>TIME TECHNOPLAST LIMITED (KOTAK SECURITIES)

The Innovative Package

Time Technoplast Ltd (TTL) is the market leader in India in the polymer based industrial packaging industry with a market share of more than 75%. The company has a technical collaboration with Mauser Germany for packaging products.

TTL has key strengths in polymers, technology and innovation. Based on this, it has successfully diversified into high-end polymer based innovative applications for infrastructure, healthcare, auto components, and lifestyle products that typically enjoy higher margins. It has also diversified into telecom battery business and formed a JV with Schoeller

Arca Systems for material handling solution and systems. We believe the recently commissioned new plants in India, Poland and Sharjah, expansions, acquisitions and a strong product pipeline would lead to 21.9% growth in revenues and 33.8% growth in profitability for the company in FY10E. We are positive on the long term growth prospects of TTL. Therefore, we are initiating coverage with a BUY recommendation on TTL with a price target of Rs.60 (50% upside potential) over a 12-month horizon. This is based on the DCF method of valuation, with 13.2% WACC and 4.0% terminal growth rate.

Key Investment Rationale
■ Market leader in industrial packaging. TTL is the market leader in the industrial packaging segment with more than 75% market share. These are used as barrels or containers for packing by users in specialty chemicals, paints, inks, pharmaceutical intermediates, FMCG intermediates, construction chemicals, additives, lube oils and food industry among others.

■ Tie up with Mauser-Werke GmbH of Germany. The company has a tie up with Mauser-Werke GmbH of Germany, which is one of the largest producers of intermediate bulk containers, plastic, steel and fiber drums in Europe and the US with annual revenues of more than $1.0 bn. Mauser has a presence in over 54 countries worldwide through its licensees.

■ Strengths - Polymers, technology and innovation. TTL has key strengths in polymers, technology and innovation. Based on this, it has successfully diversified into high-end polymer based innovative applications for infrastructure, healthcare, auto components, and lifestyle products that typically enjoy higher margins. It is important to note that all its products are based on the polymer platform primarily to replace metals and to give superior strength and overall performance utility to its customers. The company believes in R&D and has developed most of the products in-house.

■ Foray into battery business. TTL has diversified into telecom battery business by acquiring Hyderabad based NED energy systems and Bahrain based Gulf Powerbeat WLL. Through the acquisitions, TTL plans to leverage NED's technology in automotive batteries to achieve significant growth for its well established automotive segment where it enjoys strong relationships with major OEMs as Tier-I supplier. We expect the battery vertical to contribute more than 20% to the overall revenues of the company from FY10E onwards and it has high growth potential, going forward.

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