Gaurav Aggarwal of Metis Capital Management presented his in-depth investment thesis on Time Technoplast (India: TIME) at Best Ideas 2020.
Time Technoplast is the world’s fourth-largest industrial rigid packaging manufacturer and has a dominant market position in Indian plastic industrial packaging (mainly drums, jerry cans, pails, and intermediate bulk containers) used chiefly by chemical, petrochemical, and food and beverage industries.
The key reasons for Gaurav’s long-term optimism spring from a few fundamental factors, the foremost being the passionate, innovative, and transparent characteristics displayed by the management team since 1992, which owns 51% of the equity. From 2010 to 2014, the firm aggressively expanded operations overseas and has become a market leader in Southeast Asia and the Middle East.
India is the leader in Asia for usage of plastic drums and containers, with about 55% plastic / 45% metal. In the rest of Asia, the mix is closer to 10/90, so there is a long runway of growth as the company continues to steadily convert sticky customers to use safer, longer shelf life, lower lifetime cost product vs. similarly priced metal containers.
Given the ongoing focus on value-added products and 74% capacity utilization in the overseas industrial packaging business (~30% of revenue), Gaurav expects ROCE to continue to rise for next few years toward 20+% as margins and growth remain in the range of market expectations. Due to negative market sentiment in small-cap space, the valuation is compelling: a conservative DCF and comparable sales multiples suggest potential upside of 100+%.
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About the instructor:
Gaurav Aggarwal, CFA, CIPM is the co-founder and co-portfolio manager of Metis India Opportunity Fund (MIOF). Prior to starting Metis in 2011, he was a senior analyst with portfolio management duties over $50 million in fund of fund assets at a leading regional investment bank (Global Investment House) in the Middle East. Prior to this, he was with Bay Harbour Management, a $1.2 billion distressed debt and equity hedge fund in New York City. He has also served as an analyst with Polen Capital Management, a $8 billion+ long-only firm with a successful long-term track record. He received an M.S. in Accounting (specializing in Finance) and B.S. in Business Administration from the University of North Carolina at Chapel Hill. He looks forward to continue building a charity corpus equaling 25% of his net earnings from fund management which he will deploy in future charity/cause of his choice.