TITAN BIOTECH – Stock Analysis

Price: Rs 584 (Recommended on 16th August 2024)

Target Rs 1500 – 48 months

Titan Biotech Ltd. offers a compelling investment opportunity in the niche biotechnology sector, producing products essential for industries experiencing strong growth, such as agriculture, diagnostics, animal nutrition, and human nutraceuticals. The Indian Biotechnology Market, valued at USD 101.5 billion in 2024, is projected to reach USD 297.2 billion by 2033, growing at a CAGR of 11.09%.

Given the favorable industry tailwinds, Titan Biotech is well-positioned to achieve a growth rate of at least 15%, outpacing the overall market.

The company is currently available at a PEG ratio of 0.82, which, according to Peter Lynch >1 metrics, indicates it is undervalued. With an exceptional ROCE of 25.1%, the company demonstrates outstanding profitability and efficient capital use. Its debt-free status and strong balance sheet provide financial stability, enabling consistent earnings growth throughout business cycles.

Market Cap	₹ 499 Cr
CMP	₹ 604
Stock P/E	20.1
ROCE	25.1 %
ROE	20.4 %
PEG Ratio	0.42
Debt to equity	0.06
Return over 5years	74.3 %
Asset Turnover	1.13

What Is Driving the Valuations?

Titan has successfully expanded from a B2B focus to enter the B2C space by launching its own brand Nature’s Island. This strategic shift has not only increased the company’s market reach but also improved its profit margins, which have consistently risen year over year. This margin growth has been a key factor in the company’s valuation expansion.

The company is trading at a P/E ratio 20.4 and an EV/EBITDA multiple of 11.7 FY26E, which is lower than current EV/EBITDA FY24 14, reflecting the market’s recognition of its robust growth prospects.

Titan Biotech is available at 11.7x FY26E EV/EBITDA and 13.49x FY25E EV/EBITDA, Currently, the company is trading at an EV/EBITDA multiple of 14.1x and PE 20.4

Particulars	FY22	FY23	FY24	FY25E	FY26E
Sales	124	144	164	188.6	216.89
Expenses	92	114	130
EBITDA	31	30	34	37.72	43.38
OPM %	25%	21%	21%
EV				509.16	509.16
EV/EBITDA				13.49	11.738

Given the company’s strong fundamentals and growth potential, we recommend a Buy rating on Titan Biotech Ltd., with a long-term investment horizon.

FINANCIAL SUMMARY (Rs in cr)

Particulars	Mar-17	Mar-18	Mar-19	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	CAGR@7YR
Sales	53	57	65	79	142	124	144	164	18%
Expenses	47	50	56	66	96	92	114	130	16%
EBITDA	5	7	9	13	46	31	30	34	32%
OPM %	10%	12%	14%	17%	32%	25%	21%	21%
Other Income	0	0	1	1	0	1	2	2
Depreciation	1	1	2	2	2	2	3	3
EBIT	4	6	8	12	44	30	29	33	35%
EBIT(%)	8%	11%	12%	15%	31%	24%	20%	20%
Interest	1	2	2	2	2	1	1	1
Profit before tax	3	4	6	10	42	29	28	32	40%
Tax %	35%	35%	30%	25%	26%	25%	25%	25%
Net Profit	2	3	4	8	32	22	25	25	43%
CFO	0	2	5	6	19	22	21	21
EPS in Rs	2.82	3.28	4.26	8.56	36.71	26.24	30.06	30.07	40%

Titan Biotech’s Financial Performance Summary (Mar-17 to Mar-24):

Sales grew at a CAGR of 18%, from ₹53 crore to ₹164 crore, driven by market expansion.
Expenses increased at a CAGR of 16%, demonstrating efficient cost management.
EBITDA rose by 32% CAGR, reaching ₹34 crore in FY24, with margins stabilizing around 21%.
EBIT climbed at a 35% CAGR, reflecting improved operational efficiency.
Net Profit surged with a 43% CAGR, resulting in a 15% net profit margin in FY24.
EPS increased at a 40% CAGR, highlighting strong shareholder value creation.

Overall, Titan Biotech has achieved significant growth in sales and profitability through strategic initiatives and operational efficiencies, making it a compelling investment opportunity.

CORE BUSINESS MODEL

Titan Biotech Limited is one of the leading manufacturers & exporters of biological products used in the field of Pharmaceutical, Nutraceutical, Food & Beverages, Biotechnology & Fermentation, Cosmetic, Veterinary & Animal Feed, Agriculture Industries, Microbiology Culture Media & Plant Tissue Culture Media etc.

Company has its factory and plant in Rajasthan, with a combined capacity of 5,150 TPA.

REVENUE BIFURCATION FY23

Product Categories:

Food Ingredients: Flavoring, Food Preservatives, and Improvers
Collagen and Proteins: Wheat Protein Hydrolysate, Corn hydrolysate protein, Bovine Collagen Peptides, Collagen peptides, Fish Collagen, Undenatured Sternum Chicken Collagen, Chicken Protein Isolate, Soya Protein Isolate, Pea Protein Isolate, Mucopolysaccharides
Pharmaceuticals and Nutraceuticals: Nutraceuticals, Pharmaceuticals, Tablets /Syrups /Capsules, Yeast
Animal Nutrition: Binding Agents, Chelates Minerals, Mold Inhibitor, Proteins, Yeast
Probiotics and Fermentation Ingredients: Peptone, Liver Extract, Meat Extract, Malt Extract, Yeast Extract
Agricultural Products: Bio-fertilizer, Bio-stimulants, Bio-pesticides, Insecticides, Fungicides, Herbicides, Soluble fertilizer, Plant growth regulators
Culture Media: Dehydrated Culture Media, Ready To Use Culture Media, Microbiology Lab Consumables, Media Supplements, Biological Media Bases, Antibiotic Sensitivity Discs, Microbiology Lab Equipment, Plant Tissue Culture Media, Laboratory Chemicals Indicators

Geographical Revenue Split – FY23

With the experience of more than 30+ years and the remarkable market presence in 100+ countries.

Risks

Market Competition: The biological products market is highly competitive, with several players vying for market share. Any loss of market share or pricing pressure could impact Titan Biotech’s margins and profitability.
Regulatory Risks: The company’s products are subject to stringent regulatory approvals, particularly in the international markets. Any changes in regulations or delays in approvals could affect the company’s growth prospects.
Foreign Exchange Risk: With a significant portion of revenue coming from exports, Titan Biotech is exposed to foreign exchange fluctuations, which could impact its profitability.
Supply Chain Disruptions: The company’s operations are dependent on the timely availability of raw materials. Any disruption in the supply chain could lead to production delays and impact revenue.

Shareholding Pattern