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Mold Tek Packaging – Strong results, better times ahead!!
MTEP reported strong set of numbers. Standalone revenues grew 17.0% YoY and 14.9% QoQ to Rs 1,159m on back of strong volume growth (15.2% YoY and 12.6% QoQ). The volumes for the quarter stood at 6313 tons. EBITDA stood at Rs 203m 12.4% YoY and 7.6% QoQ. EBITDAM margins declined 400bps YoY (due to addition of employees at the new plants, revision in wage costs in Telangana, refurbishment of roofing, electrical and robots at Unit I) and 120bps QoQ (on back of lower gross margins) to 17.6%. The last write off on account of RAK of Rs 10m (after Rs 10m provided in Q1) will be done in Q2FY20, post which there will be no further burden on the company. Due to these onetime write offs the EBITDA/kg was Rs 33.7 which otherwise would have been Rs 34.5. The management sounded very positive and confident of achieving Rs 34.0/kg EBITDA for the full year on back of 15-20% volume growth. Adjusted PAT grew 20.4% YoY at Rs 109m.
IML revenues as a percentage of sales increased from 61.7% in Q1FY19 to 65% in Q1FY20 and volumes from 53.5% to 61% on back of manifold growth in F&F business. In spite of sustained growth in F&F we do not anticipate this mix to change in the near term due to incremental volumes from Vizag and Mysuru.
In spite of increase in interest costs estimates we have revised our PAT estimates upwards by 3.8% for FY20E and 21E due to lower tax rate (28% versus 35% previously). We expect Revenue/EBITDA/Adj.PAT to grow at 18.8%/19.0%/20.5% CAGR to Rs 5,563m/Rs 1,018m/ Rs 517m in FY21E on back of
1) sustained growth in F&F through new product and client addition,
2) incremental growth from Vizag & Mysuru plants resulting in
3) better fixed cost absorption,
4) no further overhang on account of RAK related expenses,
5) no major capex in the offing.
At CMP, the stock is trading at PER of 16.4x FY20E and 13.9x FY21E revised EPS estimates of Rs 15.8 and Rs 18.7 respectively. Maintain BUY with a TP of Rs 355.
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