Although Time Technoplast (TTL) has diversified into four new business verticals, industrial packaging remains its largest segment, contributing 59% to the total revenues in FY08.
Going forward, the management expects contribution from this segment to come down to 56% in FY09.
Contributions from infrastructure products like telecom batteries and auto components like plastic fuel tanks for commercial vehicles will increase in FY09.
Key ongoing projects are high pressure HDPE pipes for water and sewage management, prefabs and BT shelters, plastic returnable transit packaging (RTP) solutions and composite cylinders for LPG and CNG.
TTL expects net revenue of Rs9.5 billion and Rs13.6 billion in FY09 and FY10 respectively with a flat EBITDA margin of ~20%. However, we feel that FY10 growth remains a concern in the wake of weakening economic growth in India.
We have revised our WACC estimates marginally downwards from 15.7% to 15.1% due to changes in our risk free rate and market premium assumptions.
This, coupled with a downward revision of revenue estimates for FY10, has led to a downward revision in our DCF-based target price to Rs42 from Rs60 earlier. We maintain our BUY rating on the stock.