Time Technoplast: Q2-25 Earnings Call Highlights
Well-positioned for growth. Focus on value-added products, capacity expansion & debt reduction. Strategic shift in overseas business reflects confidence in its potential. Exploring new growth areas.
timetechnoplast.com | NSE: TIMETECHNO
1. Key Takeaways
1.1 TLDR
Time Technoplast is well-positioned for continued growth, driven by its focus on value-added products, capacity expansion, and debt reduction.
The company's strategic shift in its overseas business reflects confidence in its long-term growth potential.
Time Technoplast is actively exploring new growth opportunities in emerging areas like hydrogen, drones, and fire safety.
1.2 Operational Highlights:
Q2 and H1 FY25 Financial Highlights:
Net sales: ₹1,372 crores (Q2) / ₹2,626 crores (H1)
EBITDA: ₹197 crores (Q2) / ₹372 crores (H1)
PAT: ₹98 crores (Q2) / ₹178 crores (H1)
EBITDA margin: 14.3% (H1), a 40 bps improvement YoY
Volume growth: 17% YoY
Current order book for CNG cascades: Approximately ₹185 crores
Target for working capital cycle days: 85-90 days in the next 2 years
Planned QIP: Up to ₹1,000 crores for debt repayment, capacity expansion, and new product development
Sale of non-core assets: ₹65 crores realised, with an estimated remaining value of ₹60 crores
Estimated total capex for FY25: ₹180-200 crores
Capacity utilisation: 82% overall (87% overseas, 80% India)
1.3 Key Themes:
Strong Financial Performance:
Time Technoplast reported robust Q2 and H1 FY25 results with a 17% YoY volume growth and a 15% YoY revenue growth.
Profit after tax (PAT) witnessed an impressive 40% YoY increase in both Q2 and H1, driven by optimized capacity utilization and reduced finance & depreciation costs.
EBITDA margins also improved by 40 basis points, reaching 14.3% in H1 FY25.
The company is on track to achieve its 15% volume growth target for the full fiscal year.
Growth Driven by Value-Added Products:
The company's value-added product segment (composite cylinders, IBCs) is outperforming, growing at 21% YoY in H1 FY25, compared to 13% growth in established products.
This segment now contributes 27% of total sales, with plans to reach 35% in the next 2-3 years.
Key growth drivers include strong demand for Type IV composite cylinders for CNG cascades (current order book at ₹185 crores) and increased adoption of composite cylinders for LPG and CNG.
Strategic Focus & Initiatives:
Debt Reduction: The company remains committed to becoming debt-free by March 2026 and has already reduced debt by ₹52 crores in H1 FY25.
Capacity Expansion: Time Technoplast is prioritizing brownfield expansion for existing products and investing in new capacities for value-added products, particularly composite cylinders and IBCs. The new CNG cylinder capacity is expected to come online in Q4 FY25.
Automation & Cost Optimization: The company is focusing on automation, re-engineering, and equipment modifications to enhance productivity and reduce costs, particularly in power and labor.
Subsidiary Consolidation: Time Technoplast is consolidating its Powerbill Batteries and Neowatt subsidiaries to improve efficiency and profitability.
Overseas Expansion: While the sale of the Middle East business is off the table, the company is pursuing organic growth in the region, targeting a 15% growth rate across all overseas markets. Plans are underway to establish a 100% owned subsidiary in Saudi Arabia.
New Product Development: Time Technoplast is investing in R&D for new applications of composite cylinders, including fire extinguishers, hydrogen cylinders, and drone applications.
Capital Allocation:
Capex: The company expects total capex of ₹180-200 crores for FY25, with a focus on value-added products (50% allocation) and brownfield expansion. Proceeds from non-core asset sales (estimated at ₹125 crores) will offset capex requirements.
QIP: Time Technoplast has received board approval for a qualified institutional placement (QIP) of up to ₹1,000 crores to fund debt repayment, expansion plans, and working capital requirements.
1.4 Key Quotes
On the Middle East business: "We have been advised by our board member not to sell this business and grow [it] ourselves... the international business we have reviewed for the next 2-3 years [is] sustainable, and... good growth is coming around 15%."
On value-added products: "If [the] company is going to incur 100 rupees for the expansion, I think you can consider almost 50% for value-added products... in the existing product, we will do brownfield expansion, but the major expansion in India and overseas put together is the value-added product."
On the company's growth outlook: "We are quite confident for the [next] two to three years' time... oil prices have gone down... which is good [for] polymer prices... [and will] give a good conversion from metal to the polymer and composite products."
On composite fire extinguishers: "The advantage with the composite cylinders would be that they will not rust or corrode... in some of the new trains that have been rolled out by the government of India... they have mandated the use of composite fire extinguishers."
Time Technoplast Limited Q2 & H1 FY25 Earnings Call FAQ
What were the key financial highlights for Q2 and H1 FY25?
Q2 FY25
Net sales: ₹1,372 crores, a 15% increase year-on-year
EBITDA: ₹197 crores, up from ₹167 crores in Q2 FY24
Profit after tax: ₹98 crores, a 40% jump year-on-year
Volume growth: 17% year-on-year
H1 FY25
Net sales: ₹2,626 crores, a 14% rise year-on-year
EBITDA: ₹372 crores, compared to ₹315 crores in H1 FY24
Profit after tax: ₹178 crores, a 40% surge year-on-year
Volume growth: 16% year-on-year
What drove the strong performance in Q2 and H1 FY25?
The company's robust performance was fueled by:
Strong demand in industrial packaging: This core segment continued to deliver stable growth.
Exceptional growth in CNG composite cascade business: This segment saw a remarkable 36% surge.
Growth in value-added products: Products like composite cylinders for LPG and CNG contributed significantly, with a 21% increase in H1 FY25.
Optimized capacity utilization: This, coupled with reductions in finance and depreciation costs, boosted profitability.
What is the company's outlook for the remainder of FY25?
Despite challenges like extended monsoon seasons, the company remains confident about achieving its projected growth of around 15% for the fiscal year. Positive factors include:
Robust demand: The order book for CNG cascade stands strong at approximately ₹185 crores.
Favorable trends in key business segments: Both industrial packaging and composite cylinders are expected to perform well.
Declining oil prices: This translates to lower polymer prices, benefitting the company and accelerating the shift from metal to polymer and composite products.
What is the company's strategy for value-added products?
Time Technoplast aims to increase the share of value-added products in its revenue and margin mix. The plan includes:
Expanding into new value-added products: The company is developing composite fire extinguishers and hydrogen cylinders, with high expectations for their future potential.
Allocating a significant portion of QIP funds towards value-added products: This will drive expansion and innovation in this segment.
Targeting 30% year-on-year growth in value-added products: The company aims to achieve a 35% revenue share from value-added products in the next 2-3 years.
What are the company's plans for capacity expansion and capital expenditure?
Time Technoplast is primarily focusing on brownfield expansion, with a total capital expenditure estimated between ₹180 to ₹200 crores for FY25. Key aspects of the plan include:
Prioritizing value-added products: Approximately 50% of the capex will be allocated towards expanding the production of these high-margin products.
Completing the delayed CNG cylinder capacity expansion: The additional capacity of 3,600 cylinders is expected to come online in Q4 FY25.
Expanding TPL Plast's capacity in the Konkan region: This ₹25 crore investment will focus on IBC manufacturing to cater to the growing demand in this region.
What is the rationale behind the company's decision not to sell its Middle East business?
The company has decided against selling its Middle East business due to:
Strong organic growth in the region: The company is achieving over 15% growth, making it a valuable asset.
Revised valuation expectations: The company seeks a higher valuation based on its current performance and growth trajectory.
Strategic decision to expand its own presence in Saudi Arabia: The company plans to establish a wholly-owned subsidiary in Saudi Arabia to further capitalize on the region's growth potential.
What is the company's approach towards debt reduction?
Time Technoplast is committed to becoming debt-free by March 2026. The key strategies for achieving this goal are:
Focusing on organic growth: The company is not actively pursuing acquisitions, relying instead on its strong internal growth to generate cash flow.
Reducing debt through operational cash flow: In H1 FY25, the company reduced debt by ₹52 crores through operational cash flow.
Optimizing working capital cycle: The company aims to reduce its working capital cycle from the current 100 days to 85-90 days in the next two years.
What initiatives are being taken to reduce costs and improve efficiency?
Time Technoplast is actively pursuing various cost reduction and efficiency improvement measures, including:
Investing in automation and re-engineering: These efforts aim to reduce labor and power costs, with payback periods targeted at less than four years.
Switching to solar power: The company is leveraging government policies to procure up to 80% of its power requirements from solar power providers, aiming to save ₹12 crores annually.
Improving productivity: By enhancing processes and adopting new technologies, the company aims to boost output and offer competitive pricing to customers.
Source: Link to Earning Call Recording
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