MOLDTKPACNSEQ4 FY2022May 09, 2022

Mold-Tek Packaging Limited

10,052words
152turns
14analyst exchanges
2executives
Management on call
Abhishek Navalgund
NIRMAL BANG INSTITUTIONAL EQUITIES PRIVATE LIMITED
Laxman Rao
CHAIRMAN & MANAGING
Key numbers — 40 extracted
31.85%
ent financial year ending March 2022, just concluded year and our overall revenue growth has been 31.85% over the last year and PAT is up by 32.4%, but the exact volume growth is only 11%, so with 11% v
32.4%
concluded year and our overall revenue growth has been 31.85% over the last year and PAT is up by 32.4%, but the exact volume growth is only 11%, so with 11% volume growth, we could maintain a PAT grow
11%
th has been 31.85% over the last year and PAT is up by 32.4%, but the exact volume growth is only 11%, so with 11% volume growth, we could maintain a PAT growth of 32.4%. the EBITDA per kg has also s
Rs.5
%. the EBITDA per kg has also shot up from somewhere around 31.7 to 41.78 or something, so almost Rs.5 increase in the EBITDA per kg was achieved during the year due to increase sale in our foods and F
13%
ts, we have seen reasonable growth in the revenues, but in the volume terms they are still 11% to 13% growth. In the food and FMCG, in the edible oil sector where it was impacted in the first two
25%
ble oil sector where it was impacted in the first two quarters of the year, we had a de-growth of 25% though in the fourth quarter there is handsome growth of almost 60%, overall year still registere
60%
e year, we had a de-growth of 25% though in the fourth quarter there is handsome growth of almost 60%, overall year still registered a negative 24% in Q-pack that is edible oil pack excluding that in
24%
e fourth quarter there is handsome growth of almost 60%, overall year still registered a negative 24% in Q-pack that is edible oil pack excluding that in the thin wall section that is food and FMCG w
40%
l pack excluding that in the thin wall section that is food and FMCG we have a handsome growth of 40%. This is the most positive aspect of the current year's performance apart from my good 13% growth
Rs.30,
a sizable increase in the EBITDA margins per kg. The raw material price have shot up more than Rs.30, it is 28% to be precise from Rs.93 for the full year to Rs.120, so this is almost like 30% increas
28%
crease in the EBITDA margins per kg. The raw material price have shot up more than Rs.30, it is 28% to be precise from Rs.93 for the full year to Rs.120, so this is almost like 30% increase in the
Rs.93
margins per kg. The raw material price have shot up more than Rs.30, it is 28% to be precise from Rs.93 for the full year to Rs.120, so this is almost like 30% increase in the raw material price that we
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Guidance — 17 items
Laxman Rao
opening
“In terms of revenues, it is 11% to 12% in the Q4, 10.7%, but actually volumes if you consider it is around 5%, similarly the bottom line growth is also about 5%, so the prices have started falling from April 1, 2022 reasonably, not great extent, but up to around Rs.8 to Rs.10 per kg they have come down, so those benefits of March pricing will be now applicable in April and similarly April in May, so when the down trend there will be a beneficial accrual to the company’s P&L.”
Laxman Rao
opening
“As I explained in the past, IBM project is moving as per schedule.”
Laxman Rao
opening
“The pilot will be ready sometime in July at our unit one and the Sultanpur unit will be starting sometime in October.”
Laxman Rao
opening
“These products put together would be adding around 25 Crores to 30 Crores to the top line in the current financial year and in a full year, it will be in the region of 35 Crores to 40 Crores per annum, so this is a sizable addition in our food and FMCG for the current financial year and going forward.”
Laxman Rao
qa
“Now the dividend tax is in the hands of individuals, it is no more under the company, so whoever receives it, in fact if you are receiving Rs.8 this year it is less than Rs.7 that was given last year, effectively, I mean many of the investors will be incurring 20% to 30% tax bracket, so they will end up receiving only maybe effectively Rs.6 or so, whereas last year it was tax free and only 10% TDS is deducted as the norm.”
Laxman Rao
qa
“Either way, when the price come down also we do not do price reductions in that month we will do it in the next month, same thing next quarter, so hopefully the first quarter Q1 will gain if the price trend is what it is going to be and if the price trend stabilizes, still 42 to 43 is possible.”
Laxman Rao
qa
“Yes, GSK we have already more or less confirmed with them, mold development has also been cleared by them, but the mold will be tested and all that will take time, so first one is in June we are hoping, then sometime in July-August.”
Laxman Rao
qa
“Yes, gulf is almost cleared our QR code and another edible oil company government cooperative, they have placed an order with QR coded lids also, they want even lid to be having a QR code, so that machinery has just arrived last week for printing on the dynamic QR code on the lid, so these two clients will be supplied in this quarter, Gulf and the edible oil company.”
Bhargav Buddhadev
qa
“This product will be primarily for exports right or we are also looking at domestic client?”
Laxman Rao
qa
“Basically the responsibility lies with the users of containers that is Asian Paints or FMCG companies, but the processor or sizable processors are also have to fall in line and show proof of utilization to the level of 20% to 25%, the industry is still trying to negotiate in injection molding and blow molding, it may not be a big issue, but in the film industry it will be very, very difficult for them to meet the norms, so currently I think what it was set for 24% to 25% is 20% reuse.”
Risks & concerns — 3 flagged
If the price trend is increasing there could be some challenge, so I will still take 42 to 45 is the possible range given the new orders in the food and FMCG sector.
— Laxman Rao
Basically the responsibility lies with the users of containers that is Asian Paints or FMCG companies, but the processor or sizable processors are also have to fall in line and show proof of utilization to the level of 20% to 25%, the industry is still trying to negotiate in injection molding and blow molding, it may not be a big issue, but in the film industry it will be very, very difficult for them to meet the norms, so currently I think what it was set for 24% to 25% is 20% reuse.
— Laxman Rao
My first question is on those free cash flow generation if I look at last 7 years, we have done tremendously good in terms of sales growth, in terms of capacity addition, even in terms of operating cash flows, but because of continuous need of the business to invest in capex the FCF has continued to be extremely weak for last many years, what capacity levels should we feel confident that the FCF generation will continue to be healthy?
— Akhil
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Q&A — 14 exchanges
Q
Laxman Rao, Sir, thank you very much for nice result, you have given overall growth in the year, I am looking this company since last six to seven year and find when we attended AGM, you display so many products in the AGM, but along with the result you never give investor presentation in which you may show what new product we have introduced by the company where we investor may benefit a lot, this is my request, if now onwards if you can post it will be nice and will help us. Secondly, debtors rises too much is on March 31, 2022, any specific reason behind it?
Laxman Rao
Sorry, what is the second question? Debtors rises too much? Debtors? Yes. Debtors increase is too much, it was 90 Crores in March 31, 2021, it is raised to 143 Crores. 19 Crores in last year March 31, 2021 and it has now become 143 Crores may be there is some typographical error? No, it is not error, 90 Crores to 143 Crores. Oh, 90 Crores has become 143 Crores? Yes. Basically the sales growth it you look that is almost 33%. So, obviously when the sale grow more rapidly towards the end as actually the billing value has increased by almost 35% to 36% compared to last February and March, so that
Q
Sir, if you can share the fourth quarter volume numbers for the three segments, paints, lubes and food and FMCG?
Laxman Rao
Yes, the volume numbers of paint for the Q4 is 4676 tons, lube is 2140, food and FMCG is around 1580, overall it is around 8400 tons, paint is 55%, lubes is 25% and food and FMCG is 19% in the volume wise. In the sale value wise, paint is 52%, lube is 24% and food and FMCG also is 24%. Right and Sir, you have stated about likely 15% to 20% volume growth for the current year, so if you can throw some more light on that, which are the areas that you are expecting growth because for FY2022 in the past we were hopeful of 32000 volumes, but we have done a little less than 30000, so in the current y
Q
Good afternoon Sir and congrats on a good execution. Sir, we had added one customer in QR code Himel any new signups from there?
Laxman Rao
Yes, gulf is almost cleared our QR code and another edible oil company government cooperative, they have placed an order with QR coded lids also, they want even lid to be having a QR code, so that machinery has just arrived last week for printing on the dynamic QR code on the lid, so these two clients will be supplied in this quarter, Gulf and the edible oil company. Sir, what is the revenue run rate you are looking from this business in FY2023? In QR coded products? Yes. I will be very happy even if you can reach at least 5% to 6% of the revenue is coming through this QR coded that means abou
Q
Thanks for the opportunity, Sir. Sir, I just wanted to understand your view on this EPR regulations, which are going to come in FY2024 onwards and how do we see demand side post EPR norms?
Laxman Rao
Yes, we are getting ready for that actually the recycling plants in India have now developed to an extent of almost equal to the international standards, their products some of them are climbing even food safe and companies like Hindustan Lever have approved a couple of products in PVT and they are also examining polypropylene for food applications and if that really happens we are in touch with them and we are also even experimentally buying some quantities of recycled polymers from three to four reputed companies who have come up, couple of them in south, couple of them in Haryana area, nort
Q
Mr. Laxman, thank you for taking my question and congratulations to you and the team on some great numbers. I am wondering if you could repeat the 15% to 20% volume growth that you are expecting for the upcoming year where that is coming from, I believe you might have addressed it earlier, but I could not make out what is being said on the call, thank you?
Laxman Rao
See, we are assuming this numbers growth based on an assumption that there would not be a return of pandemic, as I mentioned earlier maybe you missed it, we have three to four new FMCG products of decent volume and numbers, which we have initiated mold development coming into production between June and August, these products put together along with the OTC product and IBM, we expect a sales of about 30 Crores for the current financial year and that might go up to a total of 40 Crores per annum in the next financial year because this year I am counting only on 8 to 9 months, so that is a sizab
Q
Sir, thank you for taking my question. I had one question, the realization per kilo for this quarter has dropped, so I wanted to know what was the reason for it because even our EBITDA per kg has come down, so what would be the reason for this drop?
Laxman Rao
Yes, Miraj, as I explained to you maybe you missed it, our pricing strategy is always passing on the previous month price to the next month billing, so whatever price rise in the month of March, we realize only in April and in the case of Asian Paints, which is one of our largest customers, it is quarterly basis that means October-November-December average price will be applied for January-February-March, so these two itself impacted more than 4 Crores to the bottom line that has effectively decrease our EBITDA by almost Rs.3 to Rs.4, so otherwise this would have been even 43 to 44, it is now
Q
Thank you for the opportunity. Sir, first question is on EPI norms, what is the percentage of recycling material that you need to use and by what date?
Laxman Rao
Basically the responsibility lies with the users of containers that is Asian Paints or FMCG companies, but the processor or sizable processors are also have to fall in line and show proof of utilization to the level of 20% to 25%, the industry is still trying to negotiate in injection molding and blow molding, it may not be a big issue, but in the film industry it will be very, very difficult for them to meet the norms, so currently I think what it was set for 24% to 25% is 20% reuse. And this by April 1, 2024, what is the date? I am not very sure about the date to review that, it has been gra
Q
Hello, Laxman Sir, congratulations on a good set of numbers for FY2022. My first question is on those free cash flow generation if I look at last 7 years, we have done tremendously good in terms of sales growth, in terms of capacity addition, even in terms of operating cash flows, but because of continuous need of the business to invest in capex the FCF has continued to be extremely weak for last many years, what capacity levels should we feel confident that the FCF generation will continue to be healthy?
Laxman Rao
Which generation, sorry your voice broke? I am saying at what capacity level should we expect a healthy free cash flow generation? See, free cash flow even today is healthy and we have in spite of a heavy dividend payout, we still have cash generation, which is covering our capital needs still now, but as I discussed with you all in the last couple of meetings or phone calls, going forward the investments in IBM and pharmaceutical and the new plants at Kanpur and probably one more in north expanding Mysore and Vizag and expanding our tool room and printing facilities would be requiring much hi
Q
Sir, thank you for taking my question. Sir, can you share with us constellation of IML and non IML in terms of volume and revenues for this quarter?
Laxman Rao
They are in line with previous quarters because IML is stagnating around 67% now from 65% previously, and previous year it was 65.3%, now the current year it is 67%. In terms of revenues? In terms of revenue, yes, in terms of tonnage it is 63% up from 61% last year, 63.2% to be precise. Sir, how is Mangalesh portfolio shipping up now? There is no growth I think 3% to 4% drop is there, but not a major drop so it is stabilized now. So, approximately what percentage could be that in terms of FMCG? This is hardly value wise around 5 Crores out of 30 Crores what we did, hardly 5%. And at peak this
Q
Thank you for the opportunity. Sir, I need just a few clarification on some numbers, you said like for FMCG there was de-growth due to edible oil and edible oil is nearly 70% of our revenue in FMCG is it a right understanding, Sir?
Laxman Rao
No, the total food and FMCG for the year 2021-2022, is 146 Crores out of which 38 Crores is edible oil, so hardly 25% is edible oil and the remaining 75% that is 108 Crores is from thin wall food and FMCG, we differentiate Q-pack and thin wall though they are completely IML, so the value add in thin wall that is the regular food and FMCG is much higher than Q-pack. So, thin wall and Q-pack is largely for oil category only right? No, thin wall is for food and FMCG, Q-pack is mainly for oil category, but there are other applications also detergents, nutrin powders and other products also, cashew
Q
Hi, Laxman, Sir. Sir, our operating cash flow are reduced by 75 Crores odd to 20 Crores in FY2022, so can you just explain the reasons behind it?
Laxman Rao
Sorry, 75 to? 20 Crores Which one? Operating cash flow has been reduced from 75 Crores to 20 Crores? Operating cash flow is reduced? Yes. Because of the capex you meant to say? No operating cash flow before capex? Before capex is not reduced, how can it reduce, am I seeing the same numbers? Yes, Sir, cash generated for operations in FY2022 was 2194 lakhs, last year this number was 7553 lakhs? Net cash flow is 56.5 Crores before investments and it was minus 9.6 last year. I am talking about operating cash flows, the first sub bullet cash flow number is 2194.34? Okay, 2194 cash generated from op
Q
Sir, just a couple of followup questions capacity utilization has always been in the 60% to 70% range, is that how it will always be going ahead?
Laxman Rao
Yes, Pulkit, because in the case of injection molding I explained in the past jars and caps when you utilize the capacities while the machine capacity has been taken at an average short weight of a machine, jars will be using almost 80% to 90% of the machine capacity, but caps will be using hardly 40% to 50% of the machine capacity, so that is why in injection molding anything around 70% to 75% is the best, anybody can achieve unless you are selling only jars or the only product which are deep and using the entire machines capacity, so we being a supplier of both jar and cap you need to under
Q
Thank you for the opportunity. Can you just help me with the segment wise EBITDA margins for the year?
Laxman Rao
See, though we cannot share such a fine detail, but definitely the EBITDA margins in the pail segment and even Q-pack segment will be much lower than the food and FMCG, while in the pail segment that is both for paint and lubricants, it will be in the region of Rs.30 per kg and in the Q-pack it is around Rs.35 to Rs.40 per kg and in the case of food and FMCG it will be as high as Rs.80 to Rs.120 per kg. Got it, Sir and that is all from my side. Thank you.
Q
Thank you, Nirmal Bang and thanks all the analysts who have shown interest to know about our company. I think most probably the pandemic is behind us or even if it comes back probably it would not be as pungent as it was and hopefully, we all have a good year ahead and at Mold-Tek we are confident that given this so many new initiatives we have taken up and new products that are coming up with higher value add, the future is looking brighter and I thank Nirmal Bang once again and hand it over back to the convenor for the closure of the meeting, thank you.
Management
Speaking time
Laxman Rao
63
Moderator
16
Bhargav Buddhadev
12
Pulkit Singhal
12
Deven Kulkarni
8
Karan Bhatelia
7
Ravi Naredi
6
Akhil
6
Hitesh Taunk
6
Kaushal Shah
5
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Opening remarks
Abhishek Navalgund
Thanks Nirav. Hello everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to Q4 FY2022 earnings call of Mold-Tek Packaging Limited. We have with us Mr. Laxman Rao, the Chairman and Managing Director of the company along with the entire finance team at Mold-Tek. Without further ado, I would request Laxman Rao, Sir to start with the opening comments post which we can open the floor for question and answers. Thank you and over to you, Sir!
Laxman Rao
Good afternoon everybody. Thanks for your patience. I am glad to inform you that in spite of severe inflammatory situation in raw material pricing, the company could maintain or rather improve the EBITDA margins during the current financial year ending March 2022, just concluded year and our overall revenue growth has been 31.85% over the last year and PAT is up by 32.4%, but the exact volume growth is only 11%, so with 11% volume growth, we could maintain a PAT growth of 32.4%. the EBITDA per kg has also shot up from somewhere around 31.7 to 41.78 or something, so almost Rs.5 increase in the EBITDA per kg was achieved during the year due to increase sale in our foods and FMCG products. Coming to the segment wise growth, in the paint and lubricants, we have seen reasonable growth in the revenues, but in the volume terms they are still 11% to 13% growth. In the food and FMCG, in the edible oil sector where it was impacted in the first two quarters of the year, we had a de-growth of 25%
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