Mold Tek Packaging Ltd - Research Report

 
Muhurat Pick

Private Client Research

Rating

Buy

Sector

Plastic Products

Company

Mold Tek Packaging Ltd

Reco Price
Rs. 150
Price Target (12 Months)
Rs. 300
Upside
100.00%

Date

10 September 2014
Sensex
27057.41
CNX Nifty
8094.1

Exchange

Code

NSE
-
BSE
533080

High margin products will drive the future growth.

Margin Expansion:
Mold-Tek Packaging Ltd (MTPL) developed IML (In Mould Labeling) decorated packaging for the first time in India which integrates preprinted labels into the injection molding process, producing outstanding picture quality and everlasting decoration. In a growing sector like packaging, IML decoration would be the first choice to improve product`s brand image. IML decorated thin wall containers are suitable for storage conditions like microwave, dishwasher and the deep freeze and are used for food and FMCG products world over. IML offers outstanding quality decoration, and picture quality. As of Now this product constitutes 5% of total sales which is expected to reach 20% in next three years. This product has 22% margins; hence there is lots of scope for margin expansion in next two years.

Diversified Customers:
Company has diversified customer group. Currently company is catering to Lube & Oils, Paints, Food, Thin wall and others. Lube Oils & Paints constitute major parts of sales. IML adoption is improving in pails for paint & lube industry; considerable enquiries are being generated from food manufacturers like Cadbury, SKB, Heinz and Amul for new packing development concepts using IML. Though the food & FMCG contribution to sales is just around 5%, these sectors will be pursued and are expected to contribute significantly in the near future. Hence it will help company to improve and maintain its sales growth with diversified client base growing in future.

Strong Capex Programme:
In order to meet increasing demand, Company has already taken up an expansion plan with an outlay of Rs 4 crores to expand the capacity by 50% which is expected to be available from October/ November, 2014. Company is also modernizing the tool room to provide moulds and robots with an outlay of Rs 4 crores. Company plans to set up a manufacturing unit in North India with a capital outlay of Rs 10 crores to cater to some of its major clients and the same shall be operational by March/April, 2015.Hence company has strong capex programme to cater the growing demand in next two years. Company is expecting big spurt in sales after additional capacity is executed in coming period.

Gradual Shift to IN Mould Labeling:
IML offers photographic finish and hands free operation, many paint, lube and food companies are gradually shifting to IML. This enables Mold-Tek to lead from the front, as it is way ahead of the rest of the competition in IML decoration in India. Also company uses captive technology, Earlier it used to obtain technology from Taiwan. But now they have their own technology which is giving 60% better efficiency than peers. Hence company is in continuous process of improving on its cost effective measures.

Leading Market Share:
Mold-Tek Packaging Limited is involved in the manufacturing of injection molded containers for lubes, paints food, FMCG and other products. Mold-Tek Packaging Limited is the leader in rigid plastic Packaging in India with 20% market share. MTPL is leader and innovator of pail packaging in India. It has introduced spouts and IN-Mold spout concepts for the paint and lube pails. MTPL is pioneer in the field of IN-Mold label decoration in INDIA. This encourages company to improve on its quality of product on regular basis and meet the growing market demand.

Strong Financials:
During FY 2014 company registered revenue growth of 33%, EBIDTA growth of 46% and PAT growth of 57%. Company’s fixed asset turnover ratio is at 2.46x which is very good and will further improve going forward. Higher fixed asset turnover ratio & EBIDTA margin expansion will be the key trigger for ROCE to cross 30% in next 2 years.

Stock Data

CMP (Rs)
160.25
Face value (Rs)
10
52 Week Range (Rs)
160.90- 29.10
Market cap (Rs Crores)
180.8
Price To Book Value (x)
1.07
P/E Ratio (x)
19.91
EV/EBIDTA (x)
8.90

One Year indexed Stock Performance

Mold Tek Packaging LtdSensex
Mold Tek Packaging Ltd
Performance (%)
1m
6m
12m
Absolute
6.03
23.35
35.31
Sensex
48.38
316.23
378.36

Shareholders

(in %)
30-Jun
Promoter
42.45
FII
4.47
DII
0.05
Others
53.03
Total
100

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Industry

The Indian plastics industry made a promising beginning in 1957 with the production of polystyrene. Thereafter, significant progress has been made and the industry has grown and diversified rapidly. Currently, the Indian plastics industry is spread across the country, employing about 4 million people and over 2,000 exporters. It operates more than 30,000 processing units, of which 85% to 90% are small and medium enterprises (SMEs). India is one of the most promising exporters of plastics among developing countries. The Indian plastics industry produces and exports a wide range of raw materials, plastic moulded extruded goods, polyester films, laminates, moulded/soft luggage items, writing instruments, plastic woven sacks and bags, PVC leather cloth and sheeting, packaging, consumer goods, sanitary fittings, electrical accessories, laboratory/ medical surgical ware and travel ware, among other products.

Profile

Incorporated in 1985 as a Private Limited Company MTPL was promoted by two technocrats Mr. J Laxmana Rao and Mr. A Subramanyam. Commercial production commenced in 1987 with Injection Molding and in-house tool room operations. In the year 1989, Mold-Tek pioneered the development of plastic pail concept in India in association with M/s. Asian Paints. There after Mold-Tek continue to develop various new concepts like single and double lock pails and also pioneered the concept of pull up spouts for the lube industry. Mold-Tek pioneered development of COSMOS/ULTIMO pails with better tamper evidence and leak proof features.

The Mold-Tek has a State of the Art “IN HOUSE TOOL ROOM” with sophisticated Swiss and German machinery to design & produce complex moulds. Our engineers design and produce world class Molds for pails and also multicavity hot runner molds for thin wall containers with IML capability.

Profit & Loss Statement:- (Standalone)
(Rs Crores)
Particulars
Mar 12
Mar 13
Mar 14
Mar 15E
Mar 16E
Income:-
  • Gross Sales
  • Less: Excise Duty
  • Net Sales
  • Total Expenditure
  • EBIDTA
  • EBIDTA Margin (%)
  • Other Income
  • Operating Profit
  • Interest
  • PBDT
  • Depreciation
  • Profit Before Tax
  • Provision for Tax
  • Profit After Tax
  • Adjusted EPS
  • 191.74
  • 17.43
  • 174.30
  • 153.19
  • 21.11
  • 12.11
  • 0.26
  • 21.37
  • 3.98
  • 17.39
  • 4.41
  • 12.98
  • 3.65
  • 9.33
  • 8.32
  • 214.55
  • 22.66
  • 191.89
  • 171.91
  • 19.98
  • 10.41
  • 0.30
  • 20.28
  • 6.01
  • 14.27
  • 5.46
  • 8.81
  • 3.03
  • 5.78
  • 5.14
  • 285.34
  • 30.22
  • 255.12
  • 225.92
  • 29.2
  • 11.45
  • 0.51
  • 29.71
  • 8.08
  • 21.63
  • 6.96
  • 14.67
  • 4.82
  • 9.85
  • 8.05
  • 360.00
  • 38.13
  • 321.87
  • 282.5
  • 39.37
  • 12.23
  • 0.5
  • 38.87
  • 10.05
  • 28.82
  • 7.85
  • 20.97
  • 6.71
  • 14.26
  • 11.66
  • 495.50
  • 52.48
  • 443.02
  • 385.5
  • 57.52
  • 12.98
  • 0.5
  • 57.02
  • 11.95
  • 45.07
  • 9.5
  • 35.57
  • 11.38
  • 24.19
  • 19.77
Source: Stockaxis Research, Company Data

Valuation

With increasing acceptance of IML decorated containers in food & FMCG will certainly accelerate IML product sales in the near future. In-house manufacturing of labels and robots considerably reduce the IML costs; hence will help to improve EBIDTA margins. Also company is executing strong capex programme in next two years which will help to meet growing IML product demand. Hence company is poised for the strong financial growth in next 3 years.

We assign PE of 15.17x to FY 2016E indicating target price of Rs 300 which is a fair valuation for stock considering its growth prospects in next three years.

 

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