Time Technoplast Spikes 8 Per Cent After Getting Trial Order For Litesafe Composite Cylinders

Time Technoplast has surged around 8 per cent to hit Rs 61 on the Bombay Stock Exchange (BSE) as the company bagged a trial order for ‘LiteSafe’ Composite Cylinders from a renowned Oil Marketing Company (OMcs). The project shall soon be launched in the states of Maharashtra and Gujarat.

Recently, Hon’ble Minister of Petroleum has allowed the public sector OMCs’ to roll out Composite Cylinders for distribution of LPG in India. Going forward, the company expects large orders in bulk from all OMCs immediately after successful trials.

"OMC (the one that gave Time Technoplast this order) has initiated order for 3 sizes and further order for another 2 sizes is expected to be finalized shortly. Based on the response, OMCs will standardize design and size of Composite Cylinders to be introduced in large quantities.” as per BSE released.

India has approx. 280 mn Steel Cylinders in circulation and over 25 mn Cylinders are bought by OMCs every year. Going forward Composite Cylinders are likely to take dominate the purchase of new Cylinders bought by OMCs.

Currently, the company has successfully sold ‘LiteSafe’ Cylinders in India for over 2 years with a leading LPG Distribution Company in private sector and also exported to over 17 countries worldwide. Composite products contribute around 29 per cent of its revenue. As far as margin is concerned it earns around 10 per cent at EBITDA level.

Present share of Composite Cylinder is around 2 per cent at global level, which shall go up to 10 – 12 per cent by year 2020. Time Technoplast shall be one of the biggest beneficiaries of growing acceptance for Composite Cylinders, and therefore to meet the growing demand for Composite Cylinders, Company is expanding its capacity from 300,000 Cylinders to 700,000 Cylinders p.a. in India; and the additional capacity will be operational not later than March 2016.

On the valuation front, Time Technoplast is trading at a TTM PE ratio of 10.35 and on the basis of price-to-book value it trades at 1.15x. We have recommended this stock in the magazine in our Choice column at Rs 53 as on February 23, 2015, and still we recommend to hold this stock.