From share holding pattern(trendlyne)
From BSE ,i knew pledging is for personal req.
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The company has decided to substantially wind down the operations at RAK and bring these capacities to India. Thus, realized impairment of Rs 11.51 crores for this quarter.
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Below is the presentation I did at Chintan Baithak Goa this year on Mold-Tek Packaging. Thanks.
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Mold-tek Q1 results are good
Strong profitable revenue growth of 17.40% Y on Y
Volume up by 15% for the Quarter;
Standalone Performance Highlights: -
Net Revenues up by 17.40% YoY and up by 15.46% Q1 on Q4
Net Profit up by 20.36% YoY and up by 657% Q1 on Q4
Volume up by 15.17% YoY and up by 12.56% Q1 on Q4
EBIDTA up by 14.38% YoY and up by 10.67% Q1 on Q4
EPS up by 20.36% YoY and up by 657.81% Q1 on Q4
Commenting on future prospects.
Square 0-Packs & New Products:
Mold-Tek Packaging, the manufacturer of plastic moulded containers for paints, lubricants & food, has been growing at a steady rate. The ROCE in Q1 of FY20 has improved to 30.16% Vs 27.38% in FY19. The operating margins remain stable despite surge in oil prices. The business seems on positive progression considering the new capacity additions and adding new clients in FMCG business. The Company achieved 73% growth (Q1 Vs Q1) in Food and FMCG business from Rs. 16 crores to Rs.28 crores. Mr. J. Lakshmana Rao, Chairman and Managing Director, said that Company has bagged new orders from
many new clients in Food and FMCG sector during this quarter. Apart from 5, 15, and 17 liters packs, Company introduced new 10 liter square packs for some major clients in this quarter. Demand for our Square packs continue to grow and is on way to create a major trend in the edible oil market with conversion (for Edible oils and Ghee) of Tin to plastic by major edible oil players like N.K Protein, Goyal, Damani, Gulab, Haider Group, etc. The Company has successfully added/increased capacity for these packs. Capacity shifted from RAK has been mainly allocated to these packs and other food packing products.
RAK Subsidiary:
Mr. J. Lakshmana Rao, Chairman and Managing Director, said that as announced earlier the major plant and machinery has been successfully shifted and installed at other operating locations in India to enhance domestic production capacities and meet the increasing demand of the Indian clients. It is pertinent note that during the quarter operations in our RAK subsidiary have been completely stopped. The expenses in the subsidiary includes one-time expenses due to terminal benefits paid to retrenched employees and other write offs. The closure is expected to happen before this calendar year.
New capacities at Mysore and Vizag:
During the quarter Company has successfully started supplies to APL from Vijag Unit. Orders from APL are gradually increasing for both Mysore and Vijag Plants.
The above developments will keep up the growth prospects for the Company in the coming quarters.
Disc: Invested. No recommendation though.
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Interesting commentary on F&F:
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73% growth (vs. Q1 last year) and almost doubling of business from 16 to 28 crores (this is as per guidance they gave earlier)
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New client additions in F&F space continues. Will be good to ask more details on the concall for this.
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Con Call Transcript on Q1FY20.
It is taken from company website. But reading the transcript is difficult as lot of gaps and inconclusive sentences. You have to make efforts to understand replies given by the management. Hope company come out with edited and corrected transcript in near future.
Few important points.
**Current slow down is affecting Lube segment only ,paint growth is maintained due to Asian paint new plant requirement. F&F is unaffected and we had 68% growth. Confident of maintaining our ealrier guidance of 15 to 20% growth.
** RAK plant closure will be completed by Sep 30, 2019. Additional expenditure of Rs 1Cr (40 Lacs is for relocation of staff costs including visa cancellations and 60 Lacs towards Operational losses)
** Term loan of 35 Cr and working capital limit of Rs 80 Cr.
** Kanpur PlantâŚlooking for a site between Lucknow and Kanpur to cater to the requirement of Nerolac and berger Paints.
** Mysore and Vizag Plants are operating at 40% capacity utilisation and it will scale upto 70% current year.
**Q1 EBIDTA was affected due to increased staff cost (Mysore and Vizag plants) and interest cost due to addtional working capital. But in the current year margin per Kg will in the range of Rs 34 to 35.5.
** new customers⌠Talking Amazon and Swiggy and Zomato are discussing with us . It is in discussion stage. And also discussing with Coke and Pepsi for sippers. We may start suplying sippers to Coke in next 4 to 5 months. This may be marginal this year, but it will add good numbers in next FY.
**Regarding pledging of promoters shares⌠it is for personal needs, it is around 5% of promoter holding, it is one time and it will not go up.
http://moldtekpackaging.com/resource_files/Con%20call%20Transcripts260719.pdf
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Yup. But you can listen to the actual Concall audio on stock adda and research bytes.
Also transcript posted on the site is so wrong in many places. For e.g. they have not apporached Amazon yet was the answer given by the management.
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Does the ban expected to be implemented on single use plastic affect moldtek because of its exposure to ice creame and chacolate.
These are not single use plastics. Generally these can be recycled but one should keep in mind that this is a biggest knockout risk for the company - ban of all kind of plastic packs (might not happen soon or might never happen) but definitely a risk.
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Rigid Packaging plastics are not having immediate disruption risk unless some other material other than metals are discovered and commercially become viable. The same threat exists for Finolex Ind, Astral Polytek, cable industries. We can safely assume Mold tek packaging will continue to thrive in foreseeable future as there is no risk appearing in the horizon.
I think that the risk is zero. Plastic is not a threat - it primarily the wide spread use of single use items like plastic bags, disposable plastic water bottles etc that create environmental hazard.
There is no way that large plastic containers can ever be replaced by metal containers as we used to have many decades back.
The ban, quite rightly, is only on âSINGLE use plasticâ. Mold Teck is certainly under no threat.
Disc : Holding and would continue to hold.
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Agreed that Rigid packaging plastic may not be treated as Single use plastic. But whether the ice creame cups and chacolate cups have the risk of treating as Single use plastic.
One concern: Why is the promoter holding dropped from ~43% (FY14) to ~36% in FY19
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After QIP in FY15, promoter share holding down to 34.96% from 42.83% however number of shares held is same. From FY15 to FY19 Promoter holding increased to 35.55%.
Few days back promoters bought few shares from open market.
Disclosure: Invested.
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I attended Mold-Tek Packaging AGM & following are some notes -
- The current capacity utilization at Mysore plant was 67% & that at Vizag plant was at 70%. The company expects to exit FY20 with the capacity utilization of 50% at these two plants.
- Polypropylene prices are not falling but they are stable in the range of +/- 5%. The company is able to pass on RM price changes, both positive & negative.
Competition
- Competition - Hi-Tech Packaging, Time Technoplast, Jolly, Manjushree. Time Technoplast products cover 50-100-200L size packs. Manjushree derives 60-70% of its revenue from PET bottles which government has banned.
- Competitive advantage against smaller players in food industry - Hygeine is the most important factor which we can guarantee, we can work with large volumes & deal with seasonality (e.g. 4x more demand for ice cream products in summer vs. winter), we use our own labels which helps us to control costs.
Paints
- Berger paints is our customer for 28-29 years now & they would like us to setup a plant in UP to support their upcoming plant there.
- The company supplies ~25-35% of the requirements of the paint players, rest are supplied by players linked with promoters or some other players mentioned above.
- Most of the other players (for paint industry) use Heat Transfer Label (HTL) as a mode of decoration due to lower cost compared to IML. HTL uses 18 micron PET film. if government bans 50 micron film, there might be some impact. The price difference between HTL & IML is 3-4 rs.
- Concentration Risk with Asian Paints contributing 30% of the sales - AP is very ethically managed company and we have 30 years of relationship with them.
Food & FMCG
- The Food & FMCG segment might grow at 40% in FY20. The growth in Q1 was 70%. We might exit the year for F&F segment at 130cr.
- Edible Oil segment will be big driver of growth in F&F. The company has introduced 15L pack in this segment recently.The company is also working with several clients like - Nestle, GSK, Dabur, ITC, Britannia, Emami etc.
- Iron container vs. IML container in edible oil segment - The price of IML is high compared to tin container. There is potential for food contamination/tampering in tin container & there might be a ban on re-sue of tin container. IML container is tamper proof.
- The product margins in edible oil are better than the paints.
- The company has received a big order from Britannia for 10L pack. The company is also working on a product for cheese.
Learning from RAK Plant
- The company expected Iranian market to open up & big demand from oil/paints/lube companies. But due to various geopolitical reasons, it never happened.
- Further one of the customer Akzo Nobel had promised larger volumes in those markets but it did not materialize.
- The company had procured bigger machines for RAK plant & those have been moved back to India. They are getting well used in edible oil segment for creating 10/15/20L packs.
- The equipment was imported from Japan & there is some impact due to yen appreciation.
- The customers will be served from India & the company will be cautious in overseas expansion going forward.
Plastic Ban
- The plastic ban is on - single use plastics, PET bottle of smaller size & thin plastic which is < 250 microns. The trouble with these plastics is they are very hard to collect & reuse.
- Vaccume or thermo formed plastics are more at the risk of getting banned vs. injection molded plastics which are much thicker & easier to collect/recycle.
Other
- The company does not feel that it will have to pass on the benefits of tax reduction in next 1 year at least.
Disc - token position to attend AGM, not a buy or sell recommendation, please do your own due diligence. Mistakes in the notes are solely mine.
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How much revenue will be affected due to plastic ban?
The first point on capacity utilization doesnât seem to make sense.
If you listen to Q1 conf call, the utilization of Mysuru & Vizag plant was at 40%.
It went up in Q2 - around the AGM time.
If you look at paints companies, the demand is seasonal - with highest sales in the quarter in which Diwali is there (basically 1 or 2 month preceeding Diwali). That is why capacity utilization would have gone up to fill the channel inventory.
This demand will come down post Diwali & hence on an overall basis for the full year - utilization imght be 50%.
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Clear, thanks for your notes.
Itâs a good company but some people who have seen their plant say it is quite mediocre nothing hi-tech.
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Concall Transcript -Q2FY20
*RM prices have fallen from Rs 99/Kg to Rs 90/Kg and stabilised around Rs 91/92
- IML share has gone up from 58.8% to 65.1%
*LT loan increased from Rs 15 Cr to Rs 30Cr mainly due to shifting of RAK LT loans and ST loans around Rs 79Cr from Rs 71Cr last year.
*EBIDTA per Kg is gone up marginally from Rs 33.6 to Rs 34.21
*Hosur plant shifted to Mysore to reduce operation cost as they are within 100 to 120KM .
*FMCG contribution have gone up by 40% (18.5Cr to Rs 26Cr)
*Lub contribution gone down by 23% mainly due to slowdown in economy and consequent less vehicle movement.
*Plastic ban is basically for thin wall films and thin wall containers under 160 microns
who currently the Maharashtra ban is below 50 microns, Tamil Nadu is also under 50 even
at the national level a call is taken in the couple of years I do not think they will touch
anything above 100 microns whereas our lowest size of the container we manufacture is
with thickness of 400 microns. So as of now I do not see there will be any problem or rather
there will be shift of some of the very thin wall products of like say thermoformed or
vacuum formed containers they have no option but to shift to injection moulding and come
for our IML injection moulding containers. So, any ban of thin wall will rather benefit our
company than affecting growth.
*sippers with Pepsi are moving again they were reluctant to take a call till
the ban clarity comes. Now we are again in talks with them. Hopefully next quarter they may take a call. It went very close to start off but again when the talk of plastic ban came
they wanted to wait and see what would be the outcome. Now again they were getting in
touch with them and hopefully in couple of quarters they might come out with their
decision
*Asian Paints contribution is around 37 to 38% while Nerolac (12%) and castrol takes No. 2 and No. 3 position resp[. - Mondelez contribution has come dn by 20 to 25% and the present contribution is around 8 to 9%
- Shifting of Hosur plant will result in the saving Rs 1 Cr PA.
*M2K that is Cadbury there is a drop in their overall sales which has affected our
numbers because somehow the brand is yet to take off but it is still considerable, they are
around Rs.25 Crores to Rs.30 Crores turnover we will be able to get from them which was
around 36 last year so there is a drop of 15% to 18% in the full year but still the numbers
were decent enough. In the case of HUL there is no drop actually HUL numbers have
increased and in this year from few Crores a couple of Crores last year, we are doing more
than Rs.10, 12 Crores this year and with the new product that is being added probably next
year we will be doing around Rs.18 to 20 Crores per annum and another big addition of
brand is Hatsun, Hatsun is Arun brand of ice creams, after ice creams they are into dairy
products like curds and yogurts that is really picking up. Hatsun numbers are going to be
very considerable in the next financial year this year it was⌠around Rs.5 to 6 Crores last
year that is the year ending March, but this year we are anticipating anywhere around Rs.12
to 15 Crores turnover coming from them. Hatsun and HUL will be to growth stars in the next season and we are also in touch with Nestle, Dabur and ITC foods.
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