time technoplast ltdtime has acquired technologies to develop two new products, composite cylinder...

Time Technoplast Ltd

Enhancing investment decisions

Initiating coverage

Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process –

Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental

grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The

valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to

grade 1 (strong downside from the CMP).

CRISIL Fundamental Grade

Assessment CRISIL Valuation Grade

Assessment

5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)

4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)

3/5 Good fundamentals 3/5 Align (+-10% from CMP)

2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)

1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP)

Analyst Disclosure Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest

that can bias the grading recommendation of the company. Disclaimer: This Company-commissioned Report (Report) is based on data publicly available or from sources considered reliable. CRISIL Ltd.

(CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / Report are

subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this Report. Nothing

in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assumes

the entire risk of any use made of this data / Report. CRISIL especially states that it has no financial liability, whatsoever, to the

subscribers / users of this Report. This Report is for the personal information only of the authorized recipient in India only. This

Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person – especially

outside India or published or copied in whole or in part, for any purpose.

CRISIL EQUITIES | 1

January 04, 2011 Fair Value Rs 71 CMP Rs 58

Fundamental Grade 4/5 (Strong fundamentals)

Valuation Grade 5/5 (CMP has strong upside)

Industry Information technology

Polaris Software Limited

Business momentum remains intact

Fundamental Grade 4/5 (Superior fundamentals)

Valuation Grade 4/5 (CMP has upside)

Industry Containers & Packaging

Time Technoplast Ltd Focussed value add to business

Time Technoplast (Time) is a leading manufacturer of polymer-based products with varied applications. Beginning with industrial packaging products such as drums and containers, it has subsequently moved into other polymer-based applications and also grown through acquisitions and joint ventures in India, Europe, UAE and Thailand. We expect Time to grow significantly based on healthy growth in the industrial packaging business, expansion into new Asian markets, and the launch of new products. We assign Time a fundamental grade of ‘4/5’, indicating that its fundamentals are ‘superior’ relative to other listed securities in India.

Growth in user industries to drive demand for industrial packaging Being a market leader with a 75% share in industrial packaging, Time is set to benefit from ~15-17% growth in the end-user industries, especially with consumption likely to improve with the trend to replace metals with plastics. We expect the domestic industrial packaging revenues to grow at a three year CAGR of 19% from FY10-13.

Asian expansion accelerates growth, to compete with global players After achieving market leadership in India, Time is expanding into other Asian countries with (a) an acquisition in Taiwan, (b) the acquisition of YPA, the second largest player in Thailand and (c) two Greenfield projects in Tianjin and Guangzhou in China. Although its foray into the Asian markets will provide opportunities for growth given low penetration of polymers, there will be challenges too. Time’s ability to replicate its historical success in these new markets will be a key monitorable.

New products in the offing; market acceptance a key monitorable Time has acquired technologies to develop two new products, composite cylinder and material handling products, which should accelerate growth. It acquired Komposite Praha (based in the Czech Republic), which is one of the two global companies manufacturing composite gas cylinders. Time also entered into a joint venture with Schoeller Arca, the global leader in material handling products. However, the market acceptance of the products remains a key monitorable.

Expect three-year revenue CAGR of 25%; EPS to almost double We expect consolidated revenues to register a three-year CAGR of 25% to Rs

19.5 bn in FY13 largely driven by growth in the industrial packaging segment and its foray into new markets. PAT is expected to grow from Rs 909 mn in FY10

to Rs 1,751 mn in FY13, driven by healthy revenue growth and stable margins. EPS is expected to almost double from Rs 4.3 in FY10 to Rs 8.4 in FY13.

Valuations – current market price has ‘upside’ We have used the discounted cash flow method to value Time and arrived at a fair value of Rs 71 per share. This fair value implies multiples of 10.0x FY12E and 8.4x FY13E earnings. We initiate coverage on Time with a valuation grade of ‘4/5’.

KEY FORECAST

(Rs mn) FY09 FY10 FY11E FY12E FY13E Operating income 7,834 10,003 12,124 16,542 19,525 EBITDA 1,559 1,952 2,360 3,186 3,761 Adj PAT 690 909 1,026 1,478 1,751 Adj EPS-Rs 3.3 4.3 4.9 7.1 8.4 EPS growth (%) (9.6) 30.1 13.7 44.1 18.4 Dividend yield 1.6 1.0 0.8 1.2 1.4 RoCE (%) 18.2 17.5 16.5 18.4 17.9 RoE (%) 15.3 17.1 16.4 20.0 19.8 PE (x) 9.9 13.3 11.8 8.2 6.9 P/BV (x) 1.4 2.1 1.8 1.5 1.3 EV/EBITDA (x) 6.2 8.4 7.7 6.4 5.7

Source: Company, CRISIL Equities estimate NM: Not meaningful; CMP: Current Market Price

CFV MATRIX

KEY STOCK STATISTICS NIFTY / SENSEX 6158 /20561

NSE / BSE ticker TIMETECHNO

/TIMETECNO

Face value (Re per share) 1

Shares outstanding (mn) 209

Market cap (Rs mn)/(US$ mn) 12,127 / 271

Enterprise value (Rs mn)/(US$ mn) 16,093/360

52-week range (Rs) (H/L) 65/ 43

Beta 1.07

Free float (%) 37.9%

Avg daily volumes (30-days) at NSE 229,448

Avg daily value (30-days) (Rs mn) 13.3

SHAREHOLDING PATTERN

PERFORMANCE VIS-À-VIS MARKET

Returns

1-m 3-m 6-m 12-m

TIME -7% 9% 14% 14%

NIFTY 3% 0% 18% 18%

ANALYTICAL CONTACT Sudhir Nair (Head) [email protected]

Charulata Gaidhani [email protected]

Bhaskar Bukrediwala [email protected]

Client servicing desk

+91 22 3342 3561 [email protected]

1 2 3 4 5

1

2

3

4

5

Valuation Grade

Fu

nd

am

en

tal G

rad

e

Poor Fundamentals

ExcellentFundamentals

Str

on

gD

ow

nsi

de

Str

on

gU

psi

de

62% 62% 62% 62%

12% 12% 12% 11%

4% 4% 4% 5%

21% 22% 22% 21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec-09 Mar-10 Jun-10 Sep-10

Promoter FII DII Others

CRISIL EQUITIES | 2


Table: 1 Time: Business environment

Product /

Segment Industrial packaging

Infrastructure

products

Lifestyle products

Automotive

components and

others

New products

(composite

cylinders and

material handling

products)

Revenue

contribution

(FY10)

61% 20% 9% 10% 0%

Revenue

contribution

(FY13)

59% 18% 11% 6% 6%

Product /

service

offering

Manufacturing of

polymer drums, barrels

and containers,

Intermediate bulk

containers (IBCs). These

are used in the

chemicals, specialty

chemicals, paints and

FMCG industries

Manufacturing of pipes

used for water

treatment and sewage

projects, telecom, UPS

and other industrial

batteries, prefabs &

shelters

Turfs and mattings Anti spray rain

flaps made of

polymers, fuel

tanks, de-aeration

tanks.

Composite Cylinders

made of polymers,

material handling

products like crates,

pallets, bins

Geographic

presence

India, UAE, Thailand,

Taiwan. Moving to China,

Indonesia and South

Korea. India contributes

~89% of total revenues

of this segment

India, Bahrain India, Europe,

Thailand

India, Europe India, Middle East,

Europe

Market

position

Market leader with

~75% market share

Few players in the

batteries business.

Highly fragmented

industry with large

number of

unorganised players.

The company

works directly

with the

automobile

manufacturers

These products,

mainly the composite

cylinders, are new

and will take time to

gain acceptance.

Currently composite

cylinders made of

polymers is used to

some extent in

Europe and the

Middle East

Industry

growth

expectations

End-user industry to

grow at 15%-17%

Flattish growth in

telecom batteries.

Pipes business to show

robust growth driven

by spending in water

infrastructure

~10-12% Drive by demand

in auto industry

which is expected

to grow at 12-

13% over the

next –four-five

years

Sales growth

(FY08-FY10

– 2-yr CAGR)

18% 27% 17% 1% n.m.

Sales

forecast

(FY10-FY13

– 3-yr CAGR)

25% 16% 36%

(driven by organic

and inorganic growth)

8% n.m.

Demand

drivers

• Packaging for end-user

industry

• Replacement demand

from metal to plastics

• Infrastructure spend

on water treatment

projects

• Replacement of

ductile iron pipes

with polymers

• Rising income levels

• Increase in

construction activity

for housing and

commercial

properties leads to

more spends on

interiors.

• Acceptance of

innovative

polymer

products in the

automotive

sector in India

and Europe

• Government thrust

towards use of

composite cylinders

• Retail penetration

will drive demand

for material

handling

CRISIL EQUITIES | 3


Key

competitors

Balmer Lawrie Van Leer,

Balmer Lawrie, Sintex

Industries

Jain Irrigation

Supreme Industries

Highly fragmented

industry with large

number of

unorganised players.

Innovative hence

no competitor

There are currently

only two players

including Time, who

have the technology

to manufacture

composite cylinders

from polymers;

Schoeler is the

largest player in

material handling.

Time has entered into

a JV with them in

India

Key risks • Slowdown in end-user

industries

• Lack of higher

penetration in

international markets

of China, Taiwan,

Indonesia and South

Korea

• Competition • Competition from

the unorganised

segment

• Slowdown in

automotive

sector in India

and Europe

• Lack of government

push

Source: Company, CRISIL Equities

CRISIL EQUITIES | 4


Grading Rationale

A technology-based polymer product player

Time is a leading manufacturer of a range of polymer-based products. Over a

period of time, it has acquired and developed technologies to make polymer-

based value-added products and has successfully substituted metals with

polymers.

The company started with manufacturing industrial packaging products such as

drums, barrels, containers and subsequently moved to other products.

Currently, its portfolio consists of products catering to industry segments like

industrial packaging, lifestyle products, infrastructure products, automotive

components and healthcare products. Of these, industrial packaging is the

largest contributor to revenues - 61% - followed by infrastructure (20%) and

lifestyle products (9%).Time conducts its business under two segments namely

polymer products and composite products. Although a majority of the business

comes from India, Time has crossed the borders into other parts of Asia and

Europe.

Figure 1: Segment-wise revenue break-up (FY10) Figure 2: Segment-wise profitability break-up (FY10)

Source: Company, CRISIL Equities Source: Company, CRISIL Equities

Continuously adding and innovating new products

Time has consistently been adding and innovating products. From initially

manufacturing industrial packaging products, it has expanded its basket to

include batteries, pipes, lifestyle and automotive products, and very recently –

composite cylinders and material handling products. To expand the portfolio,

Time either took the acquisition route or acquired the necessary technology

through a tie-up or joint venture to manufacture the products. A strong R&D

team is at the helm of all efforts to innovate products and identify opportunities

to replace metals with polymers, especially in high performance areas.

Composite products,

22%

Polymer products,

78%

Composite products,

23%

Polymer products,

77%

Industrial packaging is

the largest contributor to

revenues - 61%

CRISIL EQUITIES | 5


Table 2: Time has continuously added new products to portfolio

Year Products Self development/acquisition

1992 Drums & containers Self developed

1993 Large drums and barrels Through technology tie-up with Mauser, Germany

1998 Lifestyle products (entrance mattings) Self developed

2000 Consumer packaging- PET sheet & conical pails Self developed

2004 Intermediate bulk containers (IBCs) JV with Mauser

2005 Anti-spray rain flaps Self developed

2006 Healthcare products Self developed

2007 Telecom batteries Through acquisition of Ned Energy

2008 Industrial batteries Through acquisition of Gulf Powerbeat, Bahrain

2009 Pipes Self developed

2009 Composite cylinders Through acquisition of Komposite Praha, Czech Republic

2010 Returnable material handling JV with Schoeller Arca, the Netherlands


Market leader in industrial packaging

Time is the largest player in polymer-based industrial packaging with a market

share of 75%. The company manufactures a range of polymer drums, barrels

and IBCs used in the packaging of products in end-user industries such as

chemicals, specialty chemicals, FMCG, construction chemicals, paints,

pharmaceuticals and others. Although the company primarily grew organically, it

acquired the second best player, TPL Plastech, from the Tainwalla Group in

2006, which further strengthened its market position.

A pioneer in polymer-based packaging

Initially, packaging products (barrels, drums and containers) for liquids, used by

the chemical, specialty chemicals, pharmaceuticals and other industries, were

mainly made of metals. Time was the first in the market to introduce polymer-

based industrial packaging for liquids and gradually over the years it has been

successful in replacing metal-based packaging with polymers.

Polymer-based packaging scores over metals

Currently, 50% of industrial packaging products are polymer-based while the

rest are still metallic. Polymer offers various benefits: a) lower weight; b) higher

resale value of polymer containers; and c) higher quality since the

containers/barrels produced are seamless and, hence, better equipped for

transportation and difficult material handling conditions; many products are

sensitive or hazardous in nature and, hence, safety of the materials in transit is

of prime importance to end-users.

Table 3: Polymer packaging score over metals- Drums (200 litre)

Parameters Plastic (PE) Metal

Weight 8.5 kg 20 kg

Raw material Polyethylene (PE) Steel

Material cost/ kg Rs 75 Rs 35

Yield/mt 117 drums 51 drums

Raw material cost Rs 640 per drum Rs 700 per drum

Re- sale value Rs 550-600 Rs 250-300


CRISIL EQUITIES | 6


Technology tie-up with Mauser provides the edge

Time tied up with Germany’s Mauser, a leading industrial packaging player, in

1993 to get the technology for making large barrels and containers in return for

fixed royalty. In the packaging business for more than a century, Mauser has

been innovating packaging solutions designed for the safety of hazardous

chemicals to suit industry requirements.

Time has also entered into a 49-51 JV with Mauser – Time Mauser Industries

Pvt. Ltd. - for manufacturing and marketing IBCs in India. IBCs are large

containers of ~1,000 litres used for packaging chemicals and specialty

chemicals, and are used for long-distance transportation of hazardous

chemicals.

Strong and diversified clientele

Time has close to 500 clients in the industrial packaging space and is not

dependent on any one client (the top 10 customers constitute ~25% of its

industrial packaging revenues). A strong relationship with clients ensures repeat

business; 90% is repeat business. The company has set up manufacturing

facilities across India (24 units in 13 locations) in proximity to its end-users in

order to lower the lead time. Also, since there is a high amount of freight

component involved in transporting these packaging products, it is cost

advantageous.

Figure 3: Time’s manufacturing units across India


Plant location: Kolkata, West Bengal

Plant location: Panthnagar, Uttarakhand

Plant location: Baddi, Himachal Pradesh

Proposed Plant Location:Bhuj, Gujarat

Plant Location: Ahmedabad,Gujarat

Plant location: GummdiPoondi, Tamil Nadu

Plant location: Hyderabad, Andhra Pradesh

Plant location: Jammu, Jammu & Kashmir

Plant Location:Panoli, Gujarat

Plant Location: Daman and Silvassa,Gujarat

Plant Location: Mahad,Maharashtra

Plant location: Pen, Maharashtra

Plant location: Hosur, Tamil Nadu

Clients: India Glycols Ltd,

Galaxy Surfactants Ltd,

Jubilant Organosys Ltd,

BASF India Ltd, Clariant

Chemicals (I) Ltd

CRISIL EQUITIES | 7


Built up relationships with plants close to end users

Given Time’s leadership position, pan-India manufacturing facilities and superior

quality of products, it has built up strong relationships with clients. Even though

the company is vulnerable to raw material price fluctuation because its raw

materials (polyethylene and polypropylene) are crude oil-based, Time has been

able to pass on raw material hikes to its clients. With plants close to the end

users, Time has developed a win-win strategy with its clientele. Over the past

five years, it has maintained its EBITDA margin in the range of 20% despite

fluctuation in raw material prices. Figure 4: EBITDA margins have been fairly stable Figure 5: ...despite fluctuation in raw material prices


End-users to drive demand for industrial packaging

Demand for industrial packaging is driven by growth in end-user segments such

as chemicals, specialty and construction chemicals, FMCG, paints,

pharmaceuticals and lube oils.

Figure 6: End-user industries for industrial packaging

Source: CRISIL Equities

The end-user industries have grown at a healthy rate in the past few years

driven by increased consumer spending. After a slowdown in 2009, growth has

picked up with improvement in the Indian economy. While the chemicals

industry grew at ~15%, the specialty segment grew faster at ~20% in FY10.

19.8%

19.3%

21.5%

19.9%

19.5%

18.0%

18.5%

19.0%

19.5%

20.0%

20.5%

21.0%

21.5%

22.0%

FY06 FY07 FY08 FY09 FY10

EBITDA Margins

40000

50000

60000

70000

80000

90000

100000

110000

Apr-

05

Jul-

05

Oct

-05

Jan-0

6

Apr-

06

Jul-

06

Oct

-06

Jan-0

7

A pr-

07

Jul-

07

Oct

-07

Jan-0

8

A pr-

08

Jul-

08

Oct

-08

Jan-0

9

A pr-

09

Jul-

09

Oct

-09

Jan-1

0

Apr-

10

Jul-

10

Oct

-10

(Rs/Tonne)

HDPE Landed Cost (Rs/tonne)

Specialty Chemicals, 31%

FMCG, 29%

Paints & Inks, 12%

Pharmaceuticals and Interm, 5%

Construction Chemicals &

Adhesive, 13%

Lube Oils & Additives, 5%

Food, 3%

Others, 2%

Speciality chemicals,

construction chemicals and

FMCG constitute ~75% of the

end user demand for industrial

packaging

CRISIL EQUITIES | 8


According to industry sources, specialty and construction chemicals segments

are poised for an annual growth of ~15% each while FMCG is expected to grow

at ~13-14% per annum over the next three years. The paints segment is also

expected to grow at a healthy rate of 15% driven by increased housing and

infrastructure spending.

Figure 7: Speciality chemicals growth Figure 8: Growth in personal care industry


Growth to follow the substitution effect

There has been an increasing usage of polymers in the industrial packaging

segment, with plastic drums and barrels fast replacing the age-old metal drums.

Although there was hardly any usage of polymer drums in industrial packaging,

its penetration has increased over the years to 50% currently. The penetration

is expected to increase further given the various benefits of polymer-based

packaging as discussed earlier. Also, even though polymer packaging was

slightly costlier than metal packaging, the gap has narrowed. The situation is

expected to reverse with lower cost of polyethylene due to new gas-based

capacities coming up in China and the Middle East, thus reducing the cost of

polyethylene, which is the main raw material (constituting ~65% of total cost)

for making polymer packaging. This will enable an increased penetration of

plastic drums in the industrial packaging segment.

Time to strengthen operations in Asia

After capturing the Indian industrial packaging market, Time is now expanding

its footprints in other Asian markets, which currently have low penetration of

polymer packaging (~20%) but are at the cusp of shift towards polymer

packaging given the declining price differential between polymer and metal

packaging. Also, these markets are growing at a healthy rate thereby providing

immense potential and opportunities for growth. The company has already

entered Thailand and Taiwan and is now looking at China, South Korea and

Indonesia by putting up greenfield projects there.

1218

40

0

5

10

15

20

25

30

35

40

45

2002 2006 2012(E)

Market Size

200

300

525

0

100

200

300

400

500

600

2004 2008 2012(E)

(US$ mn)

Market Size

Polymer packaging is no

longer going to be

costlier than metal-based

packaging

CRISIL EQUITIES | 9


Table 4: Time’s projects in Asia

Location Capacity Mode of entry Status

Thailand 6,600 MT Inorganic Operational

Taiwan 10,000 MT Inorganic March 2011

China 13,200 MT Greenfield March 2011

Indonesia 6,600 MT Greenfield June 2011

South Korea 6,600 MT Greenfield September 20'11


International chemicals manufacturing moving towards Asia

Over the past decade, the global chemical industry has witnessed a geographic

shift in manufacturing from NAFTA countries (US, Mexico, Canada) and Europe

to the emerging economies of China, India and other parts of Asia excluding

Japan. This has triggered growth in international trade of chemicals between

Asia and the developed economies, thereby driving the demand for industrial

packaging.

Figure 9: Global chemical sales move towards China and Asia

* excl China and Japan

Source: Cefic

Entered Thailand and Taiwan through acquisitions

To foray into the fast growing Asia-Pacific market, in 2007, Time acquired Pack

Delta, the erstwhile JV with Mauser in Thailand. It acquired YPA Thailand in

November 2009, thus strengthening its market position in Thailand. Both Pack

Delta and YPA are operational with a combined capacity of 14,340 tonnes.

In October 2010, Time acquired Taiwan’s Yung Hsin, a market leader in plastic

drums. Yung Hsin has revenues of ~Rs 750 mn and a manufacturing capacity of

10,000 MT of plastic drums and containers with an IBC line that is currently idle.

With a capex of ~Rs 158 mn, Time plans to start operations on the IBC line by

March 2011 and fully commercialise the unit by FY12. Taiwan also has a low

penetration of ~8% for plastics in industrial packaging. We expect a growth of

~15% in Taiwan.

32.1%

28.0%

13.1% 11.7%

5.8%4.4%

2.5%2.4%

24.0%

21.2%

15.9%

6.4%

22.2%

5.2%

3.1%

2.0%

0%

5%

10%

15%

20%

25%

30%

35%

EU27 NAFTA Asia* Japan China Latin America

Rest of Europe

Other

1999 2009

Time’s plants in China

will be operational by

end FY11.

CRISIL EQUITIES | 10


Foray into China, Indonesia and South Korea; challenges lie

The company is looking to expand to China, Indonesia and South Korea. It is

currently planning to set up two greenfield projects (at Tianjin and Guangzhou)

and has plans for manufacturing IBCs in China since it is the hub of international

trade between Europe and Asia for chemicals, specialty and construction

chemicals, and pharmaceuticals. Although the potential for IBCs is very high in

the region, Time will be competing with the global players like Schutz and

Mauser. In China, IBCs are only manufactured in Shanghai, where both Schutz

and Mauser have a presence.

Time is setting up a facility in Tianjin, which is in close proximity to the chemical

industry park in the free trade zone in Tianjin. Tianjin is the gateway of exports

to South Korea. Time is also setting up a facility in Guangzhou, which is the third

largest city in China and a trading port. Guangzhou also has an export

processing zone, with a presence of major chemical companies. Time is also

working on setting up manufacturing facilities in Indonesia and South Korea.

Time’s progress in terms of the timely commissioning of its plants and the

business in China, Indonesia and Korea remain a key monitorable.

Infrastructure and lifestyle products segments – expanding its product portfolio

The infrastructure and lifestyle products segments contribute close to 30% of

Time’s total revenues, with infrastructure having the larger share at 20%. Under

the infrastructure business, the company manufactures batteries used by

telecom companies for their towers while under the lifestyle segment it

manufactures and distributes products such as entrance mattings, turfs and

products like chairs.

Moving into new products such as pipes as the battery business is slowing down

Time started its infrastructure products division with the acquisition of NED

Energy in 2007 which manufactures batteries required to support the telecom

towers. The company competes with Amara Raja Batteries, Exide Industries and

HCL. Although the business recorded strong growth in the past few years given

the boom in telecom (the number of telecom towers were on the rise till FY10),

the business has started to now slow down given the slowdown in growth in

telecom sector. The company has, hence, expanded its product portfolio to

polyethylene (PE) pipes which are used in desalination plants and water supply

and sewerage infrastructure. The company also supplies the pipes to major EPC

players like Larsen & Toubro, Nagarjuna Construction, IVRCL and others.

The company is eyeing high growth in this business given the government

spending on water infrastructure projects. The pipes business has been picking

up with an increase in number of water and sewerage treatment projects in

India. Water supply and sanitation (WSS) has been allotted a huge investment

outlay of Rs 1.4 tn in the 11th Five-Year Plan compared to the investment outlay

of Rs 648.1 bn in the 10th Five-Year Plan. Major thrust in the WSS segment is

WSS has been allotted a

huge investment outlay of

Rs 1.4 tn in the 11th Plan



on improving rural infrastructure, an area expects investments of Rs 907 bn in

the 11th Five-Year Plan. Also, the traditional ductile iron pipes are being

replaced with PE pipes, improving the performance in terms of corrosion,

leakage and handling pressure. We expect the pipes business to grow at ~20%

per annum over the next three years.

Figure 10: Spending on water projects to drive demand for

pipes

Source:

Time also supplies UPS and solar batteries. In October 2010, Time acquired

Powerbuild, a solar battery manufacturer in Bengaluru to cater to the demand

for solar batteries.

Domestic lifestyle business growing at a healthy rate

Time forayed into the consumer and lifestyle products business with the launch

of mattings and turfs in 2006. The company has subsequently launched other

products like moulded furniture. These products have been well received in the

market, with the lifestyle business registering a strong growth of 38% (since its

start) driven by increased spending and demand for such products. The

company has a pan-India distribution network of 9,000 dealers across 350 cities.

Solutia acquisition opens doors to international markets

Time has extended its presence to Europe with the acquisition of US-based

Solutia’s plastic products division. Solutia manufactures specialty chemicals,

performance films and glass. The plastic products division manufactures

mattings and turfs under the renowned brand ‘Astroturf’, nestpads used in

poultry farms and rain flaps under the brand ‘ClearPass’ in Romania and supplies

to the European market. With the acquisition of the plastic products division of

Solutia, Time not only gets access to ‘Astroturf’, which is a well-known brand in

lifestyle products, but it will also be able to sell the brands internationally to

various markets including Middle East and Europe.

2910

4595

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2002-07 2007-12

(Rs bn)

Govt. spending on Water Industry

The acquisition will enable

Time to market both ‘Astroturf’

and ‘ClearPass’ in the

international markets except

the USA



Automotive products segment – new products in offing, but acceptance will take time

Automotive products contribute close to 10% of Time’s total revenues. Under

this business, the company primarily manufactures and markets rain flaps and

fuel tanks to domestic as well as European markets. The company has recently

developed some new innovative products like de-aeration tanks which it supplies

to Tata Motors, Ashok Leyland and Eicher Motors for their commercial vehicles.

It is currently in talks with these companies to supply these products for

passenger vehicles. Although internationally these polymer-based products are

used in passenger cars, in India it is currently not so. We believe such products

will take some time to take off as they have to go through various rounds of

testing before they can be sold to automobile players.

Inorganic route to growth has proven successful

Time has walked both paths - organic and inorganic. Of the 38% CAGR growth

registered so far during the period FY07-10, 23% has come from the organic

path and the remaining through inorganic means. These acquisitions have been

smaller in size; the idea was not to get the capacity but to either get access to

technology or to enter new markets. The company has been successful in

running and integrating these companies with its operations. Most of these

companies have demonstrated improvement in performance after Time acquired

them, which is a testimony of Time’s strong and able management.

Table 5: Acquisitions and growth path

Year Company acquired Cost of acquisition

(Rs mn)

TTL % of

Share

Reason for acquisition

Jul-06 TPL Plastech 322.58 75% Increase dominance in industrial packaging by acquiring

the second largest player

Nov-06 Pack Delta 159.73 49% Expanding presence in industrial packaging in Thailand

Nov-07 Ned Energy 482.89 71% Application of polymers in the manufacture of telecom

batteries

Apr-08 Gulf Power 225.00 100% Expanding the product portfolio to auto batteries

Nov-09 Komposite Praha 161.04 99% Technology for composite cylinders

Nov-09 YPA Thailand 70.80 100% Entering the European markets in lifestyle products

Oct-10 Power Build 51.60 60% Increasing presence and market share in Thailand

Oct-10 Plastic product division

of Solutia Europe

160.65 100% Technology for manufacturing solar batteries

Dec-10 Yung Hsin Taiwan 225.00 90% Entering Taiwan in industrial packaging


The company has been successful in integrating and improving the performance

- utilisation and efficiencies - of acquired companies, resulting in increased

profitability.



Table 6: Financials of acquisitions

Acquisition Year of

acquisition

Financials at the time of

acquisition

Financials

(FY10)

Revenues

(Rs mn)

EBITDA

(%)

Revenues

(Rs mn)

EBITDA

(%)

TPL Plastech July 2006 372.02 10.06% 733.88 14.45%

Pack Delta Nov 2006 281.15 18.25% 663.32 17.41%

NED Energy Nov 2007 391.85 15.21% 1953.42 20.52%


Composite cylinders – new product, new challenge

Composite cylinders are cylinders made of polymers and glass reinforcement

fibre and are used for packaging gas. They have many advantages compared to

metal cylinders, both in terms of safety and weight. They not only weigh less

than half of metal cylinders, the safety levels are high as they can withstand

close to six times the pressure of a metal cylinder and are also not prone to

explosions.

The LPG cylinder market in India is huge with 180 mn cylinders currently in

circulation, while globally it is 600 mn units. These cylinders are mainly used for

cooking purposes. LPG penetration is likely to increase from an estimated 48.4%

of total households in FY10 to around 56.2% in FY15 following an increase in

rural customer base and the continued shift in demand from SKO (Standard

Kerosene Oil) to LPG. In order to encourage the use of LPG over other fuels, the

government has introduced the Rajiv Gandhi Grameen LPG Vitrak Yojana which

seeks to increase the domestic cooking gas penetration in India from 48% to

around 75% of the population by 2015. Apart from this, ~10% of the total

cylinders in circulation are replaced with new ones as typically the life of a metal

cylinder is close to 10 years.

Figure 11: Increasing number of LPG connections in India


89 95 102 106115

0

20

40

60

80

100

120

140


(mn)

LPG Connections

LPG cylinders: 180 mn

units in India, 600 mn

units globally



Time has necessary technology and first-mover advantage

In November 2009, Time acquired Komposite Praha, a manufacturer of

composite gas cylinders in the Czech Republic, when it ran into trouble during

the recession. The company was formed by four scientists who developed the

technology for such cylinders, but could not run it profitably. The acquisition has

not only given access to technical know-how but also a capacity of 0.5 mn units.

The company has already started supplying to the European markets from its

Czech Republic unit.

Also, with access to this technology, Time has already developed a prototype to

market composite cylinders in India. Although there are other cylinder

manufacturers in India, who have also shown interest to enter the composite

cylinders, currently no one has the desired technology. We believe with

technology in place, Time will reap the benefits as the market for composite

cylinder opens up in India.

Indian market will take some time to open up, but opportunities in other markets are immense

Although the Government of India is keen to push composite cylinders in the

Indian market and has invited expression of interest from various players to set

up facility in India, we believe this may take some time because of necessary

approvals, clearances and other formalities. However, Time is planning to export

these composite cylinders to countries like Middle East, Sri Lanka and Indonesia

till opportunities in India open up. The company is in the process of setting up a

unit for manufacturing 1 mn composite cylinders at Talasari in Maharashtra,

which has received certification from TUV during the month. The TUV certification

will enable it to market the composite cylinders internationally. The company is

also in talks with various oil marketing companies (OMCs) in these markets who

have expressed their willingness to source these cylinders from Time.

Material handling, another new product; technology tie-up with Schoeller Arca

In 2009, Time entered a joint venture with Schoeller Arca Systems, the

Netherlands, for the launch of material handling products (MHP) in India. The

product is unique as against typical MHP, this new innovation is sturdier and can

be folded after its emptied, thereby reducing return freight costs. As per the JV

agreement, Schoeller Arca will provide the necessary technical knowhow while

Time will manufacture and market the same in India.

MHP products are used in the retail, agriculture, fisheries, automotive and postal

sectors. The company has set up facilities to manufacture 3,000 MT of MHP

products, which is expected to increase to 6,000 MT by FY13. While the plant

has been commissioned, we expect revenues to accrue from FY12.

We believe that both these products have tremendous potential but will take

time before they are accepted completely in India; their success remains a key

monitorable. We have been conservative in our estimates for these products and

have assumed a share of just 6% to total revenues in FY13.

Market acceptance of

innovative products is

likely to further

accelerate growth and

remains a key

monitorable



Key risks

Dependence on growth of end-user industries

Time’s industrial packaging business is dependent on the growth of its end-user

industries such as chemicals, specialty chemicals, FMCG and others. In FY09,

during the economic slowdown, the chemicals and specialty chemical industry

slowed down significantly due to a slowdown in end-user industries, namely

infrastructure, construction, textiles, automobiles and personal care. Given that

industrial packaging is Time’s largest business segment, any such slowdown in

the future may have an impact on the company’s performance.

Relationship with Mauser, Germany

Time currently has a technology tie-up with Mauser, Germany for some of its

industrial packaging products for which it pays royalty to Mauser. The company

also has a JV with Mauser for the IBC products. Although the Time and Mauser

share a long relationship, any sort of disruption may have an adverse impact.

Successful integration of new acquisition is a key monitorable

Time has recently made a few global acquisitions - an industrial packaging

company in Taiwan and several acquisitions in Europe. Historically, the

management has been fairly successful in integrating the acquisitions. Going

forward, management’s ability to integrate the newer acquisitions and

successfully run these companies will be a key monitorable.

Success of new products

Time has recently developed two new products – composite cylinders and

returnable material handling. Both the products have good potential but may

take some time before they are accepted in the market. Although we have been

conservative in our revenue estimates from these new products, any further

delay in getting the desired success and acceptance from the market may have

an adverse impact on our estimates.

Delays in commissioning of new capacities

The company is currently in the process of setting up new Greenfield plants in

some international locations such as China and Indonesia. It is also in the

process of setting up facilities for its new products. Any delay in commissioning

of these capacities may have an impact on the financial performance of the

company.

Competition from international players in Asia

Although there are few players in the industrial packaging segment and with the

low penetration by plastics reduce the risks, Time faces competitive risks from

international players in industrial packaging in Asia.

In FY09, volumes and

margins were marginally

impacted due to

recession in end user

industries



Financial Outlook

Revenues to grow at three-year CAGR of 25%

We expect Time’s revenues to grow at a three-year CAGR of 25% to Rs 19.5 bn

in FY13 driven by both organic and inorganic growth. Organic growth is expected

to be 21%, primarily driven by growth in industrial packaging (expected to grow

at a CAGR of 25%) as well as new products. By FY13, new products will

contribute ~6% to total revenues. Inorganic growth is expected to come from

the acquisition of an industrial packaging unit in Taiwan and a lifestyle product

division of Solutia.

Figure 12: Revenue and revenue growth Figure 13: Growth in industrial packaging


Figure 14: Segment-wise revenue break up (FY10) Figure 15: Segment-wise revenue break up (FY13)


EBITDA margin have been fairly stable in the past; expect it to be in the range of ~19%

Time’s EBITDA margins in the past have been fairly stable and have been in the

range of 19-20%. Although the company uses polymers as its main raw

material, the prices of which have been volatile in the past, it has been able to

pass on the hike in prices given its high bargaining power with customers.

However, margins have dipped from 21.5% in FY08 to 19.9% in FY09 and

19.5% in FY10 on the back of an increase in overheads due to the various

acquisitions and lower utilisation of these capacities. We expect the company’s

7.8 10.0 12.1 16.5 19.5

16.6%

27.7%

21.2%

36.4%

18.0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

5

10

15

20

25

FY09 FY10 FY11E FY12E FY13E

(%)(Rs bn)

Revenues Growth (RHS)

5.36.3

7.6

9.911.6

0

2

4

6

8

10

12

14


Industrial Packaging (Rs bn)

Industrial Packaging,

61%

Infrastructure, 20%

Lifestyle Products, 9%

Automotive Products, 8%

Healthcare Products, 2%

New Products, 0%

Industrial Packaging,

58%

Infrastructure, 18%

Lifestyle Products,

12%

Automotive Products, 5%

Healthcare Products, 1%

New Products, 6%



margins to remain at similar levels, 19.5% in FY11 and 19.3% in FY12 and

FY13. The company reported an EBITDA margin of 20% in the first six months of

FY11.

Figure 16: EBITDA margins to remain fairly stable


PAT to grow at a three-year CAGR of 24%; EPS to almost double in three years

Consolidated PAT is expected to grow from Rs 909 mn in FY10 to Rs 1,751 mn in

FY13, driven by healthy revenue growth and stable margins. Net margins are

expected to decline from 9.1% in FY10 to 8.5% in FY11 and then improve to

8.9% in FY12 and 9% in FY13. EPS is expected to increase from Rs 4.3 in FY10

to Rs 8.4 in FY13.

Figure 17: PAT and PAT margin Figure 18: EPS to double in three years


1,559 1,952 2,360 3,186 3,761

19.9%19.5% 19.5% 19.3%

19.3%

15%

16%

17%

18%

19%

20%

21%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000


(%)(Rs mn)

EBITDA EBITDA margin (RHS)

690 909 1,026 1,478 1,751

8.8%

9.1%

8.5%

8.9%9.0%

8.1%

8.2%

8.3%

8.4%

8.5%

8.6%

8.7%

8.8%

8.9%

9.0%

9.1%

9.2%

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000


(%)(Rs mn)

PAT PAT margin (RHS)

3.3 4.3 4.9 7.1 8.4

-21%

32%

13%

44%

18%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

0

1

2

3

4

5

6

7

8

9


EPS EPS Growth

Continued capex on

expansions and

acquisitions have put a

pressure on ROE and

ROCE, which are set to

improve from FY12



Management Overview

CRISIL's fundamental grading methodology includes a broad assessment of

management quality, apart from other key factors such as industry and business

prospects, and financial performance.

An experienced management led by professionals

Time has an experienced management led a by four professionals with over two

decades of experience in the polymer industry. The company is headed by Mr.

Anil Jain, managing director, with more than three decades of experience in the

industry. Mr Jain is supported by three promoter directors - Mr. Bharat Vageria

(Director Finance), Mr. Raghupathy Thyagarajan (Director Marketing) and Mr

Naveen Jain (Director Technical).

Successful in achieving market leadership

Time has been successful in establishing a leadership position in industrial

packaging in India through both organic and inorganic growth, under the able

guidance of Mr Anil Jain. Management has not only been able to handle organic

growth but also identified right opportunities, acquired them as well as

integrated them well with the current operations.

Proactive in innovating new products

Time’s management has an eye for innovative technologies. The company has

successfully innovated and developed new products in the past. It started with

industrial packaging and then continuously added new products such as

batteries, pipes, lifestyle products, automotive products, etc. It recently

acquired a technology to make two new products – composite cylinders and

material handling. Management’s ability to continuously innovate and implement

new technologies and products has enabled Time to scale up in a short span of

time.

A strong and experienced second line; management board in place

Based on our interactions and assesment, we believe the company has a strong

second-line of management. The senior management team has varied work

experiences in their respective fields and have been with the company for a

reasonable period of time. The company also has a Management Board

consisting of twelve members who are a part of the second-line of management

along with three permanent but external invitees.

Time’s management is

well focussed on

business with due

attention to innovative

application of polymers



Corporate Governance

CRISIL’s fundamental grading methodology includes a broad assessment of

corporate governance and management quality, apart from other key factors

such as industry and business prospects, and financial performance. In this

context, CRISIL Equities analyses the shareholding structure, board composition,

typical board processes, disclosure standards and related-party transactions.

Any qualifications by regulators or auditors also serve as useful inputs while

assessing a company’s corporate governance.

Overall, Time’s corporate governance is good supported by an independent

board and good board practices.

Board composition

Time board consists of 10 members, of whom four are independent directors,

which meets the requirement under Clause 49 of SEBI’s listing guidelines.

Chairman of the board, Mr K. N. Venkatasubramanian, is a non-executive

member. He is the ex-chairman of Indian Oil and the chairman of a number of

oil companies namely IPCL, Gulf Oil. The other directors are highly qualified and

well experienced too. Most of the board members have been associated with the

company for more than 15 years and their suggestions and feedback are well-

received by the promoters. Given the background of directors, we believe the

board is well experienced. Based on our interaction with independent directors,

we believe they have a good understanding of the company’s business and its

processes.

Board’s processes

The company’s quality of disclosure can be considered good judged by the level

of information and details furnished in the annual report, websites and other

publicly available data. The company has all the necessary committees – audit,

remuneration and investor grievance - in place to support corporate governance

practices. The audit committee is chaired by an independent director, Mr M K

Wadhwa, a chartered accountant. The board meetings are conducted

professionally with the detailed agenda reaching the board of directors on time.

Corporate governance

practices are good



Valuation Grade: 4/5

We have used the discounted cash flow (DCF) method to value Time and arrived

at a fair value of Rs 71 per share. The stock is currently trading at Rs 58 per

share. We initiate coverage on Time with a valuation grade of ‘4/5’, indicating

that the market price has upside from the current levels.

Key DCF assumptions

• We have forecasted the free cash flow from FY12 to FY17

• We have assumed cost of equity of 15.3%, factoring in risk premium for low

liquidity of the stock

• We have assumed a terminal growth rate of 3% beyond the explicit forecast

period until FY17

WACC computation

FY12-17 Terminal value

Cost of equity 15.3% 15.3%

Cost of debt (post tax) 6.3% 6.3%

WACC 11.3% 12.1%

Terminal growth rate 3.0%

Sensitivity analysis to terminal WACC and terminal growth rate

Terminal growth rate

Term

inal

WA

CC

1.0% 2.0% 3.0% 4.0% 5.0%

10.1% 76 87 101 119 145

11.1% 65 73 84 97 115

12.1% 56 62 71 81 94

13.1% 48 54 60 68 78

14.1% 42 47 52 58 65

Source: CRISIL Equities estimates

One-year forward P/E band One-year forward EV/EBITDA band


0

20

40

60

80

100

120

140

Jun-0

7

Aug

-07

Oct

-07

Dec-

07

Jan-0

8

Mar

-08

May

-08

Jul-

08

Sep-

08

Nov

-08

Jan-0

9

Mar

-09

May

-09

Jul-

09

Sep-

09

Oct

-09

Dec-

09

Feb

-10

Apr-

10

Jun-1

0

Aug

-10

Oct

-10

Dec-

10

(Rs)

Time Technoplast 5x 8x 11x 16x 23x

0

5000

10000

15000

20000

25000

Jun-0

7

Aug-

07

Oct

-07

Dec

-07

Jan-

08

Mar-

08

May-

08

Jul-

08

Sep

-08

Nov-

08

Jan-

09

Mar-

09

May-

09

Jul-

09

Sep

-09

Oct

-09

Dec

-09

Feb-

10

Apr

-10

Jun-1

0

Aug-

10

Oct

-10

Dec

-10

(Rs mn)

EV 3x 4x 5x 6x

We assign a fair value of

Rs 71 per share to Time

and initiate coverage with

a valuation grade of ‘4/5’

The fair value implies P/E

multiple 10x FY12 EPS

and 8.4x FY13 earnings



P/E – premium / discount to NIFTY P/E movement


Peer comparison

Companies CMP M.cap Price/Earnings (x) Price/Book (x) EV/EBITDA RoE (%)

(Rs mn) FY10 FY11E FY12E FY10 FY11E FY12E FY10 FY11E FY12E FY10 FY11E FY12E

Time Technoplast Ltd 58 12,127 13.3 11.8 8.2 2.1 1.8 1.5 8.4 7.7 6.4 17.1 16.4 20.0

Balmer Lawrie & Co Ltd 587 9,560 8.2 7.0 5.3 1.7 1.5 1.3 5.9 3.1 2.4 22.5 20.9 23.4

Sintex Industries Ltd 190 51,868 12.2 13.0 10.5 2.1 2.2 1.7 11.2 10.1 8.3 18.0 18.9 19.5

Supreme Industries Ltd* 151 19,118 9.2 9.1 7.3 3.5 3.0 2.3 6.2 5.5 4.5 43.4 40.2 35.8

*Year ended June


-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Jun-

07

Aug

-07

Oct

-07

Dec-

07

Jan-0

8

Mar

-08

May-0

8

Jul-

08

Sep-

08

Nov

-08

Jan-0

9

Mar

-09

May-0

9

Jul-

09

Sep-

09

Oct

-09

Dec-

09

Feb-1

0

Apr-

10

Jun-

10

Aug

-10

Oct

-10

Dec-

10

Premium/Discount to NIFTY Median

0

5

10

15

20

25

30

35

Jun-

07

Aug-0

7

Oct

-07

Dec-

07

Jan-0

8

Mar

-08

May-0

8

Jul-

08

Sep

-08

Nov-0

8

Jan-0

9

Mar

-09

May-0

9

Jul-

09

Sep

-09

Oct

-09

Dec-

09

Feb-

10

Apr-

10

Jun-

10

Aug-1

0

Oct

-10

Dec-

10

1yr Fwd PE (x) Median PE

+1 std dev

-1 std dev



Company Overview

Time was promoted by a group of professionals, experienced in the polymers

business. Incorporated in 1989, Time commenced operations in 1991 as a small-

scale unit with its plant in Daman. In 1993, the company entered into a

collaboration with Mauser, Germany, the world leader in industrial packaging.

The company gradually expanded its operations to 24 manufacturing units with

13 locations in India and the rest abroad - in Sharjah, Poland, Romania and

Thailand.

The company has five business segments based on the industries to which it

supplies the products - industrial packaging, infrastructure products, automotive

products, lifestyle products and healthcare products. Of these, industrial

packaging is the largest, contributing to 61% of revenues followed by

infrastructure with 20% contribution to revenues and lifestyle products with 9%

contribution to revenues. Although the majority of its current business comes

from India, it has also spread its reach to Europe and other Asian countries.

Figure 19: Corporate Structure


Time Technoplast Limited India

Overseas SubsidiariesVentures Indian Subsidiaries

1.Time Mauser Industries Pvt Ltd India(TTL -49% ,Mauser -51%)

2.Mauser Holding Asia Pte Ltd, Singapore(TTL -49%, Mauser -51%)

2a.Pack Delta Public Co Ltd,Thailand(Mauser Holding Asia-99.65%)

3.Schoeller Acra Time, Singapore (TTL-50.10%, Schoeller Acra Netherland-49.90%)

3.Schoeller Acra Time Materials Handling Solutions Ltd., India (Schoeller Acra Time-1005)

1.Elan Incorporated FZE,Sharjah (100%)

1a.TianjingElan,China(Elan-100%)

1b.YPA,Thailand(Elan-100%)

2.NovoTechSp.z.o.o.,Poland(100%)

3.Kampozit-Praha S.R.O.,Czech Republic (TTl-99%)

1.TPL Plastech Ltd (TTL-75%)

2.Ned Energy Limited (TTL-71%)

2a.TechnikaCorp. FZE, Sharjah (Ned Energy Ltd-100%)

2a.i.GulfPowerbeat

WLL,Bahrain(Technika Corp.-100%)

4.Yung Hsin, Taiwan (90%)



Milestones

1992 Production facility commenced at Daman, launched internationally acclaimed XL-ring drums

1993 Collaboration with Mauser, Germany

1998 Lifestyle products launched-entrance mattings (DuroTurf & Meadowz) based on special product technology

2000 Consumer packaging- commenced manufacturing PET sheet and conical pails

2004 Joint venture with Mauser; commenced production of IBC

2005 Development and launch of anti-spray rainflaps

2006 Launch of DuroSoft mattings

Started overseas operations, Sharjah,UAE Acquired TPL Plastech Ltd (Tainwala poly containers)

2007 Public issue in June 2007 of Rs 10 each at a premium of Rs 315 per share

Entered into battery business -acquired NED Energy, Hyderabad Acquired Pack Delta, Thailand under JV with Mauser

2008 Commenced production at Poland for automotive components Expanded battery capacity - acquired Gulf Powerbeat, WLL, Bahrain

2009 Expanded battery operations in India, new facility at Panoli (Gujarat) through NED

Energy Ltd

Acquired composite gas cylinder business in Czech Republic

Acquired competing business in Thailand, YPA (Thailand) Ltd - industrial packaging Signed JV with Schoeller Arca Systems, Netherland for launch of material handling

products (MHP) and material handling solutions in India

2010 Setting up Greenfield packaging project in Tianjin (North China)

Acquired plastics products division of Solutia, Europe

Acquired solar batteries manufacturer Powerbuild, Bangalore Acquired Yung Hsin, Taiwan



Annexure: Financials


Income statement Balance Sheet(Rs mn) FY09 FY10 FY11E FY12E FY13E (Rs mn) FY09 FY10 FY11E FY12E FY13E

Operating income 7,834 10,003 12,124 16,542 19,525 LiabilitiesEBITDA 1,559 1,952 2,360 3,186 3,761 Equity share capital 209 209 209 209 209 EBITDA margin 19.9% 19.5% 19.5% 19.3% 19.3% Reserves 4,434 5,252 6,165 7,481 9,039 Depreciation 259 355 477 537 633 Minorities 223 312 343 377 415 EBIT 1,300 1,597 1,883 2,649 3,128 Net worth 4,867 5,773 6,717 8,067 9,663 Interest 271 333 473 646 763 Convertible debt - - - - - Operating PBT 1,029 1,264 1,410 2,003 2,365 Other debt 3,197 4,398 5,905 8,074 9,117 Other income 3 14 28 20 22 Total debt 3,197 4,398 5,905 8,074 9,117 Exceptional inc/(exp) 4 (6) - - - Deferred tax liability (net) 173 211 211 211 211 PBT 1,035 1,272 1,438 2,023 2,386 Total liabilities 8,237 10,382 12,833 16,352 18,992 Tax provision 269 296 331 455 537 AssetsMinority interest 72 74 81 89 98 Net fixed assets 3,961 4,776 6,299 7,262 8,966 PAT (Reported) 694 903 1,026 1,478 1,751 Capital WIP 284 609 989 2,053 2,053 Less: Exceptionals 4 (6) - - - Total fixed assets 4,246 5,385 7,288 9,316 11,020 Adjusted PAT 690 909 1,026 1,478 1,751 Investments 3 - - - -

Current assets

Ratios 25% Inventory 1,493 2,045 2,425 3,308 3,905

FY09 FY10 FY11E FY12E FY13E Sundry debtors 1,791 2,075 2,491 3,399 4,012 Growth Loans and advances 455 728 882 1,204 1,421

Operating income (%) 16.6 27.7 21.2 36.4 18.0 Cash & bank balance 497 432 301 334 282

EBITDA (%) 7.9 25.2 20.9 35.0 18.0 Marketable securities - - - - - Adj PAT (%) (20.7) 31.7 12.9 44.1 18.4 Total current assets 4,235 5,280 6,099 8,245 9,620 Adj EPS (%) (20.7) 31.7 12.9 44.1 18.4 Total current liabilities 1,028 1,511 1,782 2,437 2,877

Net current assets 3,207 3,769 4,317 5,808 6,743 Profitability Intangibles/Misc. expenditure 781 1,228 1,228 1,228 1,228 EBITDA margin (%) 19.9 19.5 19.5 19.3 19.3 Total assets 8,237 10,382 12,833 16,352 18,992 Adj PAT Margin (%) 8.8 9.1 8.5 8.9 9.0 RoE (%) 15.3 17.1 16.4 20.0 19.8 Cash flow

RoCE (%) 18.2 17.5 16.5 18.4 17.9 (Rs mn) FY09 FY10 FY11E FY12E FY13E

RoIC (%) 15.3 15.4 14.6 15.9 15.4 Pre-tax profit 1,031 1,279 1,438 2,023 2,386 Total tax paid (245) (258) (331) (455) (537)

Valuations Depreciation 259 355 477 537 633 Price-earnings (x) 9.9 13.3 11.8 8.2 6.9 Working capital changes (264) (626) (679) (1,458) (987) Price-book (x) 1.4 2.1 1.8 1.5 1.3 Net cash from operations 782 750 905 647 1,496 EV/EBITDA (x) 6.2 8.4 7.7 6.4 5.7 Cash from investments

EV/Sales (x) 1.2 1.6 1.5 1.2 1.1 Capital expenditure (1,608) (1,942) (2,380) (2,565) (2,337) Dividend payout ratio (%) 15.9 13.8 9.5 9.5 9.5 Investments and others - 3 - - - Dividend yield (%) 1.6 1.0 0.8 1.2 1.4 Net cash from investments (1,608) (1,939) (2,380) (2,565) (2,337)

Cash from financing

B/S ratios Equity raised/(repaid) - - - - - Inventory days 91 97 95 95 95 Debt raised/(repaid) 1,101 1,202 1,507 2,169 1,043 Creditors days 54 62 60 60 60 Dividend (incl. tax) (110) (124) (113) (163) (193) Debtor days 74 70 70 70 70 Others (incl extraordinaries) 63 47 (50) (55) (61) Working capital days 120 110 111 105 112 Net cash from financing 1,054 1,125 1,344 1,951 790 Gross asset turnover (x) 1.8 1.6 1.5 1.7 1.7 Change in cash position 228 (65) (131) 34 (52) Net asset turnover (x) 2.7 2.3 2.2 2.4 2.4 C losing cash 497 432 301 334 282

Sales/operating assets (x) 2.2 2.1 1.9 2.0 1.9 Current ratio (x) 4.1 3.5 3.4 3.4 3.3 Quarterly financials

Debt-equity (x) 0.7 0.8 0.9 1.0 0.9 (Rs mn) Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11

Net debt/equity (x) 0.6 0.7 0.8 1.0 0.9 Net Sales 2,504 2,469 3,059 2,481 3,249 Interest coverage 5.8 5.9 5.0 4.9 4.9 Change (q-o-q) 20.3% -1% 24% -19% 31%

EBITDA 533 480 479 521 624 Per share Change (q-o-q) 16% -10% 0% 9% 20%

FY09 FY10 FY11E FY12E FY13E EBITDA margin 21.3% 19.4% 15.7% 21.0% 19.2%Adj EPS (Rs) 3.3 4.3 4.9 7.1 8.4 PAT 246 219 239 269 301 CEPS 4.5 6.0 7.2 9.6 11.4 Adj PAT 246 219 239 236 301 Book value 23.3 27.6 32.1 38.5 46.2 Change (q-o-q) 21% -11% 9% -1% 28%Dividend (Rs) 0.5 0.6 0.5 0.7 0.8 Adj PAT margin 9.8% 8.9% 7.8% 9.5% 9.3%Actual o/s shares (mn) 209.3 209.3 209.3 209.3 209.3 Adj EPS 1.2 1.0 1.1 1.1 1.4



Focus Charts

Segment-wise revenue break up Stable EBITDA margins over the years


Revenue and revenue growth PAT and PAT margin


RoE and RoCE to improve from current levels Shareholding pattern over the quarters


Composite products,

22%

Polymer products,

78%

19.8%

19.3%

21.5%

19.9%

19.5%

18.0%

18.5%

19.0%

19.5%

20.0%

20.5%

21.0%

21.5%

22.0%


EBITDA Margins

7.8 10.0 12.1 16.5 19.5

16.6%

27.7%

21.2%

36.4%

18.0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

5

10

15

20

25


(%)(Rs bn)

Revenues Growth (RHS)

690 909 1,026 1,478 1,751

8.8%

9.1%

8.5%

8.9%9.0%

8.1%

8.2%

8.3%

8.4%

8.5%

8.6%

8.7%

8.8%

8.9%

9.0%

9.1%

9.2%

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000


(%)(Rs mn)

PAT PAT margin (RHS)

24.7%

18.2%17.5%

16.5%18.4% 17.9%

27.8%

15.3% 17.1% 16.4%

20.0% 19.8%

0%

5%

10%

15%

20%

25%

30%

FY08 FY09 FY10E FY11E FY12E FY13E

ROCE ROE

62% 62% 62% 62%

12% 12% 12% 11%

4% 4% 4% 5%

21% 22% 22% 21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec-09 Mar-10 Jun-10 Sep-10

Promoter FII DII Others

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