MOLDTKPACNSEJuly 27, 2022

Mold-Tek Packaging Limited

8,159words
62turns
10analyst exchanges
2executives
Management on call
Lakshmana Rao
THE CHAIRMAN AND
Abhishek Navalgund
EQUITY RESEARCH ANALYST, NIRMAL BANG EQUITIES PRIVATE LIMITED
Key numbers — 40 extracted
55%
e done wonderful in this quarter, reaching some historical volumes and that enabled us to achieve 55% volume growth in sales and PAT is up by 80%. Though it is compared with the COVID affected last y
80%
ome historical volumes and that enabled us to achieve 55% volume growth in sales and PAT is up by 80%. Though it is compared with the COVID affected last year quarter, even on comparative the figures
Rs. 207 crore
and 2019-20, these numbers have been substantially better. So, the overall top line is more than Rs. 207 crores as against Rs. 133 crores last year in terms of rupee terms that is up by 55%. But even in the v
Rs. 133 crore
s have been substantially better. So, the overall top line is more than Rs. 207 crores as against Rs. 133 crores last year in terms of rupee terms that is up by 55%. But even in the volume terms, the numbers h
rs,
d FMCG, new brand development is also started, which has been kind of suspended for the last 2 years, which might augur well for us in our IML food and FMCG segments. So, other projects are all on tim
Rs. 250 crore
ear. And also one major announcement is as expected at the time of QIP we mentioned to you that Rs. 250 crores of CAPEX is planned for the next 2.5 to 3 years. And this year itself, the company has layered o
Rs. 125 crore
ed for the next 2.5 to 3 years. And this year itself, the company has layered out plans to invest Rs. 125 crores plus or minus 5% to enhance various capacities, set up new plant at Daman, maybe start new plant
5%
s. And this year itself, the company has layered out plans to invest Rs. 125 crores plus or minus 5% to enhance various capacities, set up new plant at Daman, maybe start new plant construction at K
Rs. 1
fore passing on to the clients. So, I would not consider that as a big impact, maybe on average Rs. 1 to Rs. 2 per kg would be the impact while going up. Similarly, Rs. 1 to Rs. 2 advantage when the p
Rs. 2
ing on to the clients. So, I would not consider that as a big impact, maybe on average Rs. 1 to Rs. 2 per kg would be the impact while going up. Similarly, Rs. 1 to Rs. 2 advantage when the price is c
Rs. 119
ing down. But this time, the sync is being very high, like raw material price went up from almost Rs. 119 in December or Rs. 116 in January to almost Rs. 139 in April. And then it is now on the down trend
Rs. 116
, the sync is being very high, like raw material price went up from almost Rs. 119 in December or Rs. 116 in January to almost Rs. 139 in April. And then it is now on the down trend, last 2 months from Rs
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Guidance — 20 items
Abhishek Navalgund
opening
“So, going forward, another new announcement or new relation taken by the company is to set up a second plant at Daman because the Daman plant is now full, and there were some issues of getting additional construction permits due to the huge highway we have in front of our factory.”
Abhishek Navalgund
opening
“So, Mold-Tek company has decided to set up its new plant in a new land and very soon we will be going ahead with the plan there because a lot of clients in the Western region belong to food and FMCG are expecting us to be nearer to them in the west and it also makes both commercial and transportation sense to be closer to the clients.”
Abhishek Navalgund
opening
“The major plant of IBM products, injection blow molded products coming up at Sultanpur will be operational in the beginning of next year.”
Abhishek Navalgund
opening
“And I am also glad to inform you for the entire pilot plant capacity, we have received orders from one of the major FMCG companies in the country for a OTC product, which will completely occupy the capacity of the IBM pilot project.”
Abhishek Navalgund
opening
“And now they are opening up the doors and at least three projects are confirmed to go ahead and another fourth project is being decided in this next few weeks.”
Abhishek Navalgund
opening
“So, other projects are all on time, going on as per plans, and we hope to achieve our ambitious target in this year.”
Abhishek Navalgund
opening
“125 crores plus or minus 5% to enhance various capacities, set up new plant at Daman, maybe start new plant construction at Kanpur and complete mainly the Sultanpur pharma project at least buildings and the main machineries would be completed.”
Ravi Naredi
qa
“And sir, now much will be net profit in quarter 1 due to increase in raw material.”
Ravi Naredi
qa
“How much will be net profit rise due to raw material increase or finish cost increase in quarter 1?”
Ravi Naredi
qa
“So, whatever is in the Q4 raw material average price will be applied while invoicing in the Q1 of this year.”
Risks & concerns — 1 flagged
Do you see any major impact of potential recession in euro zone and the U.S.
— Hassan M
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Q&A — 10 exchanges
Q
Sir, you are super genius. One my request kindly preserve money for expansion in CAPEX and do not give big dividend because the equity raising cost is too much high in compared to giving the dividend. You have raised the equity by QIB and that is our costlier impact on the company and shareholders need to pay taxes on that. So, our request, please preserve the money for CAPEX expansion in the company. And sir, now much will be net profit in quarter 1 due to increase in raw material. How much will be net profit rise due to raw material increase or finish cost increase in quarter 1? Lakshmana Ja
Ravi Naredi
And one my request, please consider do not raise the equity always. Lakshmana Janumahanti: No, we will take your advice but we also have our own thought process behind that. Yes. Thank you.
Q
Sir, my question was on the lube segment. I missed your comment. You mentioned some new brand has been introduced. If you can share any experience from an existing plant or any new plant has been introduced? And secondly, I saw in your list of plants in PSUs also in the lube segment. Just wanted to know how is their off-take and how much proportion do they contribute to our lube segment? Lakshmana Janumahanti: Your first question is not clear, Mr. Omkar. Regarding the PSU, they have started picking up volumes. BPCL is the only company where we have some reasonable numbers. But apart from PSUs,
Omkar Hadkar
Yes. My first question was, you mentioned some new brand has been introduced in the lube side? Lakshmana Janumahanti: That is a new brand of lubricant companies have introduced about a year ago. And the numbers are shooting up due to various advantages that lube has against ordinary lubricants, especially for some diesel engines and CNG engines. So, that numbers have contributed handsomely in this quarter. We gained major numbers from Gulf, Valvoline, and Shell. These three major companies have adopted our sales, and that is one of the reasons why there is a shoot up in the lubes sales. And in
Q
In the press release, there is a mention about actually major FMCG and food companies opening up the new IML product development activities. Can you elaborate a bit on the statement made in the press release? Lakshmana Janumahanti: Yes. Companies like HUL, P&G, GSK, Arun Ice Cream, Amul, all these companies were generally out of developing any new concepts of packaging in the last two years because of COVID and uncertainties in the market. So, now we have seen that in the last 3, 4 months, some of them have started releasing their clearances to go ahead with the new product development with IM
Bhargav Buddhadev
Secondly, sir, any update on the QR coded IML venture which we were sort of being very optimistic on? Lakshmana Janumahanti: Sorry, what is that? Is there any update on the QR-coded IML piece, where we all excited? Lakshmana Janumahanti: Yes. Yes. On the QR coded IML, now tomorrow, actually, today, our team is with Shell, Bharat Shell. Shell and Valvoline and Gulf are advanced stage. And probably one of them would be introducing very soon is our guess. Castrol is on the little back seat. They are still not allowing people outsiders to come into their plants for trials and setting up systems. B
Q
I just wanted to understand the perspective on the export business, so how much percentage of total revenue denotes to export business? And with this easing out in freight cost and container issues, are we seeing a substantial increase in export business? Lakshmana Janumahanti: The export business is looking up, but the freight cost has still not come to the normal level. What used to be about Rs. 1 lakh, let us say, for Dubai or Middle East, is even now at around Rs. 1.8 lakhs per for a 40 feet container which went up to even Rs. 3 lakhs per container. So, it is hardly around Rs. 1.5 crores i
Hassan M
Okay. Another question is linked to this only. Do you see any major impact of potential recession in euro zone and the U.S. or what you call the mild recession? Lakshmana Janumahanti: See, as of today, we are dependent only on Indian markets and Indian growth story. And as it is our demand growth is coming mainly from replacement demand, replacement of either glass or sachets or even thin containers, which are being getting banned because of the thickness being very low, containers which are used for curds, onetime used containers are really getting banned. So, more and more companies are shif
Q
What would be our volume growth this quarter? Lakshmana Janumahanti: This quarter, the volume growth compared to the previous quarter was 51%. Compare to Q4, it is around 8%. Q4 of last year.
Management
Q
Sir, what kind of capacity addition are we looking for FY '23 and by the CAPEX of Rs. 125 crores overall? Earlier, we had around 44,000 odd metric tons of capacity, right, by the end of FY '22? Lakshmana Janumahanti: Yes. We hope the capacity will be expanded to 54,000 tons with this addition because part of the CAPEX is going towards enhancing our tool room, enhancing our label printing and dye cutting and also adding new land at Daman also. So, however, the capacity will go up from 44,000 tons to 54,000 tons by end of this FY.
Hitesh Taunk
Okay. And sir, we have clocked approximately 9,000 metric tons of capacity for this quarter. This is one of the highest. So, can we take kind of this kind of volume going forward for the rest of the year? Or do you see kind of blip in between because of lower demand in the FMCG or any other segments? Lakshmana Janumahanti: See, typically, the Q1 and Q4, are our best quarters in Mold-Tek because Q2, the monsoon starts heavily, which disrupts transportation and thereby in general consumption patterns and also some of the frozen fruits and ice cream consumptions come down. But again, from Q3, the
Q
Just two questions. Can you give just now in the previous question you answered about how lag is the pass-through that takes place? Can you give us an example like HUL, which is one of your FMCG customer. So, whenever they order for the next repeated purchase, what is the pricing that is getting passed on or sometimes when the prices are going up, how much hit do you take and how much price frequent time frequency you pass it on? That is the first question. Lakshmana Janumahanti: There is a break in your voice, Rahul?
Rahul Maheshwari
Can you tell the time frequency of passing on to the price? Lakshmana Janumahanti: Most of the clients, it is quarterly or monthly. That means some clients like HUL is quarterly. Asian Paints is quarterly. Arun is monthly. So, like that Amul is monthly. So, we have different arrangements with the different clients. And whatever is the price of, let's say, April 1st, will be applicable for one of the clients in May. And for 3 months clients, whatever the average of Jan, Feb, March will be applicable for April, May, June. So, that is how we have agreements with several clients. Small and medium
Q
My first question is on the food and FMCG segment. If I look at last 3 years, right, our contribution from F&F is in the range of 23% to 25%. So, are there any specific challenges in F&F business where we couldn't get a sizable or scalable client, the way we have done in paints, like for example, Asian Paints like 25% of our total sales. Is it something has to do with the industry? Or are there any specific challenges why we couldn't scale up in F&F till last three years? Lakshmana Janumahanti: We are growing rapidly in Food and FMCG. Last year, it was 52% growth. And this quarter, it is 54% Q
Akhil Parekh
My question was more from is there hope for further improvement in EBITDA per kg because given that FNS is almost Rs. 80 to Rs. 90 per kg. So, that can happen only obviously, our food and FMCG contribution tends to probably move from say 25% to 30% or 35%? Lakshmana Janumahanti: I agree with you. The EBITDA margins will improve faster if food and FMCG or tomorrow our IBM, especially pharma, IBM sales start picking up. Faster than other segments. So, would you be able to mention our top 5 plan and probably what roughly they contribute to our total sale? Lakshmana Janumahanti: Yes. Top 5 contrib
Q
So, you mentioned last time that we started to supply our dispensing pumps to Himalaya brand. So, how much you are shipping out there? Lakshmana Janumahanti: No, not much is going to Himalaya. They were still asking some changes and adopting the new pack design they are coming out with. So, the volumes are now not much. Our main suppliers are going to Wipro and another 4, 5 cosmetic companies in Bombay and neighboring areas.
Karan Bhatelia
Okay. And sir, what kind of capacity expansion are we looking at for the Asian Paints plants in Mysore and Vizag? Lakshmana Janumahanti: Mysore and Vizag, we are expanding from around 3,500 tons. Already, we have expanded in last year and kept 5,400 tons per annum at Vizag and 4,000 at Mysore, and 4,800 at Vizag. This will be, again, added probably to 6,300 and 6,000, respectively, by end of this year or probably in August, September itself. Some more machines are arriving. These are brownfield expansion. We'll be adding only machineries, not even molds, not even land and building. Building wa
Q
So, I just want to understand our products. I do not have any questions. So, what is this IBM, EBM and EML? Actually, I have tried to understand but couldn't sir. So, if you can just tide me in your lament like what is the broader difference in these things? Lakshmana Janumahanti: Yes. See, injection molding is a process where containers without neck, that is a big container like a paint container or a packs, these are all made of injection molding process. There, the mold cost is very high. For example, a 20-liter mold cost for jar and cap will be more than Rs. 1 crores, the mold itself. So,
Namish Gupta
And sir, one more thing. And what is this IML labels? Lakshmana Janumahanti: IML label, that is in mold labels. IML means in mold labels. That is a label made premanufactured and by robotics, the label is kept inside the mold by a Robot. And then molt and plastics in a liquid form goes into the mold and it fuses the label to the body. And when the bottle or when the container is taken out, the label is already fused, so the decoration is completed. So, there is no need to do any post operational stickering or printing on the container. So, that is the most advanced technology using robots. We
Speaking time
Moderator
13
Rahul Maheshwari
9
Akhil Parekh
7
Omkar Hadkar
6
Hitesh Taunk
6
Bhargav Buddhadev
5
Hassan M
4
Namish Gupta
4
Ravi Naredi
3
Karan Bhatelia
3
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Opening remarks
Abhishek Navalgund
Thanks, Sanju. Hello, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to Mold-Tek Packaging Limited 1Q FY '23 Earnings Conference Call. We have with us Mr. Lakshmana Rao, the Chairman and Managing Director of the company, along with the entire finance team at Mold-Tek. Without further ado, I would request Lakshman sir to start with his opening comments, post which we'll open the floor for Q&A. Thank you, and over to you, sir. Lakshmana Janumahanti: Dear all participants, thank you very much for your interest in our quarterly results conference. I am very glad to inform you that all segments have done wonderful in this quarter, reaching some historical volumes and that enabled us to achieve 55% volume growth in sales and PAT is up by 80%. Though it is compared with the COVID affected last year quarter, even on comparative the figures of 2018-19 and 2019-20, these numbers have been substantially better. So, the overall top line is more than Rs. 207 crores as
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