Time Technoplast Limited (TIMETECHNO) Earnings Call Transcript & Summary

Thanks. Welcome to the Q1 FY '22 Earnings Call of Time Technoplast. From the management today, we have Mr. Bharat Vageria, Director, Finance and CFO; Mr. Raghupathy Thyagarajan, Director, Marketing; and Mr. Sandip Modi, Senior VP, Accounts and Corporate Planning. Sir, I would request you to please start with your opening remarks. Over to you, sir.

Good afternoon to you all. And it is for -- as I just told you that this is the Q1 call. And we are here essentially to talk about our result of the Q1 FY 2022, and outlook for the rest of the year. The results are already announced, but I will just walk through some of the key financial and operational highlights. The key numbers are: During the Q1 FY '22 -- and previous year figure also, I will read it. On a consolidated basis, net sales stood at INR 755 crores as against INR 475 crores of the previous year same period. I just would like to remind you, in the previous year, same quarter, it was the COVID first wave was there. And around 40 to 45 days national-wide lockdown and some of the units were disturbed. But they have now become the useful of running the units by the way of using the digitization. And this year also in especially Q1, some of the locations, especially Telangana, East Region, Kolkata, there were some disturbance was there in Chennai region. But in spite of that, company have achieved the net sale stood at INR 755 crores as against INR 475 crores in the previous year. EBITDA stood -- EBITDA was INR 101 crores as against INR 54 crores. PAT of INR 29 crores as against a net loss of INR 12 crores. Cash profit, INR 68 crores as against INR 26 crores. In terms of the -- compared with the corresponding quarter of previous year, net sale increased by 59%, India, around 67%, overseas is 47%. Volume increased by 57%. There is a great difference of volume and revenue is around 3%. EBITDA increased by 86%, PAT increased by 344%. The EBITDA margin was 13.4% as against 11.4% increase by 200 basis points. I recall my last conference call is after the Q1, which was -- happened when my EBITDA percentage was 11.4%. That is because of some of the cost fixed expenses, which when the utilization will increase, revenue increase automatically, it will be set off. For example, salary, wages, rents, interest, these all are from the fixed expenses continue expenses, whether business is there or not there, we have to absorb that cost. Therefore, it is straight looking that 2% jump, 200 basis point jump in EBITDA. Share of the business, established product value-added products, value-added products grew by 52% in Q1 FY '22 as compared to Q1 FY '21, while established products grew 61%. The share of the value-added product has been 20% of the total sale in Q1 FY '22 as against 21% in Q1 FY '21, almost the same. Share of India and overseas business. Normal cafes, it is always 70% and 30%, but now I have seen the -- in Q1, the share of the India and overseas business, 62% and 38% as against the previous year, 59% and 41%. I will clarify here the COVID effect in the previous year, the India was much, much more compared to U.S. Therefore, we have seen the 59% revenue was in India and 41%. Now this year, same quarter 62% little, little improvement is there as far as India part is concerned. And I think except Q1, which was the major effect of the Q2, now it is witnessed everywhere, COVID cases are reducing day by day. We all know that in the month of March, April, COVID cases reached to 3 lakhs, 4 lakhs cases in a day, which is now reduced to 30,000 to 35,000. But I think, as everybody knows -- everybody is worried about COVID third wave, but I think government is also working hard on providing the vaccination to most of the people. And every company is also taking care of their all staff strength, manpower people. So that is benefiting the company. And the corona cases will be reduced. Total debt in this Q1 is reduced by INR 22 crores from the year ended finance year 2021. These efforts will continue. The total CapEx incurred during the Q1 FY '22 was INR 30 crores, which includes INR 14 crores towards the capacity expansion, retaining automatation for established product, INR 16 crores towards value-added product. As value-added product always we mentioned, is the IVC, CNG Cylinder, LPG Cylinder and MOX film. This 3 are the product considered under the value-added product where company is more focusing and increasing the revenue. We all are witness, and we all are -- I would like to again update value-added product where the company has an EBITDA level in the range of 18% to 22%. The established products where the EBITDA margin is in the range of 12% to 14%. The company is more focusing on the value-added product, even though established product will also grow as the industry will grow. Now I would like to open the floor to the answer necessary questions. And thank you.

[Operator Instructions] We have the first question from the line of Kajol Jain, who is an individual investor. Ms. Kajol Jain, please go ahead with the question.

I think you can take the next one.

[Operator Instructions] Ms. Kajol Jain, please go ahead with the question.

Am I audible?

Yes, yes.

Okay. First I'd like to congratulate Mr. Bharatji for such fantastic results. Yes. My question is on the lines of CNG cascade. So my query is that so as we can see that many electric buses are now on the road and government is pushing the electric vehicle buses project. So how -- do we see it as a threat for our CNG cascade in anyway? Or what would be your view going next 3 to 5 years?

Yes, yes. I just -- last conference call, it was in the end of the May. When we have stayed in the month of May only we got the approval for onboard application for CNG cylinder, Type IV, right?

Yes.

Recently, my marketing team has started talking to the OEM people. Now we are in the process of talking with some of the OEM directly because every -- we have a standard 2 cylinders, 60 liters and 156 liters. Okay. So I think that definitely market is there. And in our analyst meet also we have mentioned projections, in fact, how many business can be come on account of this onboard application, which we are expecting by 2024, the 210,000 buses we are expecting a total number of the buses by road. Out of that, we are expecting conversion in CNG around 85,000 buses. And number of the cylinders per bus required is 8 number. So total number of cylinder we are expecting around 6,80,000 cylinders. And this market -- potential market in the 3 years can be INR 5,000 crores. It's a total estimated business can be of the cylinder business as far as onboard is concerned. Now I will give this to Mr. Raghupathy Thyagarajan, my colleague, Director, who will give more details about the CNG cylinder.

Kajol, very specifically replying to your question as to whether the CNG growth will be affected by the potential that is coming from the electric buses, I must tell you that as far as CNG is concerned, the government has rolled out a very ambitious plan to ensure that the CNG availability is improved. So far, the availability of CNG has been focused mainly in the Northern NCR region, I would say, and probably some parts of Gujrat and Maharashtra. That is where you will see the -- most of the CNG growth has really taken place. Now as per the last geographical areas that have been allotted by the government under the offices of PNGRB, they have given an ambitious plan to a lot of companies who have -- to whom the geographical areas have been allotted. They have said that the current availability of CNG which is covering about -- almost about 15% of the country or region will have to be increased to almost about 80% of the country. They have allotted -- they have made an ambitious plan that the number of CNG stations has to go up from maybe 1,500 to 2,000 currently to almost about 10,000 CNG stations over the period of 8 to 12 years. So the availability of CNG improving, this is likely to definitely grow. There is no doubt about it. At the same time, there is a valid question as to -- I mean, CNG growth is also taking place primarily because of 2 reasons: a, it is a clean gas. So you have lesser pollution, number one. And number two, it does not really hit the -- make a deep hole in the pocket of the consumer because as on today, with the price of the petrol and diesel that is going on, when you use CNG, you're actually reducing your operating costs by almost about half. So there is a good potential for CNG as we go forward. But as far as the electric bus are concerned, there is a lot of infrastructure issues that are yet to be addressed both by the government and the industry. The biggest supply chain issue will be coming with regard to the battery, which is very difficult. The technology is not yet established. Most of the lithium ion batteries are available mostly out of China. There are no other dependable sources that are available worldwide. So that is a very big question mark, plus the fact that the infrastructure has to be providing for a large amount of charging stations and the charging time that will be involved that also has to go down. So as for the experts that are there, they would say that electric industry -- electric buses industry or vehicle industry will be known little more evident in the next 7 to 10 years without -- before which it's very difficult to take a call on the electric vehicle industry.

Okay, sir. Got it. Sir, just a follow-up question. Do we have any -- will we incur like any CapEx expenditure towards this?

CapEx for?

Will we incur any CapEx expenditure for this CNG next year?

Of course. In fact, we had initially last conference also we had told, CNG expansion we have taken because the new product we have taken under consideration in this last 6 months only because CNG, as we have mentioned, we have initially done the CapEx of around INR 25 crores to INR 30 crores. Out of that, we can generate revenue of INR 55 crores to INR 60 crores, for which we have already got the orders for this year. Now the further orders are ongoing because CNG and LPG both are the different cylinders, size of them also different. So as far as CNG is concerned, first, we are tying up, and we are negotiating with some of the other CNG applications also. So expenditure this year, we will do when the order booking will be more. And as per the market need, we will do the CapEx. So -- but normally, as we have mentioned, the normal CapEx is in the range of INR 75 crores to INR 80 crores from my existing business and additional CapEx whatever will be there for the value-added products, which includes the IBC and the mainly for the CNG because LPG already we have a capacity, and we are first utilizing our existing capacity.

Mr. Sanjay Jain, please go ahead with your question.

Hello. Can you hear me?

Yes, Sanjay.

Okay. Yes. Sir, I wanted to understand about this LPG cylinders, that 30,000 cylinders that you got order. So what is the progress on this? And what is the scalability? What is the response from the market or what stage it has reached? And which shipping unit it is been on?

I -- if you've gone through my press release, we have very clearly written update on the back to the order first time because the long back, we have supplied 40,000 cylinders. Now after that, we have taken the initiative, we have given the presentation to the government that nearby countries are using our cylinders and why this Indian government is not using. We have given our presentation to the central government also. But out of that, currently, the orders, which is under process, and it is already supply has started to the orders which we have got it from the government companies. And we are expecting, after going this cylinder -- and another thing, steel prices cylinder has also gone up substantially. So that will be more competitive advantage for government to use the composite cylinder and additional advantage of the life sale. And additional features is available in the composite cylinder.

Sir, my question is that this 30,000 cylinder order, we just got it, so we've not yet delivered it, right?

No, no. Started delivering. Started delivering. You will come to know.

And has the government -- I mean, are these cylinders out in the market?

Sir, it is going to take some time because it just orders received, I think press release given on the August 4 only, after on -- 1 day before only I received the order. So after that order, we need to prepare as per their specification. As per there want, we have to supply them, then it will go for the testing of the PESO approval and their nominated agency will test it, and it will go to the filling station. And if -- I think in market, these cylinders should come out in the next quarter in the public place. There as some distribution time take place between the company.

I see. Is there any -- somebody else also supplying such cylinders because I remember having seen some tweets by Indian Oil Company which say that it is ready available in the market.

No. I think you are talking about the one -- another private gas distribution company, who is selling the cylinder filled with the gas, that is called GoGas company. You are talking about that company?

Perhaps, yes.

I think I've also seen on the media on Aaj Tak something media channel, I have seen GoGas. And GoGas is also buying from us. It's also -- GoGas is the Confidential -- have you heard the name of the company called Confidence Petroleum?

No, I have very little knowledge here.

Okay. Fine. I think I'll tell you the Confidence Petroleum is a metal cylinder manufacturer. And at the same time, they are providing services of the gas filling station to the government companies, OMC, he provide the gas filling. And they have started their separate company called Confidence Petroleum and Futuristic Limited where they have launched their own gas distribution scheme in the metal as well as composite cylinder. And we have a signed cooperation agreement with the -- this GoGas, who are the -- we are also given a preferential for supply of the composite cylinder to GoGas. And they have launched in India, many places, they are in the process of recruiting their own distributors for this GoGas composite cylinder. So GoGas right, company.

My question -- yes. Okay. Yes, good information. The point is that if you are already supplying to GoGas and GoGas is already commercializing these products then what are we doing with OMC? Like already that...

It is very large because always -- it's the largest OMC gas and these are the private gas distribution company. Government supply is always in terms of the present also population of cylinder of the government companies is very, very high.

Okay. So basically, it means that the product is already accepted by the regulator and established in the market. Now you're just going to get a...

Yes, there is a -- there is a going of only circulation point of view because the product is approved by the government-nominated agency called PESO. It is caution of just buying and launching in the market. It hasn't started.

Right. And any market feedback you got from the experience of GoGas? How are customers receiving it in terms of the additional payment they have to pay to get this cylinder instead of sealed cylinder. Any feedback on that?

My director Mr. Raghupathy will explain you about this -- GoGas about and this distribution channel.

As far as the composite cylinders are concerned, the biggest advantage that they offer to the consumer on a day-to-day basis is that it is extremely light in weight, and you can view the level of the gas inside. People who have received this composite cylinders have been finding it extremely wonderful. It's a next-generation kind of packaging for LPG. And it has received very well -- very good response. Of course, in the realm of use of these cylinders is with the public sector units like IOCL, HPCL, et cetera. To a large extent, that was also limited to the fact that any government company would go in for such a purchase only when the price savings are there. We, in the meantime, continue to market these composite cylinders. We supply to almost about 40-odd countries globally where these composite cylinders are -- where the LPG is marketed privately. In India of late, there is a tremendous amount of -- interest that gets generated back to LPG and composite basically because of 2 reasons, a, the differential pricing between composites and steel has come down substantially as Mr. Bharat Vageria told. And secondly, overall, availability of steel cylinder continues to be a problem with the availability of steel being a very big situation challenge as on date. So those kinds of interests are kind of pushing the interest towards composite. And consumer reaction is already validated that they -- they have found that wherever the composite cylinders have been introduced, their market share have always gone up as compared to the companies who have not adopted composites.

The next question is from the line of Nilesh Shah from Arrow Investments.

This is Nilesh here. [Foreign Language] I just wanted to know where is Mr. Anil Jain? I think he was not at the analyst conference. I hope everything is well with him and all is fine and...

No, no, no, all is fine. In fact, all is fine. He had gone with some customer meeting because some urgency was there in reference to the CNG impact discussion. Some...

Because he was missing at the analyst meet as well and he's not in...

No, no, [Foreign Language] but suddenly that meeting was fixed up because today was the finalization of that deal. I cannot disclose the name of the company, but because of this thing. But definitely, he's there. He's fine. Well everything. Therefore, Raghupathy is here to explain whatever is need reference to CNG, LPG or any other products on the market.

[Foreign Language] This is the only question I had and are there...

No, nothing. Nothing. No, everything is fine. Don't worry. All our safe. Everybody is safe in the company. And all the people are here to tell you, each and every person in the company, we have provided the vaccination to people. Most of the people have taken two vaccinations. Some, including the worker I'm telling, first vaccination has been given. Second has the -- time gap is there for the 84 days. We are going to arrange for all the worker because if worker and people are safe, then company is safe.

We have the next question from the line of Gayatri, who's an Individual Investor.

Congratulations for the good results. Sir, I would like to ask, since the Board has recommended an increase in the share capital from INR 32.5 crores to INR 52.5 crores. How will you ensure that the share value of the present shareholders will not go very low, sir?

I tell you because this question after going this published result, many people have asked me. One thing I tell you, nothing on the table, nothing on the agenda. It is just some of the Board members and this thing have told to the members. One of my subsidiary company, you must have seen in the result, TPL Plastech who were -- some bonus is there, and that is announced because the liquidity is -- was very, very poor in that company. INR 10 shares and liquidity, hardly the share capital was 78 lakh shares. And out of that, 75% owned by the promoters, 3% owned by the government -- transferred to the government and 5% is still in physical. So liquidity was not there. And that company has completed almost 28 years and they have announced the bonus. So now, and this meeting only told because I have received -- the question you are asking, I have received this call in the last 3 days. Is there anything company want to place the shares? Is there any plan for the right issue? I'm clarifying you, nothing is on the table. It is just approval in the AGM because AGM once in a year, so it is just keeping in mind in the future of the company. If any time Board decide, whatever way of this, but nothing is on the table as on today.

[Operator Instructions] The next question is from the line of Hitesh from ICICI Securities.

Sir, my question -- I have 3 questions. First is, how has been the demand scenario post ease of the lockdown situation starting from the July? So we got the number of Q1, but if you could throw some light scenario, which is building up for the upcoming quarters? This is my first question. And sir, my second question is -- pertains to the PE pipe segment. That segment has remained a bit laggard as far as the overall segment is concerned. So if you could throw some light on that segment also because your order book, I think it's INR 210 crores as of now. So please, this is a 2 question from my end. I'll come -- I have more questions to ask. I'll come in the queue.