Top Conviction Ideas : Buy Mold-Tek Packaging Ltd for Target Rs. 850 - Axis Securities Ltd
Recommendation Rationale
* Pharma Division – Sustained Momentum: The pharma packaging segment continued to deliver robust growth, with revenue increasing 45% QoQ to Rs 10.8 Cr. Management highlighted pharma packaging as a key structural growth driver, supported by new client additions, innovative product offerings, and increasing capacity utilization (>50%). The company reiterated its FY26 revenue target of Rs 35 Cr, with a peak potential of Rs 55–60 Cr at current capacity, indicating a meaningful contribution to margin expansion over the medium term.
* F&F Segment – Strong Growth Despite Weather Disruptions: The F&F segment, including Q-Pack, witnessed a 35% volume growth in H1FY26, despite a shortened summer and persistent rainfall. Strategic diversification into non-seasonal categories has reduced dependency on cyclical demand and improved business resilience. The Panipat facility, expected to become operational in Q3FY26, will further enhance capacity and market reach, supporting continued growth momentum in Q4FY26 and beyond.
* Paints Segment – Muted Quarter, Outlook Steady: The paints division recorded modest 3% YoY growth due to heavy rains, although performance from key client Aditya Birla Group (ABG) remained healthy. With capacity expansions at Cheyyar and Panipat now complete, utilization is expected to improve in the coming quarters. The company continues to benefit from the shift toward RCPP packaging, which aligns with customers’ sustainability goals.
* Margins and Utilization: Capacity utilization dropped from 74% in Q1FY26 to 63% in Q2FY26, impacting operating leverage and EBITDA/kg. Despite the short-term moderation and seasonally weak quarter, margins remain higher YoY, supported by an improved product mix. Management expects EBITDA/kg to average around Rs 41/kg for FY26, with gradual improvement in profitability over the medium term as utilization levels improve.
* Valuation & Recommendation: We continue to value the stock at 20x Sept’27E EPS, with a target price of Rs 850/share. Accordingly, we recommend a BUY rating on the stock.
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