MOLD TEK PACKAGING---dividend plus growth

Stock Opportunities Untested - but worth a good look
21

Hi Kunal,

There was an accident (I think fire) at one of their sites and that’s why the dip in profit in 2013. Even then, the demand was so huge that they had to fulfill the orders from their other sites and they did it so that they don’t lose key clients. so I don’t really thing that the past performance is not stable. It has an element of cyclicity in the sense that it will do well when economy is doing well but you are on the right side of cycle as economy is expected to do better from here.

Regarding probable environmental regulation, I think, with NM at the helm of affairs one doesn’t need to worry on that looking at the large number of projects he has cleared recently which were stalled because of one or other environmental issue.

Also, there are apprehensions in investor community as there is a large debt on the books, but one can’t see that in isolation as one has to see what the debt is doing to the bottomline. In this case, It’s adding much needed levers because there is a huge demand for company’s products which is expected to grow with expanding economy.

Overall, I think it is a super growth stock with a great management available at a fair price.

Could you please share Mckinsey report, if you have it.

Thanks,

Aksh

Disc: Invested and adding on dips

1 Like
22

Completely agree with Aksh. I don’t have Mckinsey report.

Earlier I had done competitive analysis among peers and finalized Mold-tek Packaging.

Kunal
Disc : Core

23

@Kunal,

what all competitors have you looked at? could you please share your peer analysis?

24

Hi, This is my first post on Valuepickr and i am new to this forum…

I am planning to attend Mold-tek packaging AGM tomorrow, happening at Hyderabad.

Below are some of questions that i am planning to raise

1). Current Debt to equity stands at more than 1.2, how they are going to reduce the debt levels 2. What is the order book expecting from FMCG 3. About the progress on new plant they are setting up at North India with 10 crore 4. What is the market size of IML in India and how much market size they are targeting to capture

Please let me know if any more questions that i can ask.

25

Hi Srinivasa

I have following questions for the company, would be great if management gives clarity on some of them

1). What is capacity utilization in FY 14 & latest Apr-June quarter. After capex, what will be the % increase in capacity and how long that will sustain.

2). Marginshasbeen increasing continously, how sustainable is this increase, what margins can be expected in long term, say 2-3 years.

3). Multiple instances of promoter selling stake in last few months, whats the reason?

Best of luck for the AGM!!

26

Attended agm today.

Abstracts

. company is very bullish on prospectus and iml adaption

. Satara plant which is latest with full utilization made 40 cr from this plant and this year it will be 60 cr

. they are expecting big orders from akzo nobel, which will be finalized in two months. Basic mou has been signed up

. planning to put a plant in dubai, team is going to finalize the plant and this will be end of 2015

. talks with cadburry for their hot chocolate product

. developed robos inhouse at cost of 1/3 rd of market, even iml labels made inhouse. Making them end to end integrated player

. for past 20 yrs into docarative paints now expecting huge demand from fmcg, dairy products

Iml is a robotic operation , decoration first product next. Traditional is labour intensive

. in singapore and europe, only iml is allowed for food products. Even considering 10% of europe market it will be 1200 cr per year

.expecting minimum 25 cagr for next 3 to 5 years

. gwalior plant will be ready by end of year and startas production by next financial year

Below are questions that i have asked

1). about recent sell off by promoter group

most of them are between promoters and they are by their friends and relatives. They are less in number and max no sold is 5000 shares

2). regarding capacity utilization

current utilization is 85% and this is the best in industry. Once new plants comein it will increase

3). dividend pauout

as a untold policy, they will maintain 40% of net ptofit for dividends

4.on margin expansion

margins will continue to increase due to iml , robotics and better margins with fmcg products

5). on debt

not planning to reduce the debt as of now

6). on competition

iml packing, they are ahead of competition by 3 to 5 years. As they are producing robos inhouse ar very low price otherwise need to source from thaiwan which have integration issues with current plants. Hence strong barriers to enter

Disc. Invested

3 Likes
27

Thanks Srinivasa for the details. What is the size of IML market in India?

28

as per AGM today-

In developed markets, for food related items-iml is only allowed.

Here many companies are adapting this. As per mold-tek- their target market size will be 1200 crore per year (by even considering 10% of market in Europe alone). More and more FMCG and dairy companies are moving towards this- because of less laborious process, good finishing and less human intervention and hygienic compared to traditional packing…

29

There have been strong rally across all Plastic stocks like Mold Tek Packaging, Control print, Wim Plast etc.

Crude price fall might result in less RawMaterial cost hence margins are likely to improve.

30

That’s not a very well thought reason. These are just vendors to large players. There is no way the large B-B buyers are not going to extract the benefit of falling crude prices from these guys. Most of these packaging companies arent going to benefit from fall in crude price. Wimplast is a branded B-C play and hence its case is different.

31

The large buyers, of course, are going to try to extract the benefit of falling crude prices from the small vendors but it doesn’t mean it won’t have positive impact on vendors like Mold-tek for which RM is a crude derivative. Infact, India, with the slowing dragon, might be one of the biggest beneficiary of falling crude prices which, if happenes, will have a huge positive impact on the entire economy across industries.

With tailwind, small businesses will benefit the most and, Mold-tek, with lots of expansions currently going on, could well be one of the biggest beneficiary.

32

Agree with Aksh. The whole sector is on tailwind and for higher ROE stocks, it’s double edge.

Kunal

33

Q2 Result is out with excellent set of numbers. Better than expected!

http://www.bseindia.com/corporates/anndet_new.aspx?newsid=85533a39-cf0b-45a9-84dd-96b6012a328d

EPS at 4.01 vs 2.32 YOY, up by 73%

34

excellentresult.!fmcgpart is just beplayingout well!ifonlymoreseniorscouldgivetheiropinion.

disclosure-investedfromlowerlevels.addingmore

35

Q2 FY 15 results: YOY comparison

Net Operating Income up by 20%
Total Expenditure up by 17.24%
RM cost up by 21.6%
Operating Profit up by 40.5%
Net Profit up by 72%

Operating Margins at 11.33% vs 9.63%, up by 1.70%
Net Profit Margins 5.73% vs 3.97%, up by 1.76%

EPS (Diluted) 4.01 vs 2.32, up by 72.84%

Not only on YOY but even on QOQ basis, It’s showing decent growth. Mgmt has indicated 22-25% CAGR for few more years to come.

36

Yes excellent result again. Margin expansion with increased profit, revenue is good sign of business performance.

25% CAGR guided by management is ambitious. Dividend yield of 1.26% speaks for reasonable valuation.

Kunal

37

Is it a good time to accumulate the stock? The stock is fundamentally strong, need some technical update also

38

Yet Another good set of Numbers from Mold-tek.

http://www.moldtekplastics.com/investor/2014-2015/2014-15%20Q3%20Results.pdf


39

Yes great set of numbers from Mold-Tek plus a very successful QIP where Blackrock & SBI have come in now.

Management is setting up 4 new factories which will come on stream by 2016.

Expecting PAT to rise 30-35% for next 3-5 years cagr.

Stock has good days ahead.

Disc- Holding since 94 levels. Added on the flop, turn and river :wink:

Cheers

Neil

40

Dear friends,

Mold Tek packaging has been sliding consistently from 250 levels to 185 level that it reached today
I dont think this is a secular correction, but has more to do with the market perception for the growth prospects of this industry. I would like the professionals in this industry to shed some light on this aspect

regards
Amey Desai