IGI Logo

Investment Rationale

* Pharma Segment to be a Key Growth Driver: The rising demand for pharma packaging presents a strong growth opportunity for MoldTek to expand into this large sector. With the new US government imposing duties on China, the management is witnessing growing interest from clients in tablet containers, EVT tubes, canisters, and CT/CRC caps for the pharmaceutical segment. The company has recently introduced over 12 new bottle SKUs, along with two sizes in child-resistant packaging and two sizes in EV tubes based on confirmed orders. The current capacity in the pharma segment stands at around 1,800 MT, with a utilisation rate of around 40%. With more contracts in the pipeline, Mold-Tek is expanding capacity through strong partnerships and plans to double production capacity in the next financial year.

* Paint Packaging Expansion: Mold-Tek has invested Rs 10 Cr in new plant and machinery over the last few months for capacities dedicated to Aditya Birla Group’s paint business, with an additional Rs 5 Cr planned for future investments. This expansion aims to increase overall capacity at Cheyyar, Panipat, and Mahad from 6,000 MTA to 10,000 MTA. In Q3, the paint segment recorded 16% YoY volume growth, primarily driven by higher offtake from ABG. While the business from Asian Paints has remained subdued over the last few quarters, the company expects stronger momentum in Q4FY25 as volumes from ABG are expected to pick up

 Guidance/Outlook: The company recently installed new label printing machines, removing a key constraint, and expects capacity utilisation to improve going forward. It expects the pharma division to generate Rs 7 Cr to Rs 8 Cr in revenue for FY25, with a significant increase to Rs 35 Cr in FY26. The long-term target is Rs 60 Cr to Rs 65 Cr. Pharma products generate significantly higher margins, and the increasing contribution from this segment is likely to drive overall profitability. The management has guided higher single-digit volume growth in FY25, with double-digit growth anticipated in FY26. EBITDA/Kg is also expected to improve in the coming quarters with a higher contribution from pharma and other high-margin products.

Valuation/Analyst recommendation:

* The company continues to gain momentum in Pharma and has been adding new clients, which is expected to drive volume growth. Additionally, we anticipate a steady improvement in realization per kg going forward. We recommend a BUY rating on the stock with a TP of Rs 555/share, implying an upside of 10% from the CMP.

For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home

SEBI Registration number is INZ000161633