grow at a CAGR of 6.5% to
cross ~US$12.5 bn by 2021.
At present, TTL has MOX films manufacturing capacity of 6000 MT, which
would double in the next two years. Being a higher margin (~17% vs.
consolidated EBITDA margin of 14.7%) business, the company’s focus is on
increasing sales by adding more dealers across India (currently the product
has a presence across 200 cities in India). We believe the company will
clock revenue of | 184 crore by FY20E in the MOX films category owing to
aggressive capacity addition and expansion in dealer network.
Exhibit 32: Application of MOX films in various industries
Source: Company, ICICIdirect.com Research
Exhibit 33: Capacity addition in next two years
6000
12000
0
2000
4000
6000
8000
10000
12000
14000
FY18E FY20E
(m
etric
tonnes)
Capacity
expansion ~2x
Source: Company, ICICIdirect.com, Research
Exhibit 34: Capacity expansion to lead sharp revenue growth
69
122
154
0
20
40
60
80
100
120
140
160
180
FY18E FY19E FY20E
(|
crore)
CAGR 50%
Source: Company, ICICIdirect.com, Research
We believe agriculture and related industry is the main
opportunity area for MOX films. According to the company,
the size of the agriculture films market is pegged at US$8.6
bn in 2015 and is estimated to grow at a CAGR of 6.5% to
cross ~US$12.5 bn by 2021
Page 18 ICICI Securities Ltd | Retail Equity Research
Diversified client base reduces the risk of dependency
Globally, the company serves over 900 institutional clients. No client
contributes more than ~4% to TTL’s topline. This reduces the risk of
dependency on single clients in case of any adverse situations. Also,
commencement of manufacturing plants near selling markets (18
strategically located plants in India within 300 km range) helps the company
in efficient distribution and inventory management. TTL plans to replicate
the success of its domestic business to other countries by entering into
negotiations with existing MNC clients operating in India. For example, TTL
plans to leverage its years old relation with multinational companies
operating in India and start supplying the same company in other Asian
countries where the penetration of polymer drums is still low.
Exhibit 35: Marquee clientele of TTL
Source: Company, ICICIdirect.com Research
Page 19 ICICI Securities Ltd | Retail Equity Research
Key Financials
Consolidated sales CAGR of 16% in FY17-20E
In the last five years, TTL’s consolidated revenue grew at ~13% CAGR, led
by notable growth in composite cylinders segment (sales CAGR of 100% in
FY15-17). Though consolidated revenues were impacted by discontinuance
of its operations in South Korea and China in FY16, better performance in
other regions helped drive consolidated sales in FY12-17. We believe TTL’s
consolidated sales will grow at ~16% CAGR in FY17-20E mainly driven by
capacity addition in both EPs and VAPs categories. The company plans to
almost double the capacity of its piping division (including DWC) with the
composite cylinder capacity ~2.5x by the end of FY20E from FY17. Further,
under the industrial packaging division, capacity of IBCs is likely to grow at
~12% CAGR while capacity of the plastic segment is likely to grow at a
relatively lower rate of ~6% by FY20E.
We believe the VAPs category will record revenue CAGR of ~40% in FY17-
20E led by capacity addition and launch of new product category. Under the
VAPs category, we believe sales of composite cylinders would continue to
record a strong performance (with sales CAGR of 66% in FY17-20E),
followed by DWC, MOX films and IBCs categories.
EPs category sales are expected to grow at ~11% CAGR in FY17-20E driven
by both the plastic and pipe segment. We believe plastic segment sales will
grow at 11% CAGR in FY17-20E led by better utilisation at the overseas
business (with ~14% revenue CAGR) while the domestic business is likely
to record sales CAGR of ~10% during the same period. Also, the piping
segment is likely to grow at 13% CAGR in FY17-20E mainly driven by
capacity addition.
Exhibit 36: Capacity expansion on the cards ….
195000
18000
300000
540000
0
270000
53000
960000
12000
1680000
Plastic
segement*
Pipes* Composite
Cylinders^
IBCs^ Mox films*
FY15 FY20E
Source: Company, ICICIdirect.com Research, * capacity in MT, ^ capacity in units
Exhibit 37: … to drive future sales growth
1528
2755
3093
3689
4311
0
1000
2000
3000
4000
5000
FY12 FY17 FY18E FY19E FY20E
(|
crore)
CAGR ~13%
CAGR 16%
Source: Company, ICICIdirect.com Research
Exhibit 38: Historical performance of overseas subsidiaries
FY15 FY16 FY17 FY15 FY16 FY17
TPL Plastech Ltd Subsidiaries India 183.2 186.7 180.3 7.6 8.6 11.3
NED Energy Ltd Subsidiaries India 208.3 127.2 143.7 5.1 -0.7 1.8
Elan Incorporated FZE* Subsidiaries Sharjah, UAE 191.0 196.8 216.2 15.4 24.8 29.9
Novo Tech Sp Z O O Subsidiaries Poland 132.8 48.3 0.0 16.1 2.3 -
Kompozit Praha SRO* Subsidiaries Czech Republic - - - - - -
Ikon Investment Holdings Ltd* Subsidiaries Mauritius 36.3 38.1 62.1 -1.4 -1.5 -0.1
GNEXT Investment Holdinig PTE Ltd* Subsidiaries Singapore 426.4 425.5 462.2 2.6 10.1 13.5
Schoeller Allibert Time Holding PTE Ltd* Subsidiaries Singapore 37.5 39.4 35.5 -0.3 0.7 0.9
Time Mauser Industries Pvt Ltd# JV India -0.8 -0.6 0.0
Total 1215.5 1062.2 1099.9 44.2 43.7 57.3
Revenue PATCompany name CountrySubsidiary/JV
Source: Company, ICICIdirect.com Research, * Year End December, # JV, Profit/Loss considered in consolidation
We believe TTL’s consolidated sales are likely to grow at
~16% CAGR in FY17-20E mainly driven by capacity
addition in both EPs and VAPs categories. The company
plans to almost double the capacity of its piping division
(including DWC) with the composite cylinder capacity at
~2.5x by the end of FY20E
Page 20 ICICI Securities Ltd | Retail Equity Research
Rising contribution of VAPs to drive margin, going forward
The key raw material for the company’s entire product segment is High
Density Polyethylene (HDPE), which is a crude oil derivative. TTL fulfils
majority of its requirement (~70%) through imports. However, the
company’s major business is based on a non contractual basis. Hence, any
price movement of raw material is passed on to its customers with
immediate effect. In case of contractual agreement (with limited number of
high profile customers) TTL passes on price hikes with a one-month lag.
We believe the addition of new HDPE/LLDPE manufacturing capacity by
low-cost producers in North America, Middle East and China will result in
oversupply scenario for polyethylene (PE) and polypropylene (PP), which
would keep international prices of HDPE/LLDPE stable in the near future.
Even in India, the price of HDPE/LLDPE is expected to be under pressure on
account of recent capacity addition by key players such as 1) ONGC Petro
Additions Ltd (started its two 360 KTA LLDPE/HDPE swing lines in 2017), 2)
Reliance Industries (RIL), which is also a polyolefins major, is on track to
commence its LDPE and LLDPE/HDPE facilities.
Hence, the consolidated EBITDA margin would largely be driven by rising
contribution of VAPs and increase in utilisation of overseas plants.
Contribution of VAPs in consolidated sales has increased from 11% in FY15
to 13% during FY17. The VAPs category commands higher EBITDA margin
(~300 bps) compared to Eps, which contribute ~87% to the consolidated
topline. We believe new launch and capacity addition in the VAPs product
category would increase topline contribution to 23% by the end of FY20E
resulting in higher EBITDA margin. As a result, we believe the EBITDA
margin will increase ~30 bps in FY17-20E to ~15%. However, aggressive
capacity addition in the lower margin piping segment (excluding DWC)
would restrict any sharp increase in margin, going forward.
Exhibit 39: Steel prices witness uptick in price movement
-
100.0
200.0
300.0
400.0
500.0
600.0
700.0
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
(U
S$/tonnes)
Source: Bloomberg, ICICIdirect.com Research
Exhibit 40: HDPE prices movement remains lacklustre due to oversupply
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Aug-14
Nov-14
Feb-15
May-15
Aug-15
Nov-15
Feb-16
May-16
Aug-16
Nov-16
Feb-17
May-17
Aug-17
($/tonnes)
Source: Crisil, ICICIdirect.com Research
Historically, steel drums were used for packaging industrial products owing
to strength and non-reactive nature with respect to other chemicals. Over
the years, polymer based packaging products demand has seen substantial
growth owing to its quality, strength, competitive prices and durability,
which is better than steel drums. We believe a rise in steel prices (material
of steel drums) would make polymer based packaging products more
attractive. This, coupled with high resale value of polymer drums (~2x of
steel drums) is another critical factor for the increase in demand of polymer
drums in Asian regions.
We believe the new launch and capacity addition in the
VAPs product category would increase the topline
contribution to 23% by the end of FY20E leading to higher
EBITDA margin (commanding ~300 bps higher margin
than EPs)
Page 21 ICICI Securities Ltd | Retail Equity Research
Exhibit 41: Polymer based products relatively better placed than steel based
Parameters Polymer Drums Steel Drums
Weight (for 200 Liters) 8-10kg 15-23kg
Raw Material Polyethylene Steel
Re sales value ~| 500 ~| 250
Reaction Non reactive Non reactive
Transporation Easy Tough
Durability Rust/Dust free Prone to Rust/Dust
Qualtiy
Largely Seamless (hence better positioned
for transportation and difficult material
handling conditions)
Not Seamless (hence needs manual
inervention during transportation)
Source: Company, ICICIdirect.com Research
Exhibit 42: EBITDA margin to improve with rising contribution of VAPs
339 348
404
465
553
646
0
100
200
300
400
500
600
700
FY15 FY16 FY17 FY18E FY19E FY20E
( |
crore)
13
13
14
14
15
15
16
(x)
EBITDA EBITDA margin
Source: Company, ICICIdirect.com Research
Reduction in debt level creates comforts in terms of lower interest outgo
Despite a capex of ~| 300 crore to increase capacity in FY15-17, TTL’s debt
to equity declined from ~0.8x in FY15 to ~0.5x supported by a reduction in
debt level by 11%. The debt reduction happened on the back of a better
operational performance (EBITDA margin increased ~100 bps in FY15-17).
We believe there would be a further debt reduction owing to a better
operational performance, going forward. We model debt/equity of 0.3x by
FY20E resulting in a lower interest outgo.
Exhibit 43: Better operational performance to lead to reduction in debt/equity
104.3
96.2
90.1
83.6 81.678.9
0.0
20.0
40.0
60.0
80.0
100.0
120.0
FY15 FY16 FY17 FY18E FY19E FY20E
(|
crore)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90(x)
Interest cost Debt/Equity
Source: Company, ICICIdirect.com Research
TTL is likely to record EBITDA CAGR of ~17% in FY17-20E
owing to stable raw material prices and increase in
utilisation of the overseas business
Despite a capex of ~| 300 crore to increase the capacity
during FY15-17, TTL’s debt to equity declined from ~0.8x
in FY15 to ~0.5x supported by a reduction in debt level by
11%
Page 22 ICICI Securities Ltd | Retail Equity Research
Strong sales, EBITDA growth to drive PAT at CAGR 25% in FY17-20E
TTL has recorded a strong PAT CAGR of ~16% in FY15-17 supported by
moderate revenue growth (owing to divestment in overseas subsidiary),
expansion in EBITDA margin and lower interest outgo. We believe a further
increase in margin (owing to higher contribution by VAPs) and saving in
interest outgo (due to reduction in debt level) would drive PAT at a CAGR of
25% in FY17-20E.
Exhibit 44: Better EBITDA margin, lower interest outgo to drive PAT, going forward
110
138
147
182
237
288
0
50
100
150
200
250
300
350
FY15 FY16 FY17 FY18E FY19E FY20E
(|
crore)
CAGR 16%
CAGR 25%
Source: Company, ICICIdirect.com Research
Exhibit 45: Asset turnover to improve gradually with increase in utilisation of overseas business
1.41.5 1.5 1.5
1.7
1.8
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
FY15 FY16 FY17 FY18E FY19E FY20E
(x)
Source: Company, ICICIdirect.com Research
We believe a further increase in margin (owing to higher
contribution by VAPs) and saving in interest outgo (due to
reduction in debt level) would drive PAT at a CAGR of 25%
in FY17-20E
Fixed assets turnover of TTL has been stagnant in FY15-17
wherein the company divested its South Korean and
Chinese businesses. We believe the turnover will increase
gradually with the increase in utilisation of overseas plant
and stabilisation of new units, going forward
Page 23 ICICI Securities Ltd | Retail Equity Research
Better earnings growth to lead to expansion in return ratios
We believe a rising proportion of value added products in consolidated
sales would help TTL improve its debt/equity ratio further from here on. In
addition to this, an increase in utilisation of overseas business would also
aid the profitability, thus reducing the working capital requirements, going
forward. Increase in profitability coupled with a reduction in debt level
would translate into an increase in RoCE, RoE, going forward.
Exhibit 46: Increase in utilisation of overseas business to help improve working capital cycle,
going forward
27
32
34
3231 31
0
5
10
15
20
25
30
35
40
FY15 FY16 FY17 FY18E FY19E FY20E
(%
)
Net working capital (Excl cash) % of sales
Source: Company, ICICIdirect.com Research
Exhibit 47: Return ratios to improve with increase in profitability
13 1314
15
1718
11 1011
13
1415
0
2
4
6
8
10
12
14
16
18
20
FY15 FY16 FY17 FY18E FY19E FY20E
(%
)
RoCE RoE
Source: Company, ICICIdirect.com Research
We believe increase in utilisation of overseas business
would also aid profitability, thus reducing the working
capital requirements
Higher asset turnover coupled with improvement in margin
would help drive return ratios, going forward. This would
also be aided by a reduction in debt from current level
Page 24 ICICI Securities Ltd | Retail Equity Research
Risk & concerns
Volatility in raw material prices
The principal raw materials that are used in manufacturing products are PE
granules (HDPE, LLDPE, PE). These products are largely imported. These
raw materials have historically exhibited price and demand cyclicality.
Some of these materials have been, and may in future also be, in short
supply. For example, availability of these raw materials and/or TTL’s ability
to purchase and transport these raw materials may be unexpectedly
disrupted by adverse weather conditions, natural disasters or a substantial
economic downturn in industries that provide any of those products.
Hence, in case of any disruption (increase in import price or fluctuations in
foreign currency rates) margins of the company can be affected severally.
Exhibit 48: EBITDA margin movement with respect to HDPE price
1228
1357 1370
14891443
11991148
0
200
400
600
800
1000
1200
1400
1600
FY11 FY12 FY13 FY14 FY15 FY16 FY17
(U
S$/tonne)
0
2
4
6
8
10
12
14
16
18
20
(%
)
HDPE EBITDA margin
Source: Company, ICICIdirect.com Research
Growth in VAPs category not panning out...
We believe contribution of the VAPs category to the topline would increase
from 13% in FY17 to 23% by FY20E led by strong growth in composite
cylinders and newly launched products. However, a below expected
performance of VAPs category along with higher contribution of EPs in
topline would lead to muted topline, bottomline growth. Also, a higher
proportion of EPs category in the topline would lead to a deterioration in
the margin profile (EPs category EBITDA margin of ~14% vs. VAPs
category EBITDA margin of ~17%) and return ratios (as EPs products
category is capital intensive in terms of higher working capital requirement)
of the company.
Risk associated with overseas operations
TTL’s overseas operations contribute ~30% to the consolidated topline
while the domestic business has made considerable investment (~| 150
crore as on FY17) in its overseas subsidiaries/JVs. However, operations in
major geographies like Middle East and South East Asian countries may
face severe challenges in case of inflationary pressure,
geopolitical/economic uncertainties and any competition.
Favourable steel prices may hurt manufacturer of polymer drums
Since steel drums are still largely used products across the world while
polymer based drums, pails, jerrycans are catching up, growth is based on
various qualities including prices. However, any sharp correction in steel
drum prices could make it more competitive than polymer drums (steel
prices declined 36% YoY in FY16 vs. HDPE prices that declined ~17%
YoY). However, steel prices recovered sharply in FY17 whereas HDPE
prices remained lower during FY17).
Page 25 ICICI Securities Ltd | Retail Equity Research
Valuation
We believe TTL’s established product category will grow at a CAGR of
~11% in FY17-20E, mainly driven by ~13% sales CAGR of the piping
segment. Replacement demand and increase in utilisation level of overseas
business would help drive the growth of the industrial packaging business.
On the other hand, doubling the capacity and new product launches under
the VAPs category would help register strong segment revenue CAGR of
~40% in FY17-20E. The motive behind increasing the revenue proportion
of VAPs category is to drive the profitability of the business. The EBITDA
margin of VAPs products is higher by ~300 bps compared to established
products. This, coupled with no plan to increase the debt level from current
levels, would keep the interest burden lower for TTL, going forward.
Capacity expansion, rising proportion of VAPs, increase in overseas
utilisation and lower interest outgo would help consolidated sales, earning
to grow at a CAGR of ~16%, ~25%, respectively, in FY17-20E. This would
further help improve return ratios (RoE, RoCE to ~15%, ~18%,
respectively).
Historically TTL has traded at lower valuations owing to lower sales growth,
high debt level and lower return ratios. We believe FY16-17 proved to be
fruitful for the company in terms of exit from low-growth geographies,
introduction of higher margin products and reduction of debt level. Further,
though there is no direct competition for TTL, we have compared valuations
with other packaging companies with the same business model (Mold Tek
and Essel Propack). We expect a revival in the business of TTL owing to
major government infrastructure push, continued replacement demand of
industrial products and increase in proportion of higher margin products in
topline. Moreover, a better economic scenario would lead to a further re-
rating of the stock. We value the company on an EV/EBITDA basis by
ascribing EV/EBITDA multiple of 9x FY20E EBITDA. We initiate coverage on
the stock with a BUY recommendation with a target price of | 230/share.
Exhibit 49: One year forward P/E band (x)
0
50
100
150
200
250
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
5x
10x
15x
20x
Source: Company, ICICIdirect.com Research
Exhibit 50: One year forward EV/EBITDA band (x)
0
1000
2000
3000
4000
5000
6000
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
4x
6x
8x
10x
Source: Company, ICICIdirect.com Research
Exhibit 51: Valuation matrix of competitors
FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 FY17E FY18E FY19E FY17E FY18E FY19E
Essel Propack 4759 2388 2512 2857 421 488 569 196 197 232 18 17 18 18 19 18 1.0 0.6 0.7 24 24 20 13 11 9
Mold-Tec pack 886 308.3 360.9 428.9 53 62 75.9 27 31 41.5 20 20 20 22 19 21 0.2 0.2 0.3 35 28 21 18 15 12
Time Techno 5843 2755 3093 3689 404 465 553 147 182 237 11 10 11 13 13 14 0.8 0.5 0.5 29 23 18 12 10 9
RoCEPeer group
Net Profit ROEMcap
(| Cr)
D/E P/E EV/EBITDASales EBITDA
CY14 CY15 CY16 CY14 CY15 CY16 CY14 CY15 CY16 CY14 CY15 CY16 CY14 CY15 CY16
5Yr
Avg CY17E CY18E CY19E
5Yr
Avg CY17E CY18E CY19E
Greif Inc 2877 4220 3617 3324 405 327 353 92 72 74.9 8 7 8 1.0 1.2 1.1 12.9 17.6 23.2 16.7 9 10 9 9
RoE D/EInternational
peer
EV/EBITDAEBITDAMcap
(USD
mn)
PESales Net Profit
Source: Bloomberg, ICICIdirect.com Research
Page 26 ICICI Securities Ltd | Retail Equity Research
Exhibit 52: Income statement (| crore)
Year end March FY16 FY17 FY18E FY19E FY20E
Net sales 2422.7 2754.6 3092.8 3689.0 4311.5
Expenditure
Raw material 1693.0 1919.4 2152.5 2582.3 3018.0
Employee Expenses 118.1 133.2 141.3 155.7 181.4
Other Expenses 263.8 297.8 334.0 398.4 465.6
Total expenditure 2074.9 2350.4 2627.9 3136.4 3665.1
EBITDA 347.8 404.2 464.9 552.6 646.4
Other income 2.1 2.2 2.6 2.9 3.2
EBITDA (incl. other income) 350.0 406.5 467.6 555.5 649.6
Depreciation 98.8 115.5 133.0 151.2 181.1
EBIT 251.1 291.0 334.6 404.3 468.5
Interest 96.2 90.1 83.6 81.6 78.9
PBT before Exc. Items 154.9 200.9 251.0 322.7 389.6
Less: Exc. Items -19.5 0.0 0.0 0.0 0.0
PBT after Exc. Items 174.4 200.9 251.0 322.7 389.6
Tax 32.6 49.4 64.0 82.1 97.3
PAT 138.1 147.1 182.3 236.7 287.6
Source: Company, ICICIdirect.com Research,
Exhibit 53: Balance sheet
X
Year end March FY16 FY17 FY18E FY19E FY20E
share capital 21.0 22.6 22.6 22.6 22.6
Reserve and Surplus 1147.2 1303.9 1430.3 1652.8 1926.1
Total Shareholder's Fund 1168.2 1326.5 1452.9 1675.4 1948.8
Total Debt 601.1 631.0 641.0 611.0 571.0
Deferred Tax liability 39.1 47.1 47.1 47.1 47.1
Minority Interest 76.1 38.4 38.4 38.4 38.4
Total Assets 1884.5 2043.0 2179.4 2371.9 2605.2
Gross Block 1638.0 1833.8 2067.8 2217.8 2387.8
Accumulated Depreciation 617.0 733.4 866.4 1017.6 1198.7
Net Block 1021.1 1100.4 1201.4 1200.2 1189.1
Capital WIP 70.7 86.9 86.9 86.9 86.9
Total Fixed Assets 1091.8 1187.4 1288.4 1287.1 1276.0
Investments 17.6 16.8 16.8 16.8 16.8
Current Assets
Inventory 483.5 547.3 593.1 656.9 767.8
Debtors 491.7 578.2 610.1 727.7 826.9
Other Current Assets 145.3 185.5 216.5 258.2 323.4
Cash 64.2 56.2 45.2 119.5 145.6
Total Current Assets 1184.7 1367.2 1464.9 1762.4 2063.6
Current Liabilities
Creditors 322.7 345.7 406.7 464.9 543.4
Provisions 12.7 17.0 20.0 22.9 26.8
Other current liabilities 199.9 165.6 163.9 206.6 181.1
Total Current Liabilites 535.4 528.4 590.7 694.4 751.2
Total Liabilities 1884.5 2043.0 2179.4 2371.9 2605.2
Source: Company, ICICIdirect.com Research,
The consolidated topline of the company is expected to
grow at a CAGR of ~16% in FY17-20E to led by strong
VAPs segment performance
TTL has no major plan to add debt on the balance sheet
as the major capex has been over by FY17. Also, we
believe a large part of the capex is only for maintenance.
Decline in debt level helped in reducing debt/equity from
0.8x in FY15 to 0.3x in FY17
Page 27 ICICI Securities Ltd | Retail Equity Research
Exhibit 54: Cash flow statement
Year end March FY16 FY17 FY18E FY19E FY20E
Profit/(Loss) after taxation 138.1 147.1 182.3 236.7 287.6
Add: Depreciation & Amortization 98.8 115.5 133.0 151.2 181.1
Add: Interest Paid 96.2 90.1 83.6 81.6 78.9
CF bef working capital chg. 333.2 352.7 398.8 469.5 547.6
Net Increase in Current Assets -70.2 -190.5 -108.8 -223.2 -275.1
Net Increase in Current Liabilities 150.2 -7.0 62.3 103.7 56.8
Net CF from operating act. 413.2 155.2 352.4 350.1 329.2
(Purchase)/Sale of Fixed Assets 6.0 -211.1 -234.0 -150.0 -170.0
Others -117.3 96.8 0.0 0.0 0.0
Net CF from Investing act. -111.3 -114.2 -234.0 -150.0 -170.0
Pro/(Rep) of debt -203.3 29.9 10.0 -30.0 -40.0
Payment of Div & Div tax -12.9 -14.2 -14.2 -14.2 -14.2
Int. paid -96.2 -90.1 -83.6 -81.6 -78.9
Net CF from Financing act -306.8 -49.0 -129.4 -125.8 -133.1
Net Cash Flow -4.9 -8.0 -11.0 74.3 26.1
Cash & Cash Equi at beg 69.1 64.2 56.2 45.2 119.5
Cash & Cash Equi at end 64.2 56.2 45.2 119.5 145.6
Source: Company, ICICIdirect.com Research,
Exhibit 55: Ratio analysis
Year end March FY16 FY17 FY18E FY19E FY20E
EPS 6.1 6.5 8.1 10.5 12.7
Cash EPS 10.5 11.6 13.9 17.2 20.7
DPS 0.6 0.6 0.6 0.6 0.6
BV per share 51.7 58.7 64.2 74.1 86.2
Profitabilitiy Ratio
EBITDA Margin 14.4 14.7 15.0 15.0 15.0
PAT Margin 5.0 5.3 5.9 6.4 6.7
Return Ratio
RoCE 13.3 14.2 15.4 17.0 18.0
RoE 10.5 11.1 12.5 14.1 14.8
RoIC 13.7 14.0 15.0 16.9 18.2
Valuation Ratio
P/E 30.8 28.9 23.3 18.0 14.8
EV/EBITDA 13.8 11.9 10.4 8.6 7.2
Mcap/Sales 1.8 1.5 1.4 1.2 1.0
Price to BV 3.6 3.2 2.9 2.5 2.2
Activity Ratios
Inventory Days 72.8 72.5 70.0 65.0 65.0
Debtors Days 74.1 76.6 72.0 72.0 70.0
Creditors Days 48.6 45.8 48.0 46.0 46.0
Gross Block Turnover 1.5 1.5 1.5 1.7 1.8
Solvency Ratios
Debt/Equity 0.5 0.5 0.4 0.4 0.3
Debt/Ebitda 1.7 1.6 1.4 1.1 0.9
Current Ratio 3.3 3.6 3.3 3.4 3.4
Quick Ratio 1.9 2.1 1.9 2.0 2.0
Source: Company, ICICIdirect.com Research,
We expect the improvement in RoE and RoCE considering
1) healthy topline growth backed by capacity expansion
plan, 2) recovery in operating margin and 3) efficient
working capital management turning lower debt/equity
ratio
Page 28 ICICI Securities Ltd | Retail Equity Research
ANALYST CERTIFICATION
We /I, Abhishek Shindadkar, MBA and Hardik Varma, MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report
accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or
view(s) in this report.
Terms & conditions and other disclosures:
ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is
a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general
insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securitiesis is under no obligation to update or keep the information
current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended
temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
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This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
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ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
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Page 29 ICICI Securities Ltd | Retail Equity Research
ANALYST CERTIFICATION
We /I, Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance); Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research
report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s)
or view(s) in this report.
Terms & conditions and other disclosures:
ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities
Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has
its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which
are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
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