Time Techno: Charged up

Packaging firm acquires 100% of Bahrain-based Gulp Powerbeat.

The stock price of industrial packaging player Time Technoplast hits its all-time high of Rs 1,064 before it settled at Rs 979, up nearly 3 per cent, following the announcement that it acquired 100 per cent shareholding in Bahrain-based automotive battery major company Gulf Powerbeat (GPW) through its 71 per cent subsidiary NED Energy Systems.

In October, Time Technoplast had acquired a stake in Hyderabad-based valve regulated lead acid (VRLA) batteries company, NED Energy Systems, for Rs 50 crore at an enterprise value to sales of about 1.5 times.

NED is operating close to its optimum capacity and in order to meet the huge demand, the company is tripling its present capacity to 300 million ampere-hour (AH) by September 2008.

GPW has a capacity of 150 million AH, but it has a surplus capacity to make grids and lead plates of 250 million AH, which can feed NED's requirements. NED will be investing $6 million upfront in GPW and another $4 million over the next three years.

With the Bahrain acquisition, Time Technoplast will be able to cater to the auto segment as well, where NED was not present. NED is focused on the telecom sector.

According to the management, the contribution of the battery business will increase to 18 per cent in consolidated revenues by FY09.

In the half-year ended September 2007, the company reported consolidated net sales of Rs 292 crore and operating profit of Rs 61 crore. The company, which came out with its IPO in May 2007, is trading at three times its issue price of Rs 315.

At the current market price of Rs 979, the stock trades at 30 times estimated consolidated FY08 earnings and 20 times FY09 earnings, leaving little upside in the short term.

Suven Life: High on innovation

The Suven Life Sciences stock shot up 19 per cent to Rs 55 following the announcement that the company has received its first US product patent.

The patented compound (Suven 502) targeted at treating neuro-degenerative diseases such as Alzheimer's and Parkinson's is estimated to have a global market potential of $18 billion.

The company management believes that the product can be launched by 2012 if the clinical trials go as planned. The company has been focusing on the central nervous system category as it believes that the value proposition is the highest in this segment due to stiff R&D challenges and its head start in the segment.

Suven is planning to raise $50 million through the equity route by January 2008 to invest in R&D facilities and start clinical trials on its new drug pipeline.

The company's next potential candidate, Suven 504, targeted at tackling obesity, is expected to be put up for investigational new drug filing, which is the precursor to getting a patent within a year.

The company gets 90 per cent of its revenues from contract manufacturing but expects that revenues from this business will come down to 60 per cent as contribution from contract research moves up.

This shift is expected to improve operating margins, which were at 17 per cent in FY07. Suven management estimates the top line to grow at 30 per cent and operating profit to increase by 20 per cent in the next two years.

At the current price, the stock discounts its FY09 estimated EPS of Rs 1.2 by a high 46 times. With uncertain cash flows and high R&D spends, this stock is not for the risk-averse.

With contributions from Priya Kansara and Ram Prasad Sahu