Q2FY25:
• Value added products grew by 21% in Q2FY25 as compared to Q2FY24, while established products grew by 13%.

• Polymer products: Composite products = 63:37% of sales
• Value added products: 28% of sales with 18.3% EBITDA margins

• Total Debt reduced by Rs. 51cr from H1FY24

• order book- PE Pipes: 175cr. Composite Cylinders (CNG Cascades): 185cr

• Return on Capital Employed for H1FY25 = 17.0%

• New Manufacturing unit by TPL Plastech Ltd: In the Konkan region of Maharashtra, TPL Plastech Limited (75%), Subsidiary of the Company is setting up Greenfield manufacturing project for Industrial Packaging products i.e., Intermediate Bulk Containers (IBC), Plastic Drums & Jerry Cans. This unit will cater to the existing & growing Agro chemical and allied demand in addition to the emerging market arising due to setting up of new projects on Solar/PV Chemicals, fruit and juice industry, semi-conductor chemicals and Ethyl Natural Alcohol units. Other than offering the latest developments in Packaging, the Company will have cost advantage for servicing in surrounding areas considering the voluminous product. The Company has already received land allotment from the Government authorities on a long-term lease basis & estimating to complete this project in FY 2025-26.

• Update on Sale of Overseas Business (Middle East): The Board of Directors reviewed the status of the disinvestment process regarding the sale of a 50% stake in the UAE business to a financial investor. After thorough discussion, which included an evaluation of the current situation in the Middle East, the Company’s strategic goal of becoming debt-free through its growth plan (targeting around 15% p.a.) and the ongoing Qualified Institutional Placement (QIP) (as detailed in Note No. 1), the Board decided not to proceed with the sale of the business.

• The Company’s Board has approved the consolidation of its product portfolio and manufacturing units in India & overseas, including the addition of new locations, Brownfield expansion, to better align with market demand while optimizing costs.

• Management has identified non-core assets for disposal with a realization value of Rs. 125 Crores (approx.). As of September 2024, the Company has successfully realized Rs. 65 Crores, and efforts are ongoing to achieve the remaining Rs. 60 Crores within the next 12 months.

• Development of technologically advanced TBS (Transparent Container Batteries) and E-Rickshaw batteries in Lead Acid and Lithium, through subsidiary company (NED Energy Limited & Power Build Batteries Pvt. Ltd.) is under process at their existing units. TBS is a type of lead-acid battery commonly used in power segment for backup power systems and, other applications requiring reliable and long-lasting energy storage and projecting for launch in Q4FY25

• Dominant market position with over 55% market share in domestic Industrial packaging.

• Well established inhouse R&D team of around 30 people having experience of more than 15 years for upgrading existing and developing futuristic products by using latest processing technology

CONCALL NOTES:

• LPG CYLINDERS: Certain Indian government gas distribution companies need 14.5 kg cylinders which company is Currently developing. But it is going to take time. And further, in the present scenario, all the distributor meets of the government companies are ongoing so that the company can also understand the market size and take the necessary action to put the capacity in place. So, this is the advance we ourselves are keeping ready for that.

We will continue the 10 kg cylinder sales but the large volume means 50 lakhs, 60 lakhs cylinder order they have asked us to develop a cylinder of 14.5 kg. I mean, we and Supreme are involved together we are developing a cylinder of 14.5 kg now they will develop the tool, the drawing design has been submitted, this is not done immediate, it is a six-month project. The drawing, design will be approved. We’ll make the product, submit it, and get the money approved. But during that intervening period, the 10-kilogram project will continue

Secondly, I am glad to tell you that along with IOCL, IOCL has given us permission since March to do distributor meet. All their distributors will go to cities to meet distributors and create awareness. So, already, as of today, it’s been done in 14 cities. HPCL, BPCL has also allowed they have to give permission because we are meeting their customers and dealers. And we are creating awareness for their dealers and distributors in this city so that in future demand can be created. In six months, all over India, HPCL, BPCL, IOCL distributors will be met and awareness will be created about what are the advantages of Cylinder, because normally, what do people think? And this is a plastic cylinder and a metal cylinder. But the plastic cylinder is light, it is explosion proof, it has light weight, it has easy gas visibility. To explain all this, if we explain to the distributor, then the distributor will tell the dealer, the dealer will tell the consumer, then it will be used in mass media. Then it will be used slowly slowly.

• Company will achieve target to achieve the working capital cycle days of 85 to 90 days in the next two years’ time

• SAUDI EXPANSION: The company-management has decided to put their own plant in Saudi, which will be around 100% by subsidiary of Time Technoplast Ltd. Saudi has good demand with upcoming chemical zone areas. And t Saudi government is welcoming to expatriate, and they are giving good kind of benefits to the industry people. So, we thought it is better to put our own unit there in Saudi. Currently, we are servicing from our nearby countries, Bahrain and small units available in Saudi also. And this will be the 100% ownership.

• Overseas business will grow at 15% in the 2-3 years.

• The oil prices have gone down in the range of $70 to $75, which at one point of time, it was $85 to $90. So, it is good. When the polymer prices are down, companies take the strength and the benefit pass on to the customers. And it gives good conversion from metal to the polymer and composite product take place faster.

• And another thing, it is seen that in the last one year or next one year also, one or two years good new capacities of polymers are also coming. I am glad to tell you, anybody in the processing process industry, next three years, good for the polymer processing and composite product company, because the capacity and there is a demand gap between the demand and the supply. So, it means the buyers’ market, you can ask your discounts, whatever things you want, and the faster conversion will be there.

• DRONE APPLICATION OF COMPOSITE CYLINDERS: The government is focusing on using more drone by the agriculture use also, and for surveillance. So, currently, what I understand, most of the drone companies, I think 20-25 companies are in India, who just is engaged in manufacturing of the drone. And as I understand drone value, per drone value, ranging from Rs. 5,00,000 to Rs. 30,000,00. And many agriculturists now started using for the fertilizer, seed growing, the drone they are using. And currently they use the batteries. So, when they will use this cylinder, then they can go the fly on the high and further they can fly the more hours, four times capacity more than the present batteries they use it. So, the new application is coming and very soon you will hear application for the drone application of our products. I will update as we get the final approval for this very huge opportunity in that line of the business. Because internationally I understand it’s a $40 billion business as far as drones are concerned globally. But India has a good opportunity. So, we’ll see how we’ll grab that opportunity available.

• IMPORTED RAW MATERIAL SUBSTITUTION: We have certain understanding with the local manufacturers to develop this product in the next two years’ time. I don’t want to mention the name of the polymer manufacturer because they are the large company and the confidentiality agreement signed between us to develop that product.

• Reliance has declared Rs. 65,000 crore investment in compressed biogas plant in Andhra Pradesh. So, that is also where the composite cylinder can be used.

• So, we are projecting the composite business, cylinder business, can be of Rs. 2,200 crores yearly business it is possible in the next three years’ time, looking at the policy of this government.

So, we are also targeting, in the next five years’ time, this composite product, which is currently Rs. 350 crores can be reached to over Rs. 2,000 crores in the 5 years’ time and around Rs. 1,500 crores in the next 3 years’ time.

• COMPOSITE FIRE EXTINGUISHERS: Typically, the fire extinguishers are made of metal, and they are normally installed at a place and very rarely in use. Though the cylinder is, extinguishers are not used, they undergo a lot of corrosion and deterioration on the cylinder. And when the need comes in, you have to ensure that these cylinders are actually in working condition. On many, many places, they may observe that the cylinders are non-functional and they don’t even work because of the fact they continue to corrode. The advantage of the composite cylinders would be that they will not rust or corrode, and that’s a big advantage that we’ll have. In some of the new trains that have been rolled out by the Government of India, such as the Vande Bharat, etc., if you go through the documents there, in the tender documents, they have mandated the use of composite fire extinguishers in those new age trains. So, it’s a clear acknowledgement as well of the technology that is available and we are moving in that direction. The demand is enormous, there is no doubt about it.

• We will always have first-mover advantage in newer composite products in terms of experience and R&D.

• AUTOMOTIVE APPLICATION: Already gotten an approval from Tata Motors. Today, we have an approval for automobile industry for the size of 60 Liters. So, we have started working with them. We know that it’s an 8 to 12 months project when working with the automotive line. So, already my team have started working with them, getting the drawings, do the development because every vehicle’s capacity is different. Then we need to do the development of the tool for each and every model and each and every manufacturer. So, our team has started talking with them. And when expansion will come in the Q4 of this FY25, thereafter, we will take each of the OEM and supply them.

OEM, we are the Category-1 supplier. We are having a green channel with all OEMs because certain OEM products we have done, for example, Tata. We are already working diesel fuel tanks. We have worked out. And we are supplying from my Pantnagar factory. You know that Tata Magic and that vehicle, they are using that fuel tank of the gas, this diesel fuel tank. We are supplying. For composite product, air-receiver tank, we have worked for 30 liters with them. Now 20 liters under development. Certain composite products which are not of the commodity nature, especially we have a relationship with Tata, Ashok Leyland. So, we do some of the automatic components, which are not of the commodity, specific customized product, we already deal with them. So, in fact, people have started talking with them. We are in process of getting their design, drawing approvals, then we will do the development, submit them, then the PESO approval will be required. And when you go in automotive industry, then Automotive Research Institute, which is in Pune, their approval will also be required. So, we’ll do the right time so that all get the approvals, and we will introduce that in the automotive industries also. But there are many other things, many composite products. By using the same line, we can work out for the automotive industry.

• Asset turns for Capex – Value-added products: 3x. Normal products: 2-2.5x

• Whenever we do the automation re-engineering product, we consider the payback period and payback period should be less than four years whether by way of a reduction in the power cost, reducing the labor cost, etc.,

• POWER COST REDUCTIONS: We are working on power cost reductions also. As you know that the government is also focusing on the use of the solar power. Just a bulk figure, which I remember I would like to tell you. In a year in India, we used 15 crores units of the power. So, you know that certain government’s policies come out in Karnataka, Tamil Nadu, Maharashtra, Gujarat. You can buy up to 75% to 80% of your power requirement from the solar manufacturing companies. So, already, we have already signed an agreement. We have done the equity investment. And we are going to save almost Rs. 3 a unit. So, if I just remember, around Rs. 4 crore units which we have a requirement in Gujarat, Maharashtra, Tamil Nadu, and Karnataka we have signed. So, the company will be able to save next year at least Rs. 12 crores on account of the power, power cost itself. Because otherwise, my power cost itself is more than Rs. 110 crores something we are paying annually. Now, the similar policy we are expecting in the other states also, like in Telangana, in Uttarakhand, in Himachal, everywhere we are expecting, because one, our team is completely following the government Ministry Department and other local departments, wherever policy is coming, immediately we are tying up and try to save these costs because the major cost as far as power is concerned

• TPL PLASTECH EXPANSION: TPL Plastech is just expansion in the Konkan region because Time Technoplast does not manufacture IBC in the Maharashtra Konkan region. Currently, their customers are servicing from the Union Territory area, Daman and Silvassa, and Dahej area. So, too much logistic cost is involved. But especially in this Konkan area, too much chemical demand is coming up in Maharashtra government and many new units are coming up that region, which is already mentioned in note, you must have seen, see the solar, PV chemicals, fruit, juice industry, semiconductor, many new units are coming and because of the near to the Nhava Sheva port and the reason chemical zone is coming up. So, TPL Plastech exact investment will be worked out but roughly I can say it will be in value around Rs. 20 crores to Rs. 25 crores including the cost of the land and buildings and equipment and so that if company will do Rs. 25 crore investment then definitely it can generate the revenue of around Rs. 75 crores to Rs. 80 crores.

• Rate of interest: 8.25% to 9% in India. And in overseas it is in the range of 6% to 7%.

• OXYGEN CYLINDERS: Oxygen cylinder, yes, we have order. We were not executing it because we didn’t have a line. But we have executed something in this quarter. Already I had orders of 5000 oxygen cylinders. But supply is running. And as I said a while ago, we are going to get cylinder approval for Type3 drone application on this line which is a very, very huge market. But the hydrogen cylinder is Type-3. You will get news very soon about its approval. And we are going to supply for drone applications also. It’s all new, it is like that we are looking out, we are in composite product. In composite product, there is LPG, CNG, hydrogen, drone applications, air receiver tank, and in the automotive sector, there is more. Like there is fire extinguisher. We will use our knowledge of the composite product manufacturing and explore the possibilities in the industries where these items can be used.

• The point is straight. Where the iron needed is100 kg in an item, if the composite product works in 40 kg, then the weight reduces by 60%. The weight reduces by 60 percent, which increases the efficiency of the item. It becomes easy in handling.

THINGS TO TRACK:

• CNG CASCADE DEMAND: Will demand get hurt by recent developments regarding reduction in APM gas to CGD’s? Or will the trend of conversion of steel cylinders to composite cylinders continue? How will Supreme Industries entry into this segment play out?

• LPG PROGRESS WITH OTHER OEM’s

• PROGRESS OF NEWER PRODUCTS: Drone application, fire extinguishers, water heaters, oxygen cylinders.

• PROGRESS OF AUTOMOTIVE APPLICATION

• RAMP UP NEW CNG CYLINER CAPACITY

I maintain positions in gold and silver through ETFs. But I have mixed-up reasons. I buy them as they are not correlated to equity, from a diversification standpoint and as they are ETFs, they also give me a chance to book profits from time to time. For pure diversification, with no expectation of return, as equity allocation gets bigger, with time, I prefer physical gold. And as silver is more volatile than gold.

GOLDBEES and SILVERBEES are very liquid, didn’t compare the expense ratios of these with other ETFs.

Gold has its proponents, it does have some value in the broad context of asset classes and financial products; its connection to USD and the movement of USDINR. We may have some views and insights as per its history and historical performance and our own experiences, but we have no control over its price, its value keeps on changing, as we know.

So just like hunting for value/bargains, we can look at gold too, from diversification standpoint alone, as it may not yield any return in the period we hold for, and it can even go down. So if we don’t expect any return and are even willing to take some loss, we can allocate to gold, and the allocation can depend on the capital allocated to equity or the volatility of the equity holdings or the possible loss in the equity PF, which if happens can make gold go up. If the allocation is considerable, and if it does not move for extended periods, it will be good if we don’t think about the opportunity cost.

Some points may have lost validity due to time or some changes, but these are worth reading.

I am also wondering what’s their view on this commodity business, but their picks are very interesting. Shrimp price started raising since june’24 at the same time MIT entered.

Is Aarti Industries set for strong growth? Detailed analysis by Rohit Nagraj, Centrum Broking Ltd

Yes @PuneetNandwani it is a great valuation below 2.5 ps but there is also a reason why it is valued below 2.5. Agro tech foods sales growth and profits have been negative by checking out their past performance. But after acquiring DelMonte I guess their statements will start to improve. Also I checked out Convergent and Samara capital they have great portfolio and they taking the finance and changing the board members can be a turn around for Agro tech foods. They also focused on expanding their Margin levels by Supply chain optimisation.

But their product portfolio is no very much attractive according to my views, I can be completely wrong but what I suggest is to wait for 2-3 quarters to see how company is showing their turnaround and is their P&L statement improving or not.