Mold-tek Packaging (MTEP IN)€¦ · 2021-03-18 · Asian Paints, having total capacity of 40,400...

Mold-tek Packaging

March 17, 2021 2

Contents

Page No.

Mold Tek Packaging – Proxy for Paints and FMCG............................................... 4

Paints Presents a steady growth opportunity ..................................................... 5

MTEP well placed to capitalise on paints opportunity ..................................... 5

Lubricants to remain a low growth business ...................................................... 6

MTEP eyeing huge opportunity in Food and FMCG ........................................... 7

METP has backward integration and technological superiority ............................ 10

23% capacity expansion to cater to rising demand .............................................. 12

Customized solutions give an edge to MTEP ...................................................... 14

Financials and Valuation ...................................................................................... 16

Niche products to drive margins ....................................................................... 16

Initiate with Buy rating and Target price of Rs 509 ........................................... 18

Key Risks ............................................................................................................. 19

Story in Charts ..................................................................................................... 20

March 17, 2021 3

Rating: BUY| CMP: Rs415 | TP: Rs509

Packaged for growth

We are Initiating coverage on Mold Tek Packaging (MTEP) with BUY rating

given that it is a proxy on growth potential in Domestic paints, Food & FMCG

industry. We believe 1) Steady state high single digit to low double digit

volume growth in user industries (8-12%+), 2) 23% increase in capacity over

FY20-23 3) Scale up in dedicated capacities for Asian Paints (8500MT) and

Berger (3000MT) will enable 15% volume CAGR over FY21-23. MTEP sales mix

will improve with rising share of IML in paint pails (backed by cost efficient

in-house robotics) and 22.5%/16.5% volume growth in FMCG/Foods over

FY21-23. We expect niche products contribution to increase to 80% in FY23

(73% in FY20) with an increase in EBITDA/kg from Rs32.9 in FY20 to Rs39.6

in FY23. We estimate revenue/Adj PAT CAGR of 19.0%/35.1% over FY21-23E

which will enable FCF of Rs 1bn and ROE & ROCE of 23.9%/29.9% by FY23.

30% dividend payout and Rs700mn debt reduction from recent rights issue

are positives. MTEP is trading at 16.3FY23E EPS, a discount of 61% to

Paints/FMCG companies. Initiate with BUY rating and target price of Rs 509

(20x FY23 EPS).

User industry growth will drive demand: Paints and Food & FMCG industry

is expected to grow sales at 12.2%/10.4% over next 3 years, in turn creating

robust demand for packaging solutions. MTEP dedicated plants for APNT and

Berger, and rising presence in packaged food (Edible Oils, ice creams, sweets,

Yoghurt) and personal Care (Sanitizer packs and Pumps) will enable share

gain and 15.1% volume CAGR over FY21-23.

MTEP provides End-to-end solutions under one roof: MTEP is integrated

right from product inception to mold designing, processing and decorating

products. Designing and production of molds takes place in in-house tool room

with state of art machines from Switzerland and Germany. It is the only

company to completely integrate facilities; from robot manufacturing (savings

of ~65%) to mold and label manufacturing and die-cutting machines which

enables faster turnaround time with low cost of production. Being a one-roof

solution provider makes MTEP a preferred choice among suppliers.

23% capacity expansion to fulfill rising demand: In order to meet rising

demand, MTEP is expanding capacity at various facilities like Satara (500 MT),

Vizag (1250 MT) and Mysuru (1250 MT) at a total cost of Rs 70-80mn and a

dedicated 3000 MT greenfield facility for Berger (Kanpur). MTEP is looking to

1) increase pocket share from existing customers, 2) attract new customers

and 3) add new/differentiated products to accelerate volume growth.

Innovations to drive growth and profitability: MTEP has gained due to first

mover advantage in Paint industry (plastic pails and IML). It is looking at

replicating that in Food & FMCG with packaging like Q packs for edible oil &

ghee, square packs for Ice creams, lickable packaging for Mondelez and now

dispensing pumps for sanitizers & Hand wash. Supplying niche products has

enabled premium pricing and improvement in margins. We expect EBITDA/kg

to increase to 39.6 in FY23 from 32.9 in FY20.

Mold-tek Packaging (MTEP IN)

March 17, 2021

Company Initiation

Key Financials - Standalone

Y/e Mar FY20 FY21E FY22E FY23E

Sales (Rs. m) 4,374 4,522 5,433 6,404

EBITDA (Rs. m) 800 903 1,121 1,373

Margin (%) 18.3 20.0 20.6 21.4

PAT (Rs. m) 388 441 600 804

EPS (Rs.) 14.0 15.8 21.5 25.4

Gr. (%) 57.6 13.2 36.1 18.1

DPS (Rs.) 5.0 6.0 7.0 8.0

Yield (%) 1.2 1.4 1.7 1.9

RoE (%) 20.0 20.1 22.9 23.9

RoCE (%) 20.9 21.5 25.1 27.7

EV/Sales (x) 2.9 2.7 2.3 2.1

EV/EBITDA (x) 15.7 13.7 11.0 9.6

PE (x) 29.7 26.2 19.3 16.3

P/BV (x) 5.8 4.8 4.1 3.4

Key Data MOLT.BO | MTEP IN

52-W High / Low Rs. 434 / Rs. 135

Sensex / Nifty 50,364 / 14,910

Market Cap Rs. 12 bn/ $ 159 m

Shares Outstanding 28m

3M Avg. Daily Value Rs. 54.57m

Shareholding Pattern (%)

Promoter’s 35.10

Foreign 9.31

Domestic Institution 12.84

Public & Others 42.75

Promoter Pledge (Rs bn) -

Stock Performance (%)

1M 6M 12M

Absolute 8.8 44.3 97.0

Relative 12.5 12.6 22.8

Charmi Mehta

[email protected] | 91-22-66322256

Heet Vora


Amnish Aggarwal


Mold-tek Packaging

March 17, 2021 4

Mold Tek Packaging – Proxy for Paints and FMCG

Mold-Tek Packaging (MTEP), found in 1985 by technocrats Mr. Lakshmana Rao

(Managing Director) and A Subramanyam (Deputy Managing Director) is India’s

leading supplier of Rigid packaging solutions to Paints, Lubes, Food & FMCG

industries. It has 9 manufacturing plants in India, including 2 plants dedicated to

Asian Paints, having total capacity of 40,400 tons

MTEP moved up its value chain from just screen printing to Heat Transfer labeling

and in recent times to In-Mold labeling (IML) which it pioneered in India in 2011.

The company revolutionized the entire paint industry by introducing plastic pails in

lieu of metallic cans. As of now, all major paint companies are MTEP’s clients. It is

also a major supplier to lubricant clients like Castrol, Shell since more than a

decade. As lube industry is currently growing at 5-6%, MTEP’s lube revenues are

expected to grow in a similar range too.

Since past few years, MTEP diversified its packaging solutions to Indian Food and

FMCG businesses. It does packaging for Edible oils, Ghee, Ice creams and it has

now entered personal care category with dispensing pumps for hand wash and

sanitizers. FMCG contribution to sales increased from <5% in 2016 to upwards of

20% currently. Innovative products, superior technology, acquisition of clients,

growth in user industry will aid MTEP to grow its volume at 15.1% CAGR over FY21-

23.

Major Clientele across Paints, Lubes and FMCG

Source: Company, PL

Sales mix - Paints account for more than 50% of revenues

62.9 50.3 47.7 52.4 53.5 53.6 53.8

31.0

31.6 30.7 24.4 22.8 20.5 18.4

6.1 18.1 21.6 23.2 23.7 25.9 27.7

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

FY17 FY18 FY19 FY20 FY21E FY22E FY23E

Re

ve

nu

es (R

s b

n)

Paints Lubes FMCG

Source: Company, PL

Mold-tek Packaging

March 17, 2021 5

Paints Presents a steady growth opportunity

The Indian paint industry currently valued at approximately Rs 545bn (grew 11%

CAGR 2014-19) is expected to grow to Rs 971bn by 2024 (12.2% CAGR 2019-24)

is mainly driven by 1) rise in urbanization, 2) growth branded paints popularity, 3)

shortening of re-painting cycle, 4) infrastructure initiatives by the Government, 5)

increase in housing demand and 6) rise in construction activity.

Paint industry to grow at 12.2% CAGR over 2019-24

324 545 9710

200

400

600

800

1000

1200

2014 2019 2024E

Paint industry (Rs bn)

Source: Company, PL

There is a strong co-relation between the paint industry and GDP growth of India,

as it is historically almost doubled India's GDP growth rate. Asian paints being the

industry leader, would grow at least in line with the industry growth. Asian Paints

has registered a CAGR of approximately 11% during FY11-20, 1.8x growth rate of

India’s GDP during the period.

Asian Paints volume grows 1.8x real GDP growth

9

5 5 6 7 8 8 7 74

-5

68

17 15

8 10

7

12 9

8

14 12

9

20

13

-10

-5

0

5

10

15

20

25

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

FY

20

FY

21E

FY

22E

FY

23E

Real GDP Asian Paint volume growth

Source: Company, PL

MTEP well placed to capitalise on paints opportunity

Since inception, MTEP has worked with leading names in the Paints industry

like Asian Paints (APNT), Kansai Nerolac (KNPL) and Berger Paints. APNT

being their biggest client accounts for ~35% of total revenues.

Mold-tek Packaging

March 17, 2021 6

In 2019 inaugurated two dedicated plants, each of 3000MT capacity for Asian

paints, currently running at 57% utilization levels.

MTEP is setting up a 3000 tons plant for Berger in Kanpur, which will initially

commence with 600 tons by CY22 end and rest by FY23 end.

We expect volume CAGR of 16.5% over FY21-23E for both APNT and KNPL

respectively on back of robust growth in paint industry.

As paint industry and paint companies are set to grow robustly, we expect paint

volumes to grow at 16.5% CAGR over FY21-23E with revenues growing at

19.4% to Rs 3.45bn in FY23.

Paint pails for major clients

Source: Company, PL

Lubricants to remain a low growth business

Lubes accounted for ~32% of revenue in FY16 catering to clients like Castrol, Gulf

oil, Shell and Exxon. Sales have grown at 6.3% CAGR over FY16-19 and we

estimate 7.1% revenue CAGR over FY21-23 to Rs 1.18bn.

On an average, industry has grown 4.5% in last 10 years

(4.3)

8.4

21.4

3.4

0.1

7.9

(2.8)

11.9

(5.6)

4.5

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Growth in consumption of Lubricants and greases

Source: Company, PL

Mold-tek Packaging

March 17, 2021 7

Lube demand is driven by growth in automobiles sales. Over past few years,

the quality of lubricants improved with shorter replacement cycle resulting in

subdued consumption of lubricants along with suppressed auto demand.

However, we believe the worst is over for CV segment and expect growth of

31%/14% YoY in FY22/23.

Domestic CV sales to grow 26.7% in next 2 years

683

798 793

633 613685 713

844

1004

718

506

708803

-40

-30

-20

-10

0

10

20

30

40

50

0

200

400

600

800

1000

1200

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

FY

20E

FY

21E

FY

22E

FY

23E

Domestic CV ('000s) Growth (RHS)

Source: Company, PL

There will be no impact of EV (electric vehicle) on demand for lubes as it will

take decades for EV to penetrate as a preferred choice and huge replacement

demand for lubes.

Lubricants revenues account for only 22% in 9MFY21 which will likely fall to

18% by FY23 as revenues from Paints and FMCG revenues are growing at a

faster rate.

Leak proof lubricant packaging

Source: Company, PL

MTEP eyeing huge opportunity in Food and FMCG

India’s packaged food business is currently valued at Rs 1.64trn driven by rising

incomes, urbanization, favourable demographics and changing lifestyle in last 5

years. The sector’s retail revenue size was Rs 984bn in FY15, (about half of its

current size) with a registered CAGR of ~10.7% during FY15-20 estimated to grow

at 10.4% in next five years to reach at Rs 2.69trn.

Mold-tek Packaging

March 17, 2021 8

Packaged food industry to grow at 10.4% during 2020-25

984 1,636 2,687 -

500

1,000

1,500

2,000

2,500

3,000

2015 2020 2025E

Indian Packaged Food Market (Rs bn)

Source: Company, PL

Food revenues account for 24.6% in 9MFY21 which was mere 5% in FY16. It

currently supplies to brands like Amul, Vadilal, Cadbury, London Dairy, Heinz

and Hindustan Unilever.

IML packaging is currently most preferred as it keeps container weight low and

is heat, moisture and chemical resistant plus increases shelf life of products

Food and FMCG packaging is dynamic and is different for similar types of

products, hence customization is possible that leads to higher realisations and

margins from this segment. Additionally, bulk purchases by companies gives

further boost to margins.

Clients prefer tamper and leak proof packaging especially for cosmetics and

pharma products. However, post Covid-19 retail consumers now want high

standards of packaging for all products.

The company also commenced production of dispensing pumps from Dec-20,

with 9mn pieces capacity per day costing Rs 150m and can likely earn

revenues of Rs 600mn at peak utilization levels.

We expect Food and FMCG revenues to grow at 28.6% CAGR over FY21-23E

to Rs 1.78bn on back of innovations, market share gains and conversion from

rigid packaging to IML packaging.

Q-pack and Thin wall packaging contributes to 75% of revenues

Q Pack - Edible oil

35.6%

Thin w all - Curd & Ice cream

40.3%

M2- Cadbury17.0%

Others7.1%

Source: Company, PL

Mold-tek Packaging

March 17, 2021 9

Packaging for various types of FMCG products

Source: Company, PL

Mold-tek Packaging

March 17, 2021 10

METP has backward integration and technological superiority

Superior Technology makes MTEP an end-to-end solution provider: From

product inception to mold designing, processing and decorating products,

MTEP covers an entire spectrum of services. The company also introduced

IML decorated packaging for the first time in India. IML uses Robots that place

preprinted labels in the molds before molding plastic flow into mold below the

label thereby fusing the label while molding itself. The technique produces

outstanding picture quality with an everlasting decoration that cannot be

removed.

With state of art in-house tool room and facilities for mold design &

manufacturing, robots manufacturing, IML label manufacturing and injection

molded container production, MTEP is able to provide end to end solution to

clients without any down time or dependency on imports.

Latest machines used for IML packaging

Source: Company, PL

Below are some of their services:

Product Design, 3D rendering and Animation

Rapid Product and Mold Development

Suitable Robot development

Developing Creative artworks for Decoration

Cylinder manufacturing and Prototypes

In-house label manufacturing to control cost of IML

ERP for easy monitoring and logistic

Mold-tek Packaging

March 17, 2021 11

Backward integration aids cost savings: MTEP’s in house robot

manufacturing, mold and label manufacturing and die-cutting machines enable

faster container production. It is the only company to have completely

integrated facilities and one amongst 3 companies of the world to manufacture

its own labels. The resultant savings in manufacturing Robots instead of buying

them, was ~65%.

Also fully integrated operations led to savings in capital as well as operating

costs. Due to drop in mold costs, reduced wastage and optimal usage of raw

materials, MTEP is able to sell at competitive prices without compromising

quality thereby giving lot of customer stickiness. The company’s backward

integration capability is a result of its technocrat promoter, Mr. Lakshmana Rao,

and Mr. A Subramanyam.

Mold-tek Packaging

March 17, 2021 12

23% capacity expansion to cater to rising demand

Robust growth in Paint and FMCG industry: Paint as well as Food & FMCG

industry are growing rapidly, thereby increasing the overall packaging demand.

While MTEP has sufficient lubricant and paint capacities, it is overall running

at ~80% utilisation levels. To meet the increasing demands, MTEP is planning

brownfield capex in Satara (500 MT), Vizag (1250MT) and Mysuru (1250MT)

plant along with greenfield capacity in Kanpur.

Dedicated plants for Asian paints and Berger: Asian paints is MTEP’s

biggest client that accounts for ~20% of total revenues. In 2019, 2 dedicated

plants for Asian paints were commenced with 3000MT capacity each at 57%

utilization levels and another 1250MT p.a. capacity will be added by April-21 in

both plants costing ~Rs50-60mn. This move makes MTEP a direct beneficiary

of growth in the industry, as Asian paints is India’s largest paint company.

MTEP is setting up a 3000MT plant in Kanpur for Berger Paints and it is likely

to commence operations with 600MT by CY22 end and balance by FY23 end.

The commercial production for dispensing pumps commenced from Dec-20,

with 9mn pieces capacity per day costing Rs150mn. It can likely earn revenues

of Rs600mn at peak utilization levels.

Capacity to steadily increase to 45600 MT pa by FY23

Segment FY19 FY20 FY21E FY22E FY23E

Paints 18,250 18,250 18,400 21,400 22,600

Lubes 9,500 9,500 9,500 9,500 9,500

FMCG 9,250 9,250 12,500 13,000 13,500

TOTAL 37,000 37,000 40,400 43,900 45,600

Source: PL, Company

Overall volumes to grow at 15.1% during FY21-23E

18.8 19.3 21.4 24.3 26.2

30.5 34.7

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0


Overall Volumes (MT)

Source: PL, Company

Innovation to increase pocket share: Over the past years, MTEP has

designed and developed packaging products for customers according to their

requirements resulting in client stickiness. Recently, they developed

dispensing pump keeping in mind increase in production of sanitizers and hand

soaps. They even designed containers for Mondelez’s Lickables and were its

exclusive suppliers in India. The company designed and developed square-

Mold-tek Packaging

March 17, 2021 13

shaped packs which is witnessing increased adoption in regional edible oil &

dairy companies due to its tamper proof features. Currently MTEP is working

on introducing ‘QR code printed IML’ which will offer traceability and anti-

counterfeit solutions. Many lubricant and FMCG companies are looking for

such supply chain solutions which MTEP will be the first one to offer.

Constantly introducing new products to meet market demands

Source: Company, PL

Launched tamper evident, reusable and leak proof sanitizer containers in various sizes

Source: Company, PL

Mold-tek Packaging

March 17, 2021 14

Customized solutions give an edge to MTEP

MTEP was one of the first companies to introduce plastic pails in paint industry

having deep entrenched relations with top 5 paint companies in India.

It also forayed into Food & FMCG business in 2016 with mere contribution of

5% to topline and provided customizable solutions to clients according to their

product SKUs.

It started with producing Q-packs and Square packs for FMCG companies and

then subsequently forayed into icecreams. HUL, Mondelez, Amul and Vadilal

are some of its major customers since the beginning. These products paved

way for MTEP to charge higher margins for its niche products

Differentiated packaging for different type of products – Round Pack, Oval Pack, Round Pack, Square Pack

Source: Company, PL

Different products need different packaging features addressed by developing

various packaging solutions which meet stringent product specifications

commanding a premium price thereby resulting in higher margins.

Over years, MTEP was able to add clients and innovate products in-line with

industry demand and increase market share. Hence, today Food and FMCG

account for 25% of topline.

Clients prefer tamper and leak proof packaging especially for cosmetics and

pharma products; however, with Covid-19 retail consumers now want high

standards of packaging for all products.

The company also commenced production of dispensing pumps from Dec-20,

with 9mn pieces capacity per day costing of Rs 150mn and can likely earn

revenues of Rs 600mn at peak utilization levels.

As products are niche (tamper-proof, leak-proof, in different shapes and sizes),

a premium price is charged for the same. Resultantly, EBITDA/kg grew from

Rs 27.6 in FY16 to Rs 34.2 in 9MFY21 (Rs 36.4 in 3Q21). With increase in

contribution from value added products this is expected to increase to Rs

39.6/kg in FY23.

Mold-tek Packaging

March 17, 2021 15

F&F has higher realization/kg due to customization & innovation

184.8

164.3 173.4 169.6

161.1 164.3 169.2

173.6 158.8

168.0 163.6 164.5 167.7 169.4

225.8

281.3

245.7 238.7

219.6 230.6

242.1

100.0

120.0

140.0

160.0

180.0

200.0

220.0

240.0

260.0

280.0

300.0


Paints Lubes FMCG

Source: Company, PL

Avg EBITDA/kg expected to grow at 6.4% CAGR over FY20-23E

27.0 27.5

32.9 33.7 32.9 34.5 36.8

39.6

-

5.0

10.0

15.0

20.0

25.0

30.0

-

10.0

20.0

30.0

40.0

50.0

FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

EBITDA/KG (Rs) Contribution of F&F (%-RHS)

Source: Company, PL

Mold-tek Packaging

March 17, 2021 16

Financials and Valuation

Niche products to drive margins

FY21 was impacted by the pandemic resulting in only 6.2% revenue growth.

We estimate sales of Rs5.43bn/Rs6.40bn by FY22/FY23. With increase in

niche products contribution, gross margins are expected to expand to 42.5%

in FY23 from 41.3% in FY20. Operating costs are expected to fall by 190 bps

by FY23 as against FY20 levels. EBIDTA margins are expected to increase to

21.4% by FY23 from 18.3% in FY20.

EBITDA margins to expand 320bps from FY20 to FY23

39.4% 38.2%40.5% 39.4%

41.3% 42.4% 42.1% 42.5%

16.5% 17.2%18.7% 18.3% 18.3%

20.0% 20.6% 21.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

Gross margin EBITDA margins

Source: Company, PL

EBITDA/kg improving as F&F contribution increasing

62.9 50.3 47.7 52.4 53.5 53.6 53.8

31.0

31.6 30.7 24.4 22.8 20.5 18.4

6.1 18.1 21.6 23.2 23.7 25.9 27.7

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0


Re

ve

nu

e (R

s b

n)

Paints Lubes FMCG EBITDA/kg (RHS)

Source: Company, PL

Main raw materials involved in our manufacturing process include Poly

Propylene Copolymer (PPCP), High Density Polyethylene(HDPE), Low

Density Polyethylene (LDPE) and Linear Low Density Polyethylene, which are

procured mainly from domestic suppliers.

The average RM prices decreased from Rs 94.6/kg to Rs85.6/kg from FY19 to

FY20, and is currently in the range of Rs 84.24 for 9MFY21. Any fluctuation in

the international price of crude oil affects the price of polymers.

Mold-tek Packaging

March 17, 2021 17

The company generally passes on raw-material cost fluctuations to the clients.

However, any inability to pass on the increased costs of polymers to our

customers in future, may affect its profitability.

MTEP has very less debt in its books with DER of just 0.5x in FY20. We expect

generation of free cash worth Rs 2.5bn in FY21-23. RoE/RoCE to reach

24.6%/23.8% by FY23.

DER at comfortable levels of 0.3x by FY23

0.1 0.2

0.2

0.4 0.5

0.5

0.3

0.3

-

0.1

0.2

0.3

0.4

0.5

0.6

-

200

400

600

800

1,000

1,200

FY

16

FY

17

FY

18

FY

19

FY

20

FY

21E

FY

22E

FY

23E

Net Debt (Rs mn) DER (x- RHS)

Source: Company, PL

Robust return ratios

19.4 18.4 19.0

13.2

20.0 20.1 22.9 23.9

25.5 25.7 28.4 27.5 26.7 26.8

29.8 29.9

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

FY

16

FY

17

FY

18

FY

19

FY

20

FY

21E

FY

22E

FY

23E

RoE RoCE

Source: Company, PL

The company utilizes its cash reserves by paying dividends consistently and

investing in capital expenditure. Capex is expected to be ~Rs 600m for FY22-

23.

Sales to grow at 19.0% CAGR over FY21-23

Particulars (Rs mn) FY19 FY20 FY21E FY22E FY23E

Revenue 3,941 4,374 4,522 5,433 6,404

YoY Growth 16.1 11.0 3.4 20.2 17.9

Gross Profit 1,554 1,805 1,916 2,287 2,721

Gross Margins 39.4 41.3 42.4 42.1 42.5

Operational Cost 834 1,005 1,013 1,165 1,348

% of Sales 21.2 23.0 22.4 21.5 21.0

EBITDA 720 800 903 1,121 1,373

Margins 18.3 18.3 20.0 20.6 21.4

Other Income 18 17 5 6 13

Depreciation 147 190 217 245 276

Interest 71 102 101 80 35

PBT 404 497 589 803 1,075

Tax 159 109 149 202 271

PAT 246 388 441 600 804

EPS (Rs) 8.9 14.0 15.8 21.5 25.4

Source: Company, PL

Mold-tek Packaging

March 17, 2021 18

Recent rights issue will be used to repay debt over coming years

Particulars (Rs mn) FY19 FY20 FY21E FY22E FY23E

Capex 839 335 474 370 568

Debt 889 1,066 922 797 372

Cash and CE 9 10 80 57 271

Wcap 160 115 135 50 113

RoE (%) 13.2 20.0 20.1 22.9 23.9

RoCE (%) 27.5 26.7 26.8 29.8 29.9

Source: Company, PL

Initiate with Buy rating and Target price of Rs 509

We believe MTEP is a leading packaging solution provider for Domestic paints

as well as Food & FMCG industry, expected to grow in healthy double digits

ahead. The company remains a preferred choice of all large corporates like

Asian Paints, Kansai Nerolac, Berger Paints, HUL, Vadilal, Mondelez and so

on.

Over the years, MTEP not only created strong relationships with old customers

but also acquired new customers simultaneously. Additionally, its superior

technology, backward integrated operations and product quality helped in

delivering strong volume growth of 9.5% over FY16-20 with revenue growth of

12.2%.

We expect MTEP to grow revenue/adj PAT at 19.0%/35.1% over FY21-23E on

back of 1) robust demand from paint industry currently growing at 12% CAGR,

2) dedicated plants for Asian paints and Berger, 3) ramp up of pump capacity

and 4) increase in Food & FMCG contribution, thereby increasing EBITDA/kg.

Currently, the stock is trading at 16.3FY23E EPS. We initiate with Buy rating

and target price of Rs 509 (20x FY23 EPS).

Mold-tek Packaging

March 17, 2021 19

Key Risks

High dependence on a single client: With 2 dedicated facilities, Asian Paints

currently accounts for ~35% of MTEP’s revenues and is their single largest

client. Such high dependence may be considered risky. However Asian Paints

being a leader in its industry having stable track record, potential downside

looks limited.

Competition: Any global or domestic company with similar business offering

can come into play. Nevertheless, given client stickiness and product

requirements it is difficult for any competition to reach at MTEP level in a short

span.

Raw material prices are crude dependent; hence any upward or downward

revision can impact company’s profits. But the company follows a cost plus

pricing model, hence it can easily pass on the price change to clients with a lag

of 1-2 months.

Delay in expansion can lead to loss of client orders

Mold-tek Packaging

March 17, 2021 20

Story in Charts

Revenues to grow at 18.2% CAGR over FY21-23E

2,7

57

3,0

08

3,3

95

3,9

41

4,3

74

4,5

22

5,4

33

6,4

04

(3.3)

9.1

12.9 16.1

11.0

3.4

20.2 17.9

(5.0)

-

5.0

10.0

15.0

20.0

25.0

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY

16

FY

17

FY

18

FY

19

FY

20

FY

21E

FY

22E

FY

23E

Revenue (Rs m) Growth (%) (RHS)

Source: Company, PL

EBITDA margins to expand 180bps over FY20-23

39.4% 38.2%40.5% 39.4%

41.3% 42.4% 42.1% 42.5%

16.5% 17.2% 18.7% 18.3% 18.3%20.0% 20.6% 21.4%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

FY

16

FY

17

FY

18

FY

19

FY

20

FY

21E

FY

22E

FY

23E

Gross margin EBITDA margins

Source: Company, PL

Paints account for 50% of total volumes

11.7

10.4

10.8

13.5

15.0

17.7

20.4

6.2 6.8 7.2 6.5 6.3

6.6 7.0

0.9 2.2 3.4 4.3 4.9

6.1 7.3

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0


Vo

lum

e ('0

00 M

T)

Paints Lubes FMCG

Source: Company, PL

Paints & FMCG to grow at 18%/27% over FY21-23

2.2 1.7 1.9 2.3 2.4 2.9 3.4

1.1 1.1 1.2

1.1 1.0 1.1

1.2 0.2

0.6 0.8

1.0 1.1

1.4

1.8

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0


Re

ve

nu

e (R

s b

n)

Paints Lubes FMCG

Source: Company, PL

IML value contribution at 65.4%

62

59

59 69

65

65 69

66

64

65

65.4

38

42

41 31

35

35 31

34

36

35

34.6

0

20

40

60

80

100

1Q

19

2Q

19

3Q

19

4Q

19

1Q

20

2Q

20

3Q

20

4Q

20

1Q

21

2Q

21

3Q

21

IML Non-IML

Source: Company, PL

IML volumes at 63% of total volumes

54

53

53 6

5

61

61 65 7

8

63

62

63

47

47

46 3

6

39

39 35 2

2

38

38

37

0

20

40

60

80

100

1Q

19

2Q

19

3Q

19

4Q

19

1Q

20

2Q

20

3Q

20

4Q

20

1Q

21

2Q

21

3Q

21

IML Non-IML

Source: Company, PL

Mold-tek Packaging

March 17, 2021 21

Financials

Income Statement (Rs m)


Net Revenues 4,374 4,522 5,433 6,404

YoY gr. (%) 11.0 3.4 20.2 17.9

Cost of Goods Sold 2,569 2,606 3,146 3,683

Gross Profit 1,805 1,916 2,287 2,721

Margin (%) 41.3 42.4 42.1 42.5

Employee Cost 494 502 576 672

Other Expenses - - - -

EBITDA 800 903 1,121 1,373

YoY gr. (%) 11.1 12.9 24.2 22.5

Margin (%) 18.3 20.0 20.6 21.4

Depreciation and Amortization 190 217 245 276

EBIT 610 685 876 1,097

Margin (%) 13.9 15.2 16.1 17.1

Net Interest 102 101 80 35

Other Income 17 5 6 13

Profit Before Tax 497 589 803 1,075

Margin (%) 11.4 13.0 14.8 16.8

Total Tax 109 149 202 271

Effective tax rate (%) 21.9 25.2 25.2 25.2

Profit after tax 388 441 600 804

Minority interest - - - -

Share Profit from Associate - - - -

Adjusted PAT 388 441 600 804

YoY gr. (%) 57.8 13.8 36.1 34.0

Margin (%) 8.9 9.8 11.0 12.6

Extra Ord. Income / (Exp) - - - -

Reported PAT 388 441 600 804

YoY gr. (%) 57.8 13.8 36.1 34.0

Margin (%) 8.9 9.8 11.0 12.6

Other Comprehensive Income - - - -

Total Comprehensive Income 388 441 600 804

Equity Shares O/s (m) 28 28 28 32

EPS (Rs) 14.0 15.8 21.5 25.4

Source: Company Data, PL Research

Balance Sheet Abstract (Rs m)


Non-Current Assets

Gross Block 3,046 3,497 3,947 4,447

Tangibles 3,031 3,481 3,931 4,431

Intangibles 15 16 16 16

Acc: Dep / Amortization 1,058 1,275 1,520 1,796

Tangibles 1,049 1,265 1,509 1,783

Intangibles 9 10 11 13

Net fixed assets 1,988 2,222 2,427 2,651

Tangibles 1,982 2,216 2,422 2,648

Intangibles 6 6 5 3

Capital Work In Progress 118 137 52 115

Goodwill - - - -

Non-Current Investments 76 88 119 159

Net Deferred tax assets (116) (131) (151) (178)

Other Non-Current Assets 166 135 180 164

Current Assets

Investments - - - -

Inventories 500 500 586 686

Trade receivables 580 619 744 877

Cash & Bank Balance 10 80 57 271

Other Current Assets 150 146 152 178

Total Assets 3,626 3,967 4,366 5,158

Equity

Equity Share Capital 139 139 139 158

Other Equity 1,832 2,283 2,688 3,756

Total Networth 1,970 2,422 2,828 3,914

Non-Current Liabilities

Long Term borrowings 252 172 122 72

Provisions 26 25 29 34

Other non current liabilities 1 2 3 3

Current Liabilities

ST Debt / Current of LT Debt 815 750 675 300

Trade payables 180 193 233 272

Other current liabilities 265 271 326 384

Total Equity & Liabilities 3,626 3,967 4,366 5,158


Mold-tek Packaging

March 17, 2021 22

Cash Flow (Rs m)

Y/e Mar FY20 FY21E FY22E FY23E Year

PBT 497 589 803 1,075

Add. Depreciation 188 216 244 275

Add. Interest 102 101 80 35

Less Financial Other Income 17 5 6 13

Add. Other (98) 44 (22) 40

Op. profit before WC changes 688 951 1,104 1,426

Net Changes-WC (38) (18) (131) (170)

Direct tax (109) (149) (202) (271)

Net cash from Op. activities 542 784 771 985

Capital expenditures (335) (474) (370) (568)

Interest / Dividend Income 17 5 6 13

Others 24 (10) (30) (39)

Net Cash from Invt. activities (294) (479) (394) (593)

Issue of share cap. / premium (190) 177 (28) 477

Debt changes 177 (145) (125) (425)

Dividend paid (133) (166) (167) (195)

Interest paid (102) (101) (80) (35)

Others - - - -

Net cash from Fin. activities (247) (235) (400) (178)

Net change in cash 0 70 (23) 214

Free Cash Flow 206 309 401 417


Quarterly Financials (Rs m)

Y/e Mar Q4FY20 Q1FY21 Q2FY21 Q3FY21

Net Revenue 1,065 654 1,190 1,335

YoY gr. (%) 5.6 (43.6) 4.1 32.6

Raw Material Expenses 627 377 665 765

Gross Profit 438 277 525 571

Margin (%) 41.2 42.3 44.2 42.7

EBITDA 191 93 258 278

YoY gr. (%) 0.8 (54.3) 22.6 44.4

Margin (%) 17.9 14.2 21.7 20.8

Depreciation / Depletion 49 49 55 53

EBIT 142 44 202 225

Margin (%) 13.3 6.8 17.0 16.9

Net Interest 26 22 24 25

Other Income 4 1 2 1

Profit before Tax 120 23 181 201

Margin (%) 11.2 3.6 15.2 15.1

Total Tax 24 6 46 51

Effective tax rate (%) 20.3 24.8 25.7 25.5

Profit after Tax 95 18 134 150

Minority interest - - - -

Share Profit from Associates - - - -

Adjusted PAT 95 18 134 150

YoY gr. (%) (0.1) (83.8) 19.6 59.4

Margin (%) 9.0 2.7 11.3 11.2

Extra Ord. Income / (Exp) - - - -

Reported PAT 95 18 134 150

YoY gr. (%) (0.1) (83.8) 19.6 59.4

Margin (%) 9.0 2.7 11.3 11.2

Other Comprehensive Income - - - -

Total Comprehensive Income 95 18 134 150

Avg. Shares O/s (m) 28 28 28 28

EPS (Rs) 3.4 0.6 4.8 5.4


Key Financial Metrics


Per Share(Rs)

EPS 14.0 15.8 21.5 25.4

CEPS 20.8 23.6 30.3 34.2

BVPS 71.1 86.9 101.5 123.8

FCF 7.4 11.1 14.4 13.2

DPS 5.0 6.0 7.0 8.0

Return Ratio(%)

RoCE 20.9 21.5 25.1 27.7

ROIC 16.4 16.5 19.1 22.3

RoE 20.0 20.1 22.9 23.9

Balance Sheet

Net Debt : Equity (x) 0.5 0.3 0.3 0.0

Net Working Capital (Days) 75 75 74 74

Valuation(x)

PER 29.7 26.2 19.3 16.3

P/B 5.8 4.8 4.1 3.4

P/CEPS 19.9 17.6 13.7 12.1

EV/EBITDA 15.7 13.7 11.0 9.6

EV/Sales 2.9 2.7 2.3 2.1

Dividend Yield (%) 1.2 1.4 1.7 1.9


Mold-tek Packaging

March 17, 2021 23

Price Chart

PL’s Recommendation Nomenclature

Buy : >15%

Accumulate : 5% to 15%

Hold : +5% to -5%

Reduce : -5% to -15%

Sell : < -15%

Not Rated (NR) : No specific call on the stock

Under Review (UR) : Rating likely to change shortly

145

215

285

355

425

Mar

- 18

Se

p -

18

Mar

- 19

Se

p -

19

Mar

- 20

Se

p -

20

Mar

- 21

(Rs)

Mold-tek Packaging

March 17, 2021 24

ANALYST CERTIFICATION

(Indian Clients)

We/I, Ms. Charmi Mehta- CA, Mr. Heet Vora- CA, Mr. Amnish Aggarwal- MBA, CFA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

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Mold-tek Packaging (MTEP IN)€¦ · 2021-03-18 · Asian Paints, having total capacity of 40,400...

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