HOLD

Results Update Mold-Tek Packaging Target Price

9th November 2023 Packaging 950

Q-Pack & F&F Segment Gaining Traction; Paints Continue to Disappoint

(CMP as of 8th Nov 2023)
Est. Vs. Actual for Q2FY24: Revenue – MISS; EBITDA – MISS; PAT – MISS CMP (Rs) 880
Change in Estimates post Q2FY24 Upside /Downside (%) 8%
High/Low (Rs) 1123/832
FY24E/FY25E: Revenue -13%/-3%; EBITDA -13%/-3%; PAT -19%/-4%
Market cap (Cr) 2,930
Recommendation Rationale Avg. daily vol. (1m)Shrs. 74,368
 Paints report Poor show: The company decided to cut on supplying to smaller players due to No. of shares (Cr) 3.32
weaker margins. This along with flattish growth in key customers led to a degrowth of 8% in
the paint segment. The gross margins were also impacted due to new packaging material Shareholding (%)
norms which led to a drop in EBITDA per/kg Mar-23 Jun-23 Sept-23
 Developments of Food & FMCG and Pharma Packaging: The company began production
Promoter 33.5 33.3 33.1
for of F&F products in Sultanpur (Hyderabad). Two plants for the Pharmaceutical segment will
FIIs 16.9 18 17.8
start operations by Dec’23 with a product mix which is expected to allow Mold-Tek to penetrate
into major four packaging segments for pharma products. The company expects improved DIIs 19.45 18.6 18.5
EBIDTA as it begins to sell its Pharma products from Q4FY24. It is focusing on four new Retail 30.2 30.1 30.6
projects that are in the final stage of commissioning. While Sultanpur-Hyderabad Block-A for
Pharma and Block-C for integrated printing facility will be ready by Dec’23, the two new plants Financial & Valuations
for ABG at Panipat and Cheyyur are expected to start commercial production in Q4FY24. Y/E Mar (Rs Cr) FY23 FY24E FY25E
 New customer Addition: During this quarter, the company bagged new orders from reputed Net Sales 729.9 747.0 1,002.3
companies like Mahalasa Exports, Shri Sai Enterprises, Ushodaya, and A S Trading, etc. EBITDA 135.4 136.7 185.4
Company Outlook & Guidance: The company’s growth rate will improve in the coming quarters Net Profit 80.4 69.7 102.3
as FF and Pharma Packaging start contributing to the topline. However, the full impact of 3 plants EPS (Rs) 24.4 21.6 31.7
of ABG and Pharma packaging will be reflected in FY23 as the plants achieve considerable scale. PER (x) 36.1 40.8 27.8
We maintain a cautiously optimistic outlook on the stock (Unchanged from the earlier stance). P/BV (x) 5.1 4.6 4.0
However, we have revised the company’s FY24E EBITDA/kg estimates to factor in a slight EV/EBITDA (x) 21.3 21.4 15.5
slowdown because of Paint players (major volume contributors) and a consequent reduction in ROE (%) 19.8% 11.4% 14.6%
margins
Change in Estimates (%)
Current Valuation: 30x FY25E (unchanged)
Y/E Mar FY24E FY25E
Current TP: Rs 950/share (Earlier: Rs 990/share) Sales -13% -3%
Recommendation: We believe Mold-Tek packaging shares are trading at a fair value, and since EBITDA -13% -3%
the broader future prospects of the business have remained largely similar, we therefore maintain PAT -19% -4%
our HOLD rating on the stock.
ESG disclosure Score**
Financial Performance: Mold-Tek Packaging reported a slightly weak set of numbers in Q2FY24. Environmental Disclosure N.A.
The company reported revenue of Rs 170 Cr (down 6.7%/8.3% YoY/QoQ), missing our estimates
Social Disclosure Score N.A.
by (13%) as its Paints business reported de-growth. EBITDA came in at Rs 32 Cr (down 5.6%/8.3%
YoY/QoQ) and missed our estimates by 13%. The company’s PAT stood at Rs 16 Cr, down Governance Disclosure N.A.
Score
19%/16% YoY/QoQ due to higher depreciation. This was on account of a set of new facilities which Total ESG Disclosure Score N.A.
are yet to add productively to the company’s topline. Sector Average 33
Source: Bloomberg, Scale: 0.1-100
Outlook: Mold-Tek Packaging’s new product development pipeline in the Pharma segment, **Note: This score measures the amount of ESG data a company reports
customer addition in new segments that have higher margins and leading to improvement in publicly and does not measure the company's performance on any data
point. All scores are based on 2022 disclosures
profitability/margin profile, and broader growth prospects will support demand in the coming
quarters. This will help the company in improving its capacity utilisation post-expansion. The Relative performance
company’s product profile diversification will lead to smoother earnings flow in the coming years but
175
short-term pain on margins and high Ppex will be a drag on earnings.
125
Valuation & Recommendation: We have marginally revised our company’s FY24/25E estimates
downwards to factor in volume degrowth but we maintain our multiple of 30xFY25E on account of 75
stable future growth levers which leads to maintaining our HOLD call. The revised target price 25
is Rs 950/share, which implies an upside of 8% from the CMP. May-22 Nov-22 May-23 Nov-23

Key Financials (Consolidated) Mold-Tek Pack BSE Sensex

(Rs Cr) Q2FY24 YoY (%) QoQ (%) Axis Est. Variance Source: AceEquity, Axis Securities
Net Sales 170.4 -7% -8% 197.0 -13%
Prathamesh Sawant, CFA
EBITDA 32.1 -6% -8% 37.0 -13%
Analyst
EBITDA Margin 18.9 21bps 1bps 18.8 8bps Email: [email protected]
Net Profit 15.7 -19% -16% 19.5 -20%
EPS (Rs) 4.7 -19% -16% 5.9 -20%
Shivani More
Research Associate
Source: Company, Axis Research Email: [email protected]

1
Key Concall Highlights
 Pharma Segment: The company is entering 4 segments in pharma i.e., OTC, Effervescent tubes, Canisters
and Tablet packs which may enable the company to penetrate into the huge Pharma-Packing segment. It
expects Pharma packaging will be the torch bearer of growth in the coming years.

 Patents received for Square Packs: The company has obtained a patent on Square Packs and is taking
steps to avoid duplication in the production of these products.

 Guidance on EBITDA per KG: There was pressure on EBITDA during this quarter, mainly because of an
increase in manpower. For this FY, the management anticipates a similar range of EBITDA to 37-38 per kg
level. However, for FY25, it will be in the range of 41-42 per kg.

 Capex: The company has spent Rs 148 Cr in FY23 on new projects at Sultanpur and additional capacities at
Unit l, Unit 8, Unit 9 and Printing facilities at Unit 6. For FY24, the company is planning to spend Rs120 Cr. on
3 ABG plants at Panipat, Cheyyar and Mahad, an integrated printing facility and a Pharma division at
Sultanpur.

 Lubricants: The company is seeing growth mainly because of its continued movement into IML and some of
them into QR-coded IML containers. Moreover, the IML shift from ordinary decoration to IML decoration is
what causing the growth in the Lubricant sector. The company expects the lubricants to do well despite the
sector’s volumes not growing considerably. The company expects 7-10% annual growth for the next 1-2
years.

Key Risks to our Estimates and TP

 Slower ramp-up or de-growth in customer industries as the company has strong client concentration.

 Delay in setting up new facilities affecting the ROCE

 Lower volume off-take could have a negative effect on operational leverage.

Revenue and Volumes by Segments.

Revenue (In cr.) Volume Value contribution (%)

Paint Rs 78 4,460 47%

Lubes Rs 38 2,162 22%

Food and FMCG Rs 33 1,040 20%

Square pack Rs 19 1,117 11%

Change in Estimates
Revised Old Change

FY24E FY25E FY24E FY25E FY24E FY25E

Net Sales 747.0 1,002.3 863.1 1,029.8 -13% -3%

EBITDA 136.7 185.4 158.0 190.5 -13% -3%

EBITDA Margin (%) 69.7 102.3 85.6 106.1 -19% -4%

PAT 21.6 31.7 26.5 32.8 -19% -3%

EPS 747.0 1,002.3 863.1 1,029.8 -13% -3%

Source: Company, Axis Securities

2
Q2FY24 Results Review
Q2 FY24E Axis
Q2FY23 Q1FY24 Q2FY24 Y-o-Y Q-o-Q
Axis Estm Variance

Net Sales 182.6 185.9 197 170.4 -6.7% -8.3% -13.5%

Expenditure

Net Raw Material 108.0 107.2 114.00 97.4 -9.8% -9.2% -14.6%

Gross Profit 74.6 78.7 83.0 73.0 -2.1% -7.1% -12.0%

Gross Margin (%) 40.9 42.3 42.13 42.9 200bps 55bps 73bps

Employee Expenses 11.0 11.8 13.00 12.0 9.0% 1.4% -7.8%

Other Exp 29.6 31.8 33.00 28.9 -2.1% -9.1% -12.4%

Total Expenditure 148.5 150.9 160.0 138.3 -6.9% -8.4% -13.6%

EBITDA 34.1 35.0 37.0 32.1 -5.6% -8.3% -13.1%

EBITDA Margin (%) 18.7 18.8 18.78 18.9 21bps 1bps 8bps

Oth. Inc 0.2 0.6 0.50 0.5 172.7% -20.5% 1.7%

Interest 0.8 1.5 2.00 1.8 126.0% 17.5% -11.6%

Depreciation 7.4 9.4 10.00 9.6 29.7% 1.8% -4.2%

PBT 26.1 24.8 25.5 21.3 -18.3% -14.0% -16.4%

Tax 6.7 6.0 6.00 5.6 -15.6% -6.8% -6.4%

PAT 19.4 18.7 19.5 15.7 -19.2% -16.2% -19.5%

EPS 5.9 5.7 5.9 4.7 -19.2% -16.2% -19.5%

Source: Company, Axis Securities

3
Financials (Consolidated)
Profit & Loss (Rs Cr)
Y/E March FY22 FY23 FY24E FY25E
Total Sales 631 730 747 1,002
Total RM Consumption 377 436 444 596
Staff Costs 39 44 49 65
Other Expenses 96 115 117 155
Total Expenditure 511 594 610 817
EBITDA 121 135 137 185
Depreciation 26 30 37 46
EBIT 94 105 99 139
Interest & Finance charges 9 4 8 4
Other Income 2 1 2 2
EBT (as reported) 87 103 93 137
Tax 23 22 23 34
PAT 64 80 70 102
Other Comprehensive 8 30 1 1
APAT 72 111 70 103
EPS 20 24 22 32
Source: Company, Axis Securities

Balance Sheet (Rs Cr)

Y/E March FY22 FY23 FY24E FY25E
Equity Share Capital 16 17 17 17
Reserves 441 542 602 690
Net worth 457 559 619 706
Total loans 44 47 97 49
Deferred tax liability (Net) 15 21 21 21
Long Term Provisions 4 4 4 4
Other Long Term Liability 0 0 0 0
Capital Employed 501 597 712 763
Net block 257 366 450 433
CWIP 14 17 17 17
Inventories 96 85 92 124
Sundry debtors 143 123 133 178
Cash and bank 4 5 20 23
Loans and advances 1 1 1 1
Other Current Assets 15 24 24 24
Total Current assets 271 239 271 350
Total Current liabilities 73 99 98 109
Net Current assets 198 141 174 241
Capital Deployed 501 597 712 763
Source: Company, Axis Securities

4
Cash Flow (Rs Cr)
Y/E March FY22 FY23 FY24E FY25E
PBT 87 103 93 137
Depreciation & Amortization 27 31 37 46
Finance costs 9 4 8 4
Changes in WC (100) 46 (13) (54)
Net Cash Flow from Operations 68 3 159 103

(Incr)/ Decr in Gross PP&E (50) (145) (119) (30)

Proceeds from the sale of fixed asset - - - -
Cash from Investing Activities (B) (55) (148) (119) (30)

(Decr)/Incr in Debt (9) (4) 50 (48)

Payment of finance costs (9) (4) (8) (4)
Dividend (11) (26) (11) (15)
Cash From Financing Activities (C ) 57 (10) 31 (68)

Incr/(Decr) in Balance Sheet Cash 4 1 16 2

Cash at the Start of the Year 0 4 5 20
Cash at the End of the Year 4 5 20 23
Source: Company, Axis Securities

Ratio Analysis (%)

Y/E March FY22 FY23 FY24E FY25E
Growth (%)
Total Sales 31.9% 15.6% 2.3% 34.2%
EBITDA 27.7% 12.2% 0.9% 35.6%
APAT 18.1% 54.5% -36.4% 46.3%
Profitability (%)
EBITDA Margin 19.1% 18.6% 18.3% 18.5%
Net Profit Margin 11.4% 15.2% 9.4% 10.3%
ROCE 18.8% 17.6% 14.0% 18.2%
ROE 15.7% 19.8% 11.4% 14.6%
Per Share Data (Rs)
EPS 19.7 24.4 21.6 31.7
BVPS 141.5 172.9 191.5 218.6
Valuations (x)
PER (x) 44.7 36.1 40.8 27.8
P/BV (x) 6.2 5.1 4.6 4.0
EV/EBITDA (x) 23.9 21.3 21.4 15.5
Turnover days
Debtor Days 67 83 60 48
Payable Days 29 33 27 22
Source: Company, Axis Securities

5
 Mold-Tech Pack. Price Chart and Recommendation History

(Rs)

Date Reco TP Research

03-Jan-22 BUY 920 Top Picks
27-Jan-22 BUY 920 Result Update
03-Feb-22 BUY 920 Top Picks
10-May-22 BUY 777 Top Picks
28-Jul-22 BUY 900 Result Update
11-Nov-22 BUY 900 Result Update
08-Feb-23 Hold 1,000 Result Update
04-May-23 Hold 990 Result Update
08-Aug-23 Hold 990 Result Update
09-Nov-23 Hold 950 Result Update

Source: Axis Securities

6
About the analyst

Analyst: PrathameshSawant, CFA

Email: [email protected]

Sector: Chemicals & Midcap Opportunities

Analyst Bio: Prathamesh is a CFA with 7 years of experience in Equity Research& Valuation.

About the analyst

Research Associate: Shivani More

Email: [email protected]

Sector: Chemicals & Mid-Cap Opportunities

AnalystBio: Shivani is CFP starting her career in Equity Research.

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 DEFINITION OF RATINGS

Ratings Expected absolute returns over 12-18 months

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CHADAW CHADAWAR
Date: 2023.11.09
AR 11:24:29 +05'30'