MOLD TEK PACKAGING---dividend plus growth

[Gaurav_Catalyst]

In their overall revenue, Asian paints still commands a reasonable large share. Also one of the related party of Asian Paint i.e. Hitech Corporation Ltd do supply paints pack.

From annual report of Hitech, it can be seen that their operating margin are lower as compared to that of Mold Tek.

Naturally, If Asian paints is getting cheaper packaging material (that even from a related party) - they would prefer to get the material as much possible from Hitech only - and in turn this will impact the volumes & margins of Mold tek.

Think in some of the last concalls Mr. Rao has mentioned about pricing pressure on business with Asian Paints.

Hence, gains from biz with Grasim can be assumed to neutralize with pain in biz with Asian Paints.

Gains in Pharma biz is still a evolving story with many ifs & buts.

Looks like correction in P/E is at its best considering consistent selling, in absence of sustainable growth in volumes/sales/profits/eps.

Notes: Almost 68% of sales in the books of Hitech are coming from Asian Paints Total Value is - Rs. 383 Crores in FY2024.

[rkirana]

Very good insights. Mold-tek has lost its sales growth (partly due to high competition from HiTech) and therefore huge P/E contraction.
Pharma is definitely a huge opportunity & so is FMCG but Mold-tek is a packaging company that will make tubes for the pharma companies. They will definitely have squeezed margins here - so might be a case of wasted capacity expansion as there are simply too many players here and packaging is a commodity business unless Mold-tek establishes with innovation, that they are the lowest cost producer, which did not come through in the conf call

[dark_hunter]

@Gaurav_Catalyst

Naturally, If Asian paints is getting cheaper packaging material (that even from a related party)

@Gaurav_Catalyst

Hence, gains from biz with Grasim can be assumed to neutralize with pain in biz with Asian Paints.

@rkirana

Mold-tek has lost its sales growth (partly due to high competition from HiTech) and therefore huge P/E contraction.

Asian paints does 35,000 crore sales per annum, standard cost of packaging is around 5-12% percent lets take the lower end 5% (1750 crore) Hitachi has 800 crores RPS (Related part transaction) approved for the span 3 years, all paint companies has by default to de risk more than one packagin provider , 70% of hitech (350 corore has been taken by asian paints ), reamaining needs to be serviced by other player ( you can do the math).

Any manufacturing business can be thought of commodity business ( except brand moat, or networking moat or Economies of scale), however they were able to maintain the margin acorss cycles and its pretty stable, so they are not your regular commodity player,

Side Note:
Hitech don’t have plants nearby to all of their customer established, They have their own set of proeblems when it comes to facility expansion

@rkirana

They will definitely have squeezed margins here - so might be a case of wasted capacity expansion

It doesn’t matter, one Moldtek is low cost producter with higher quality ,

Two the main thesis here itself, operating leverage kicking in , because of two things , higher fixed cost absorption, when the revenue is increase, and two FMCG, and Pharma are twice and thrice the margin compared to paints and lubes (even at the lower end) , so eventually, all these things will kick in.

The bottom line will grow quite faster than topline.

The only risk i see in this overall is , how long they are gonna take to bring their pharma FMCG sales to a meaningful percentage of the total revenue, Since Pharma has stringent approvals and time taking process.

@rkirana

It has corrected another 21% from November. Are you still holding the bag on this or have cut losses?

Unfortunately it corrected even more around 30 - 35% and now its back to 25% (if the results are not good then it may fall further too ), and i had to buy more, stil the loss is substantial, and yes i am holding it, until my thesis plays out and i ll decide or think about selling at only two instance, one they are unable to scale their Pharma and FMCG business to my liking
and the next one is next capcity constraint (subjected to their ability to use the exisitn capacity to pharma) - currently pharma can generate 100 crore potential revenue (20-25 PAT) .

TLDR; basically next cycle of uptrend peak (if i can spot it)
Explained this in detail in one of my above post

[drjpatwa]

Great discussion. I thought Hi-tech would be some small unit catering only to asian paints. However, they have plants at 15+ locations (May be all of them near asian paint plants) & few more customers apart from asian paints.

So obviously, they would be the preferred partner for asian paints & not only that when they buy it from other players including mold-tek, they would bargain hard.

Management might have sensed this in advanced that’s why they have gone big for Birla paints. Remember, still Asian paints constitute around 25% business of mold tek. Management gave hint about tough pricing pressure in paints but when specifically asked about loosing market share for asian paints, they denied citing other issues in previous concalls.

May be someone can ask question specifically about this issue in upcoming concall to get more clarity.

[drjpatwa]

Interestingly I had recently painted my 2 house with Asian paints. Just out of curiosity, I checked whether there is any label of packaging company.

I found label at the bottom - 1 from mold tek packaging, 1 from Hitech plast (Not full name written but looks like Hitech) & 1 from Parekh plast India pvt. ltd. Also found 1 old tin (7-8 years ago) of asian paint which is not made of plastic. So does paint companies use other material than plastic also?

[Suyog_Patil]

Mold tek were the first one to convince paint companies to avoid tin and start with plastic packaging, i have not seen tin packaging in a while now, maybe it will just be a small part of the pales

[Gaurav_Catalyst]

I know a north india based MSME manufacturer who supplies small size tin pack to paint companies, His client list includes all known paint companies like - AKZONOBEL, Asian Paints, Berger Paints, Sirca paints.

[Gaurav_Catalyst]

Results concall scheduled today at 5PM.

@drjpatwa

upcoming concall to get more clarity.

12f7759a-3fa6-44f3-8d51-1e9e4dc037ce.pdf

[dark_hunter]

may be its matter of time to catch up I guess

90d28c03-d888-4ff0-ba78-7d4d80733ca8.pdf

[drjpatwa]

So today’s concall cleared all doubts we had. Management acknowledged that they lost significant market share in Asian paints either due to hitech or due to other players.

So Hitech risk is being playing out. Don’t know how much more market share they will loose in asian paints, that’s key risk bcoz loosing asian paints market share is negating ABG’s growth.

[Divyanshu_Taneja]

Hello sir, What is your view after results especially on losing asian paints sales part , how you are looking through,
Secondly which parameter we should use to value mold tek business to understand how cheap it is
Thanks pl

[mmvravindra]

Loosing market share in Asian paints is not surprising, because Asian paints itself loosing market share. In such scenario its obvious that Asian paints will maintain its volume to its associate which is Hitech and reduce the volumes to other suppliers like Mold-tek, adding to it, Asian paint would go after the suppliers who can give better price. They have to negotiate hard because their margins are also contracting.

[dark_hunter]

@Divyanshu_Taneja

What is your view after results especially on losing asian paints sales part , how you are looking through,

Nothing Much Actually, I didn’t gone through the concall fully yet, however they lost 10% of volume they supply to Asian paints, which is 2.5% overall, but ABG is making up for it , that’s why they are net positive in volume, besides paints margin are lesser than their average , honestly, I would like them to focus more on higher margin products such as FMCG, Pharma

@Divyanshu_Taneja

Secondly which parameter we should use to value mold tek business to understand how cheap it is

I am not sure about the valuation part, it’s totally depends on the Market perception at any point in time, the only things, I track about them are very simple stuff like how much growth happening in FMCG, and how fast they are scaling up their pharma division, ( Both seems to be going good and even better than I expected ), Ofcourse due to ABG, at least they wont lose volumes in paints segment, and besides paints industry itself grows in 10% cagr every year so,

@dark_hunter

Anti thesis:

1. Not able to scale up pharma-section and FMCG section
2. Not able to win new customers - should be tracked every quarter
3. Having some sort of quality issue their molds and packages which spoils the reputation in the pharma section

Well the anti-thesis is not playing out so

Personally, I may add more if I have more cash, or whenever it falls , Because the business is doing all the right things, the cycle will turn in their favour eventually when it does, with margin expansion, higher fixed cost absorption,

The bottom line will grow very very faster than the top line. (Refer to my other posts)

Note: Invested sitting on 30% loss, 7.5% of my portfolio, PE may contract further in the near term, (Kindly I request not to refer me as sir )

[dark_hunter]

Moldtek Packaging Pharma Film

[Pragnesh]

Feb 2025 concall summary

Pragnesh's portfolio

Mold tek packaging Concall ( feb 2025) ============ 1…FUTURE GROWTH TRIGGERS A…Pharma B…ABG paint C…Q pack and fmcg D…Iml in asian paints will lead to stabilization of business loss(probabaly) E…Addition of 40% printing capacity F…Improvement of margin due to pharma G…Decreased depreciation cost in future RISK FACTORS 1…10% loss of asian paint market share 2…Lubricant@only 2-3% growth 1…Growth =I’m really excited that pharma is going to be the game changer for next – at least for…

[Sanjeev_95]

Hi these are my observation about the business.

Mold-Tek Packaging – Localized Moat & Pharma Advantage
-------Localized Moat:

• Sets up captive/near-plant facilities next to client factories
• Enables just-in-time delivery and cost-efficient logistics
• Increases client dependency and reduces switching likelihood
• Strong integration into clients’ supply chains creates stickiness
  -------Entry into Pharma Packaging:
• Pharma is a highly regulated and compliance-heavy industry
• Clients face high costs and risk in switching due to:
  -Regulatory re-approvals
• Quality validation processes
• Supply disruption concerns
• Mold-Tek becomes an indispensable partner once onboarded
  -Unlocks high-margin, long-term contracts with steady demand
  ------Strategic Advantage:
• Combines operational proximity with regulatory entrenchment
• Builds a strong competitive moat that is both cost-efficient and hard to replicate

------Operating Leverage from Recent Capex:

• Significant capex already undertaken to expand capacity
• As volumes rise (especially from pharma), fixed costs get spread
• Results in margin expansion and strong profit growth
• Asset-light growth ahead as capex phase nears completion
  This is my understanding. Feel free to counter.

[Pragnesh]

Concall may 2025(moldtek pack)

MOAT

A…Tool room and various molds
That is strong moat. Very difficult for other companies and strong entry barrier.

B…Pharma USP: Rapid mold and product development due to in-house tool room—“Mold-Tek could do it in 1.5 to 2 months vs. 4-5 months for competitors.

=The point what Mold-Tek is trying to drive to pharma companies is our ability to develop new products faster than anybody else. Even the leaders in pharma packaging, we are in a position to meet or exceed them in terms of new product development.

=======================

1…Pharma

=As an opportunity, pharma is a huge
opportunity, close to Rs. 5,000 crores opportunity, including both exports and the Indian market.
So, even if we reach 1% to 2% of the market share, it will be close to Rs. 100 crores.

=By end of 1st year itself, company
achieved over 50% capacity
utilization to reach Breakeven level.
Further capacity expansion across
product mix planned by Q1/Q2.

=Out of 20+ pharma clients who cleared audits, only 4-5 have started commercial buying; more expected to ramp up.Huge opportunity ahead.

2…FMCG

A…Printing capacity
enhancement for handling
seasonal demand

FY 25 F&F growth of 11.76% as the new printing capacities started improving quarterly numbers

B…Square pack
FY 25 growth of 17.34% fueled by detergent segment and cashews

3…Paint

A…Aditya Birla steady growth
Aditya Birla Group (ABG): Capacity enhancement (brownfield) at Cheyyar and Panipat, operational from March/April.

B…Asian paints
IML adoption
Increased IML adoption; all four plants (Hyderabad, Satara, Vizag, Mysore) now equipped for IML production.

4…Lubricants

=Long term contracts to safe-guard volume share from industry leaders like Gulf, Shell, Castrol

5…Capex

A…pharma
-Capacity Expansion:
Current: 1,500 TPA; ramping up to 3,000 TPA by March 2026.

-Capex: Adding 5 new injection molding machines; molds arriving by June.

-Land: Applied for 2.5 acres adjacent to existing Sultanpur facility for future pharma expansion.

B…Printing Capex: @ Rs. 25 crore printing capacity up >70%.

=FY25 Capex: ~Rs. 140 crore (higher than earlier guidance of Rs. 70-80 crore), split between pharma, printing, and incremental paint capacity.

FY26 Capex Guidance: Rs. 70-80 crore.

[Chandan_Sharma]

Q1FY26
Sales 23%
PAT 35%

15% volume growth

[Gaurav_Catalyst]

Now the company is getting silent recommendation …

https://www.valueresearchonline.com/stories/226170/paint-sector-wars-silent-winner-stock/

[dark_hunter]

Interesting Packaging Play : Sadhan Business Analysis