IGI Logo

Mold-Tek Packaging reported decline in sales by 3%. Volumes grew modestly by 3% while realization dropped by 6% YoY to Rs205/kg. The modest growth was on account of weak sales in company’s paints segment. Paints segment’s volume/value declined by 10/16% respectively. Gross margins improved by 50/60bps on YoY/QoQ basis. RM/kg declined by 7/8% on a YoY/QoQ basis to Rs120/kg. Despite lower sales/kg getting offset by lower RM/kg, EBITDA/kg declined by 13% due to higher operating expenses. Several new projects in implementation phase added to the operating cost. Though we remain bullish on Mold-Tek on account of market leadership in IML packaging, massive capacity expansion and introduction of new product categories we believe that near term growth is priced-in. We maintain our FY23/24 earnings estimates and increase FY25 estimates by 6%. We maintain ADD rating & value the company at 30x 1HFY25E EPS to Rs1,014 (earlier TP of Rs965). Strong capacity expansion plans for FY23/FY24

MTEP currently has 44.3ktn capacity with 76% utilization rate. The company is adding capacity for thin wall containers (4.7ktn), bulk packs (2.6ktn), IBM containers (2ktn), IML labels (doubling capacity to 45mn labels per month) and tool room facilities (per month capacity to increase from 4 in 2021 to 8 in 2023). Apart from this company is planning to add new designs and shapes for Food & FMCG and Lubricant industries. Mold-Tek is expected to spend Rs100mn in FY23 (9MFY23: Rs800mn) and has guided to spend another Rs1,250mn on capacity building in FY24. The company has cumulatively expended ~Rs2500mn on capacity building over FY18-22. Total capacity at end of FY23/24 will reach at 54ktn/70ktn. At 80% utilization rate on capacity of 70ktn MTEP can reach sales of Rs12.5-13bn by FY26. This implies sales growth of 18-20% over FY22-26.

Client additions, newer product categories to drive growth

The company recently received orders from Shell for its newly developed QR coded IBM containers. It is expected to add two more clients – Cream Stone and Walko for this product in coming quarter. Pharma IBM containers are expected contribute to sales from FY24. Apart from this, Mold-Tek recently received approvals from Iodex. It started manufacturing custom packs for Kisaan and Horlicks (1kg and 2kg products). During this quarter, the Company bagged new orders from 32 new Food & FMCG clients. Mold-Tek has received two LOI from Grasim for plants at Panipat and Cheyyar (near Chennai). The company will be setting up plants with initial capacity of 2000tn pa. The company is also expected to start two new plants at – Daman II for FMCG and Sandila for paints. These two new plants are expected to commercialize by 2QFY24/1QFY25 respectively.

Valuations

We expect sales/EBITDA/PAT to grow at CAGR of 17%/20%/20% respectively over FY22- 25E. We estimate EBITDA margins to expand by 140bps over FY22-25E to 20.5%. We maintain our FY23/FY24 earnings estimates and roll forward to FY25. We maintain our FY23/24 earnings estimates and increase FY25 estimates by 6%. We maintain ADD rating & value the company at 30x 1HFY25E EPS to Rs1,014 (earlier TP of Rs965).

To Read Complete Report & Disclaimer Click Here

For More Centrum Broking Disclaimer https://www.centrumbroking.com/disclaimer/

SEBI Registration No.:- INZ000205331

Above views are of the author and not of the website kindly read disclaimer