Feb 2024 concall(Mold tek packaging)
1 …Performance
=Q3 sales volumes are up by 14%. This is the first time this year that we could cross 10% – I mean,
double-digit volume growth.
=However, the EBITDA is up by only 5.23%
=Net profit due to increased depreciation and financial costs has come down by about 15%, because there’s almost 50% increase in the financial costs and 26% in depreciation due to the new machines being added in a big way.
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2…Capex
=Current year, already INR105 crores of investments are made. And
in the remaining 2 months, we hope to reach our targeted investment of about INR120 crores in the financial year
A…Panipat plant
=Panipat is yet to start. They
have taken only trial samples and their lines are getting debugged. So I think on a middle of February or end of February, they have a formal inauguration of Panipat.
B…Cheyyar plant
= Cheyyar started already
in January. So we’ll be going along with them. So hopefully, in these 2 months, before March 31, both the plants will be up and running.
=And as I said, I can only comment upon the numbers and the capacity utilization only seeing few months of operations sometime in the month of June/July.
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3…PAINT SEGMENT
=.Why flattish growth in paint segment
A…Asian paint@satara plant
=Last 4, 5 quarters, there is a drop in paint volumes due to Satara Plant, one of the major plans for Asian Paints was underutilized due to various maintenance and remodification work they have taken up there.
=And now it is back to normal,
B…Not chasing new paint players
I also mentioned in the last quarter that we are not chasing any more new Paint other than the new ABG, that is Aditya Birla Group, we are not going after the small and medium
players in this field because of the tight pricing norms they are following.
FUTURE GROWTH FROM PAINT SEG.
A…ABG(Aditya birla group)
=I am very glad now the commercial supplies to ABG have started in the middle of January and they are picking up pace in February, at least for Cheyyar plant for ABG, and indications are that in a month’s time probably supplies to Panipat Plant also will start.
=So by the time we close this financial year, there will be some numbers coming from ABG, and they will very strong improve the Paint numbers in the coming quarters, starting from Q1 of next financial year.
B…New products for asian paint
=And coming back to our major client, Asian Paints, they have given us the opportunity in 2 new product segments. I can’t reveal the details. And those 2, one of them started in
February, other one will start mid-March. So those 2 also will be contributing to reasonable
numbers to our growth in Paint segment.
C…Paint segment growth
=.So going forward, we’ll be back to double-digit Paint sales growth, which was a major miss in the last 4 to 5 quarters.
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5…PHARMA
=.Pharma Packaging, we are coming out with small USPs in all the segments.
A)…For effervescent tubes,
=we are the first company to establish IML, in-mold labelling.
=There is a company which is not so successful in developing the IML solution.
= But our samples and our first lots of trial samples, what we supply to clients are well accepted. So our effervescent tubes would come not only in HTL, but also in IML for the first time in the country.
=And we definitely see a great advantage there because in Pharma, label quality and clarity
and its stickiness to the container is very important.
= In IML, we’ll be giving that as permanent skin like kind of decoration. So definitely, there is a good interest from the Pharma companies
whom we have approached so far.
B) Canisters
= we have come out with a single-piece canister as against 2-piece canisters that are prevalent in the country
=We are going for larger etching, which is the latest in the canister manufacturing in the world, which would give us an USP against the labelled canisters.
=So in Q1, we might see some numbers coming in from those 2 segments also
C)Iodex
=Iodex project, which has been long delayed, is now starting. Their assembly lines have been corrected and recent trials are approved. They’re ready to go for commercial impression from March. So if not
much, at least from Q1 definitely, Iodex will also be adding numbers.
D…Pharma segment growth
=Overall capacity of the plant, if it turns at of full capacity, which may not happen in the year 1, would be in the tune of around INR50 crores per
annum in terms of revenue.
= So going forward, the numbers can only go up rapidly from INR20 crores, INR25 crores in the year 1, that is '24, '25.
=They should at least cross the entire capacity of INR50 crores to INR60 crores within 2, 3 years can be better.
=But I can only comment once we see the market response from sometime in June, July.
=Probably in the year, '24, '25 itself, you will see progressively pharma
contributing to the bottom line in a handsome manner.But it might take a full year to really reflect on a substantial basis.
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6…FOOD AND FMCG
=The main lever for Food and FMCG going beyond the current team level is our plant at North, that’s Panipat, -which is starting in February for ABG -March for thin wall containers
- 6 products to be introduced in the month of March, April, and
-another 4 in June, July.
=So these 10 products would be having numbers in the year '24, '25 at least for 8 to 9 months
=Probably at least half or more than half would be produced in North, that’s in Panipat. So going forward, again, we’ll be going into 20s for growth in Food and FMCG
=Customers
-HUL would be more than 10% alone. Maybe Hatsun, that is an ice cream major in South, Arun
Ice Creams. They also must be around 10%. Cadbury’s could be somewhere around 7%, 8%.
That is M2K Lickables chocolates. That one is around 7% to 8%.
=In Food and FMCG, by expanding our presence in North and widening our
product range, every year, we’re adding 3,4 new products. This year also, no Exception. These
things will continue to give us a 20% volume growth at least for the next 2, 3 years and that will be at a much better EBITDA of close to INR80 per kg.
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7…Q pack
=We are aiming around 40%.growth in Q packs
=We are finding very good growth in
Qpack sales, that is our Square Pack and adoption option by Gemini and Patanjali for their edible
oil has also now increased the attraction in that segment.
=In fact, we grew by more than 100% in that segment this year. And we expect to grow at least 30% to 40% even on this – increase the
number for the next financial year.
=Reasons for good growth in Qpack
A…One is the big brands are now adopting our pails
B…We could push out patent rights on the Qpack and could take up kind of suspension of activities by some of our competitors, who have completely copied our concept and model.
=So that is also going to help
us in a big way, especially with the organized sector companies who don’t want to play with patents and IP rights
C…One of the reasons is we have widened our product ranges.
Currently, we have 2, 5, 10, 15
and 17-liter Square Packs.
D…Adoption by cashews and fertilizer and nutrients, which started a year ago, are really picking up pace. And they find this pack very useful and
very attractive also in the marketplace.
=So these are the reasons why there is a spurt in growth in Qpack sales.
Let’s see how it goes because now Gemini Oil, which is one of the
largest in South, in Hyderabad. They have adopted our 10-liter pack and they’ve also taken some
5-liter later packs. They are indicating interest in other packs also.
=Patanjali has started taking
for the last 2 months in decent volumes, but comparative to Gemini, it is much low. And we are
also having some Sunpure and other big brands inquiries for 10-liter pack
=Why Q pack has low ebidta
Qpack, though it is good growth driver, it is not a high contributor
towards EBITDA. It is similar to Paint segment or little better than that.
Less number of players adopt IML in that. Only edible oil, some of the nutrients and protein powder manufacturers, they go for IML. Majority of this cashew and other players go for plain containers.
So you all know that in IML, we have much better margins. Hence, Qpack growth will not contribute handsomely to the bottom line in terms of per kg. In terms of capacity utilization and
in terms of profitability, is still good, but not as good as Food and FMCG
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8…EBIDTA
=Currently, this year, we might end up at around 37 kg only. But for the Q1 onwards, we will see a definite improvement in the EBITDA per kg also.
We have rough guess is like this
A…Paint, Lubes and Qpacks
=They have in the region of INR30 per kg to INR35 per kg.
=In case of some of the paint
companies, it is less than even INR30 per kg.
=Paints would improve because we have a good understanding with ABG and Asian Paints
where we are concentrating for our growth in the next financial year, where our EBITDAs are
protected definitely or even improved.
B…Food and fmcg
=In the case of Food and FMCG, it is in the range of INR80 per kg.
C…Pharma
=And going forward, in our pharma, we are aiming at INR120 per kg to
INR150 per kg
=Having said that, my main growth in EBITDA per kg would be coming from pharma in the next couple of years.
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9…Future revenue growth and ebidta
A…EBIDTA
=EBITDA percentage wise, we are almost there, 18.91% is EBITDA
margin. Probably, we will attempt to cross the 20 percentile during '24, '25.
=If pharma goes as
per our plans, it should be in that region. Otherwise, it may take 1 more year, but we will be certainly there, is my guess in the 1 year or max 2 years. That is regarding EBITDA.
B…Revenue
=Raw material plays a vital role in our top line .- 18% to 20% drop in raw material price. It shows there is a 4% fall in the revenue. In fact, it is 6.6%
growth in the volume.
=We are aiming at, as I said in my previous commentary also, at least 15% or probably 20% volume growth for the next financial year.
= That is on the volume front, I can comment. How it will reflect on the revenue, it will depend upon the raw material price momentum.
A…Paint will continue to be a main growth factor next year because ABG growth will be considerable.
=And as I said, the Asian Paints
also given us a couple of opportunities which would take the Paint growth into double digit is my strong feeling for the next financial year.
B…Pharma Packaging, though it might not be a very big number next year, from the year 2 onwards, it will definitely be a considerable addition, at least 5% and above for the top line or
could be even a 7%, 8%.
C…Thin wall, that is Food and FMCG and Square pack, especially, will be shooting up at a pace
much better than Paint segment.
=So the numbers will be more favourable in Square Packs,
followed by Food and FMCG and then Paint. That is the order of growth percentage
=So it’s better to have Food and FMCG and Pharma growing. That will be adding better numbers to the bottom line. So that impact you will see in the next financial year partially, and from '25, '26, certainly in a significant manner.
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10…Break down of 57,000 ton installed capacity by FY '24
=50% in Paint,
=Lubes maybe around 22%, 23%. And
=Food and FMCG should be in the region of 14%, 15%.
=Qpack also will be in the region of 15%,
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11…Fungability
=The beauty of injection molding process is sometimes, let’s say, the paint industry does not grow
as per our anticipation, we can use the same molds and – sorry, same machines and robots also
for the Qpacks.
=Similarly, some of the smaller machines of the pail manufacturing can also be used for Food and FMCG.
= So that fungibility is there across the capacities. So there is no worry
that let’s say, if I aimed at 20% growth in Food and FMCG, but there’s a growth of 30%, we can
still handle it.
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12…New clients
=In this quarter, we added Patanjali, SciTech Specialties, Swagath Hotels, Daspalla Hotels, SN Traders, Vijaykant Dairy & Food
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13…Promoter holding
=Any long distance promoters are selling for their personal needs, but there’s no change in promoter
holding as far as I know.
Disc…invested since 3-4 yrs and added more recently