Mold-Tek Packaging Q1FY18 Concall Sunmary

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Financial Highlights:

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  •  Steep fall in sales in June due to the expected GST implementation, company manages to maintain 6% growth in value terms.
  • Profits have gone up by just over a marginally 1.3% due to better product mix.
  • There’s an increase food and FMCG sales sharply from about 5% last year of Q1 to almost 16% in this quarter.
  • Reduced profitability due to option of defer tax adjustments almost to the tune of Rs. 45 lakhs in this quarter.
  • Impact of PP price increase which hardly was about a Rs.1000 in this month would be passed on to the client as it will be passed on to the client
  • Current price is around 85, 86. last quarter it was 89/ Unit
  • 15% revenue has been contributed from food and FMCG segment, one of the new big clients is Cadbury
  • Contribution from FNF is already at 15.8%. It will be ending at least 17%, 18% of the overall sales coming from food and FMCG this year. and target is more than 20% for the year 2018, 2019.
  • EBITDA per kg is about 33 as against earlier estimate of 28, 29 levels in FY2018.
  • Breakeven point would be in the region of around 1.5-2 Crore monthly sale
  • RAK plant also will start contributing to the bottom-line from December.
  • Penetration rate for IML is 54.5% in Q1, this was below 25% two years ago.
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  • 40% of Sales to paint industry goes in IML
  • Breakup of paint is at 4,900 tons with around 53% pink, 31% blue, and 16% food and sense.
  • Working capital is currently also the similar level Rs. 30 - 33 crore is the utilized funds – more than Rs. 70 croresavailable.
  • Working Cycle inventory at about 68 day
  • EBITDA Per kg revenue is 189 for IML & HDL and overall it is at 172
  • In food and FMCG, 10+ percent growth at delta.

Innovation and Product Development

  • Threat from bio degradable plastics -
    • The biodegradable plastics are very long shot and are not even in the countries like Europe and U.S., Japan.
    • They’re n ot  even come to 0.1% of entry or not even 0.01% of the entire consumption. However, it can adapt if the situation changes.
  • Oxygen barrier IML is the second thing and It has also been talking about it. The company has come to a stage where it has developed prototypes and submitted to couple to clients
  • Over a period of every six months or one year it will be adding couple of new products which would be adding numbers in the food and FMCG. 

Capital Expenditure

  • RAK capacity utilization has improved from 90 Lakh in Q4 last year to 180 Lakhs in Q1 this year and in the current couple of moths again It will see another 20% to 25% growth on the monthly numbers.
  • For new plants of Asian Paints the land and the building designs are just being finalized and plants are expected to go into production one by around July, August of next year and another by end of the calendar year 2018
  • The company is expanding the IML label capacity and the thin wall container molding capacity, which will be almost more than double from 1,400 tons to 3,000 tons.
  • Autofit will be ready by December and rest will be by June next year.
  • In FY 2018 & 2019, Capex for two Asian paint plants will amount to 4-5 Crores
  • Major investment of almost another 20 -25 Crore has to happen during the year 2018, 2019.
  • There may be a few crores of investment in the present FMCC given the opportunities come up.
  • Total of 30-35 crores kind of CapEx during 2018, 2019, which is happening almost same level in this year also.
  • Next five expansions will add total capacity from 3,000 to 4,000 tons,
  • Addition of Robots
    • It is adding another 10 robots, some of them are getting operative in December itself and that adds up to 55 robots in total
    • The robots are being added through In house manufacturing as well as import. The company has a limited capacity to manufacture and assemble robos
    • Imported price from Taiwan or Hong Kong or even China is around Rs. 30- 32 lakh whereas it makes for at least around Rs. 16-20 lakh depending upon the complexity. 
    • If it goes for a European robo it could be as the expenses are Rs. 50 lakh plus. 
    • Capability at Vizag and Mysore is 14,000 tons in first five year

Customer Update

  • Good Chance of food and FMCG orders from various MNCs.
  • Talks with 5-6 MNCs for product development as a result of Cadbury tie up.
  • The company is working with many other MNCs on different product ideas
  • Commercial agreement with a big client soon, commercial production has to start for them in FY18-19.
  • Low price continues to attract dairy client in Dubai

 Competition 

  • Paint & Lube being very lucrative industry are technologically very advanced. Competitors are Jolly Plastics and Hi-Tech in this space 
  • MTR and other food companies are also taking thin wall IML containers.

GST Effect

  • Paint has degrown by 4% and lubes by 11% because of  GST, expected to improve
  • June and July both are affected due to GST. The movement of goods has come down resulting in lower orders.
  • August and September things have started stabilizing growth has started picking up
  • Paint has degrown by 4% and lubs by 11% because of GST, expected to improve soon
  • GST has impacted everybody to relax and first look at business and supply chain. T is one of the reasons why there was some delay in some of the decisions, which have been pending for last three, four months.
  • Things are now slowly moving back to growing numbers in the last few weeks. Otherwise there could have been much more editions during the last four, five months.

 Guidance

  • Growth from paint will come in 2019-20 as both of Asian plants become operational
  • By end of this year RAK plant will be operating around breakeven
  • Paints and lubes together has its share of around 18% to 20% of the overall market size.
  • Growth from paint will come in 2019-20 as both of Asian plants become operational
  • Sipper will be there in less than 1 litre category by June next year, it was delayed due to GST
  • In the next three months to six months Total can emerge as one of the major clients forin Gulf. 
  • Next year could be more RAK and food and FMCG driven growth. 

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    Mold Tek Packaging Q4FY17 Concall Summary

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    Financial Highlights:

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    • This year Volume growth by 12%
    • EBITDA is up by 13% and EPS is up to 9.75 from 8.7.
    • Rs 95 Lakhs deduction of stock valuation due to shortage of material.
    • Rs 30 crores business from Dairy Milk Lickables during 2017-18, 35 crores projected for next year.
    • Expected to cross 15% Growth in financial year 2017-18
    • Have to invest at least 25 Crore in year 2018-19
    • CapEx at 244 Crores in 2016-17
    • Debt at 149 Crores in year 2017, Last year it was 115 Crores
    • Got 80 Lakhs worth of discount in Q3FY17
    • Break even to be achieved by FY2018
    • 18.66% Increase in Employees cost paid in last quarter
    • J Lakshmana Rao as promoter increased his Share to around 35% and Rules out buyback
    • No Plan to increase Debt as cash position is healthy. Free fund to tune of 30 crores still available for investments.
    • Quarterly sale up by more than 50% from IML, 270 tons of RAK sold
    • No addition of top line from Asian Paints plant.
    • Major growth from FMCG and RAK contribution (from next year)
    • Spending on FMCG unit to grow as it is not seasonal and provide stream of revenue throughout the year
    • Dairy milk lickables will contribute around 10% growth alone. The growth combined with RAK would safely lead to more than 20% growth in sales.

    Operational Highlights:

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    • IML grew from 44% to 49%. IML contribution to 4th Quarter was 52.7%
    • Drop in stock value of raw material (Rs. 6 below market price) was observed leading to total of 95 lakh drop.
    • Overall volume for 2017 is 18830 tons as compared to last year at 16,880 tons
    • Company expanding it product portfolio by adding products like ice creams, cheese, butter etc.
    • Plant started getting reasonable traction. Utilization in range of 25%-30%
    • 15% increase in spend on food and FMCG unit
    • Raw material is stocked for 10 to 20 days
    • Loss in first four months of Operation of new unit asIt has just started and has very little capacity utilization at this point of time.

    Customers and competition

    • Asian Paints contributes 30% to sales
    • One more order from Cadbury, Mondelez
    • Talks are on with Heinz, Danone, TATA Tea etc.
    • Couple of players from Delhi and Bombay pose as competition

     Capex  

    • 80% capacity utilization is realistic given the product mix.
    • RAK Facility capacity is almost 27,000 with 3000 recently added in year 2017
    • Plant building in Mysuru and Vizag to be completed soon.

    Effect of demonetization

    • Thanks to First two quarters, where we could grow at 20%. Essentially Demonetization brought down growth volume from 20% to 4% for next two quarters. Third quarter ended with a negative growth.
    • Effect of Demonetization still lingering over business with GST adding to the woes.
    • Slow growth rate is observed in lubes and paints business. Additionally, demonetization would lead to uncertain adverse impact on these businesses.

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    Mold Tek Packaging Limited Q3FY17 Concall Summary

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    Performance Highlights

    Mold Tek Packaging Q3FY17 Financials
    • Many orders being received from paint, lube and dairy industry
    • The sales declined marginally in volume about 2% from 6.01 Cr Q3FY16 to 5.55 CR in Q3FY17. Profits dropped by about 8% from 2.01 Cr against 2.17 Cr last year
    • Demonetization effect was felt in paint and lube segments. Q4FY17 is expected to be better. Demonetization impact on Paint industry which is an end user will be more visible in next quarteR
    • The company sold 4140 tonnes as against 4235 tonnes in Q3 2016. Volume in 9 months FY16 was 12,320 and the same for 9 months FY17 is 14,000
    • Volume growth of 13.54% in terms of sales and 16% in term of production
    • Capacity utilization in first 7 months of FY17 was at 71% with about 14000 tonnes being manufactured

    IML vs Non IML Split

    Mold Tek Packaging IML vs NOn IML Split

    Volume breakup

    Q3FY17 vs Q3FY16

    Mold Tek Packaging Q3FY17 Volume breakup

    9M FY17 vs 9M FY16

    Mold Tek PackagingVolume breakup 9MFY17
    • Volume breakup 9M FY17 Vs 9M FY16
    • There is no term debt. Working capital loans is around RS 8 r in Q3FY17 vs Rs 10 Cr in Q3FY16
    • Working capital days are expected to be around 70-75 days in the near future

    RAK Plant

    • Growth of light hair oil from Apr -Dec2016 by 2.1%
    • Will start contributing from Q1Fy18 and will achieve breakeven by Q1 or Q2Fy18
    • It is 100% IML pant
    • Will hit Rs 25-30 Cr turnover in first year leading to an increase in IML share by 10%
    • RAK plant has a total capacity of 3000 tonnes. The plant will process 50-60 tonnes in January, 100 tonnes in February and close to 75-80 tonnes in march 2017. Production will be more than 100 tonnes per month from April. So, in FY18 production should hit 2000 tonnes
    • RAK plant is being well appreciated by all customers visiting the facility
    • Factors leading to better profitability at RAK Plant
      • Raw material difference in RAK plant is Rs 15 to Rs 16 per kg
      • The company realizes better pricing
      • There is no income tax on earnings in SEZ

    Customers

    • Company is now developing product for Mondelez
    • P&G’s Ariel pack has received good response and has led to repeat orders
    • Company is actively pursuing Smithkline Beecham (for Horlicks), Dabur, Patanjali, Levers (for Vaseline), Britannia, ITC and Tatas, Halidrams
    • Negotiations are on with another paint company for 100% IML products. This will require a 3000 tonne facility
    • For RAK Plant, Marmum, Ai Ain and other 3 companies in dairy segment have given clearance. Couple of paint companies have also given clearance
    • Asian Paints contributes 21% to overall revenues but will improve to 30% after doubling of capacity in new plants.
    • In the edible oil segment, Bunge and Kamani has started picking up. ITC Agro tech is also taking small quantities. Company is providing square packs to this segment and expects Rs 6 Cr revenue this year and Rs 10-1 CR revenue from next year
    • The company has given presentation to Patanjali while with Haldiram the company is at finalization stage
    • The company expects to make Rs 25 Cr from Oil marketing companies in next 2-3 years

    Capex

    • Mysore and Vizag Pants for Asian Paints
      • Will go into production by June 2018 and October 2018 respectively
      • Capex for each plant would be Rs 15 to 18 Cr for first phase of 3000 tonne capacity. Th capacity needs to be doubled in three years so another Rs 10 Cr will be needed in 2021-2022.
      • Company has already spent Rs 6 Cr to buy 5 acres of Land in Mysore and 3 acres of land in Vizag. Construction activity will commence from June-July 2017
      • Another Rs 24 Cr to 26 CR will be invested in next financial year.
    • Capex in first 9 months of FY 17 has been Rs 22 CR which includes capex for RAK plant. The capex is mostly through internal accruals
    • Capex for FY 17 is expected to be around Rs 31 Cr. Cash flows net of dividend are expected to be Rs 25 Cr. Cash flows from Apr-Oct 2017 will be around Rs 14-15 Cr. No increase in debt levels expected to fund capex requirements
    • Capex guidance doesn’t include investment needed for another 3000 tonne for the other paint company that MTPL is in talks with
    • In Q4FY17, company is expanding its facility in Hyderabad for Cadbury and shifting of tool room building is still being completed. This will require Rs 3 to 4 Cr. This includes Rs 2 Cr for bringing in new machines
    • Total capex in Fy17 will be around Rs 26 to Rs 27 Cr
    • Company’s capacity post FY17 will be around 31000 to 32000 tonnes  

    New Technology

    • New technology on oxygen barrier IML is on the back burner now.

    Market Share

    • Paint and lube segment: MTPL has a market share of 20% in the organized market. Company’s turnover is Rs 300 CR, organized market Rs 1500 Cr and unorganized market is around Rs 600 Cr. Total target market is thus Rs 2100 Cr
    • Food and FMCG segment: Total addressable market is Rs 2000 to 3000 Cr. MTPL’s turnover this year is just Rs 17 CR and will hit Rs 24 Cr next year.
    • Client wise Market Share
    Client wise market Share

     

    Competition

    • Couple of players in IML like one in Gujarat and one in Delhi. They are with 2-3 robots and 5-6 standard moulds.
    • Main competitor in Paints segment is Hitech plast with revenues of around Rs 460 Cr
    • Other players are Jolly Plastics with about Rs 20 CR turnover and another unlisted company with Rs 180 CR turnover. Couple of other players are in the range of Rs. 70-100 Cr. About 5 to 10 players are in the region of Rs 50-60 Cr
    • The company has a cost advantage because it is vertically integrated with its own robots. The company has close to 45 robots

    GST Impact

    • Company is sanguine about GST as it will provide a level playing field in different states

      Cost

    • Raw material cost had gone up from 71 to 88 in Q2FY17. It now stands at 91
    • Other expenses have grown impacting EBITDA per kilo.  

    EBITDA Margins

    • EBITDA per kilo is down from Rs 27 to Rs 23 due to higher other expenses
    • Rise in raw material cost is not expected to impact EBITDA margins
    • Margins in FMCG business is 22-25%. Blended margins will be around 14-15% in FY17. It will improve by 0.6% to 0.7% next year
    • Company is aiming for EBITDA of Rs 29 per kilo for FY18. 9 month FY17 EBITDA per kilo stands at Rs 27.8
    • EBITDA per kg inspected to be around at RAK will be around 38 per kg
    •  

     Revenue Guidance

    • Company is expected to clock 5-8% growth in terms of volumes in Q417. Overall growth in FY17 will be 12%
    • RAK plant will give additional Rs 25-30 Cr n FY 18
    • Asian Paints business
      • Mysore plant will run for 6 months and Vizag plant for 2 months.  This gives an average 3-4 months’ production for these two plants. Each pant is 3000 tonnes, so 2000 tonnes of additional production will happen in Fy18. Assuming 1000 tonnes of production, it is an increase of 4-5% from Asian Paints
      • The production will hit 6000 tonnes in FY19
      • Asian paints has promised to double intake from FY22 so production will hit 12 tonnes
      • This translates into a growth of 20-25%
      • Revenue generation at full capacity of 6000 tonnes is Rs 180 per kg or Rs 180,000 lakh x 60 = Rs 120 Cr
    • Revenue mix Guidance for FY18
    Mold Tek revenue Mix Guidance for FY18

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