Mold-Tek Packaging Limited
8,805words
102turns
13analyst exchanges
2executives
Management on call
Manish Mahawar
ANTIQUE STOCK BROKING
J. Lakshmana Rao
CHAIRMAN & MANAGING
Key numbers — 40 extracted
11%
ded monsoon which generally impacts our paint industry demand, we could post a decent growth of 11% in terms of volume growth though in rupee terms it is higher by 14.4%. In volume terms it is arou
14.4%
could post a decent growth of 11% in terms of volume growth though in rupee terms it is higher by 14.4%. In volume terms it is around 11% growth in the sales volume and about similar 11% growth in th
10.5%
e terms it is around 11% growth in the sales volume and about similar 11% growth in the PAT level 10.5% to be precise, the PAT level. The main highlights of this quarter or rather impediments during th
15%
roductivity and sales actually. In fact the demand is still better. We could have easily posted a 15% volume growth had we got the spares and support in time, but unfortunately worldwide there is a s
12%
nately both Telangana, Andhra and even in Daman there is an increase in power cost to the tune of 12% to 15% which on a cost of 7% of our cost of manufacturing has taken a toll of almost 1% in terms
7%
and even in Daman there is an increase in power cost to the tune of 12% to 15% which on a cost of 7% of our cost of manufacturing has taken a toll of almost 1% in terms of increase in cost so these
1%
tune of 12% to 15% which on a cost of 7% of our cost of manufacturing has taken a toll of almost 1% in terms of increase in cost so these two are major and there is of course transport cost increas
Rs.41
d disruptions, the company could post a decent 11% volume growth and maintain an EBITDA of around Rs.41 and hope to see that these hurdles are cleared once the new capacities are added in the month of
Rs.200
nd nearness to the market especially the Pharma market where the value addition is in the tune of Rs.200 to Rs.250 per kg so these are the points where we are concentrating and we wish to penetrate and b
Rs.250
s to the market especially the Pharma market where the value addition is in the tune of Rs.200 to Rs.250 per kg so these are the points where we are concentrating and we wish to penetrate and become a pl
2 million
y keeping Wipro in mind which has a plan to set up a big plant in Hyderabad with a requirement of 2 million to 3 million pumps per month which is now just they are picking up 2 lakhs to 4 lakhs per month s
3 million
ro in mind which has a plan to set up a big plant in Hyderabad with a requirement of 2 million to 3 million pumps per month which is now just they are picking up 2 lakhs to 4 lakhs per month so that sharp
Guidance — 20 items
“Even machines which are supposed to be delivered in July and August are postponed to November and even December, but now we are taking trials of those machines so hopefully by the end of this month, November we will be having the printing capacities added which would be able to provide us the necessary labels in time to cater to the growing demand.”
“So in spite of these three cost or disruptions I would say cost and disruptions, the company could post a decent 11% volume growth and maintain an EBITDA of around Rs.41 and hope to see that these hurdles are cleared once the new capacities are added in the month of November and December and look forward to a stronger performance in the coming quarters.”
“Hyderabad is kind of a hub I would say second or third hub in the country and there is a huge expansion of 16,000 acres of land is being allotted to various multinational companies including Indian companies to manufacture pharmaceutical products here in Hyderabad and those land allocations started in October this year and hopefully within the next two years those plants will be up and running and apart from that there is a huge value addition in these products.”
“In the case of Valvoline we already submitted the caps and clear coated jars and they will be able to come out with a proposal by the end of this month.”
“ABG has given a letter of intent for us to go ahead with setting up a plant at Panipat and their initial projection for the year two is around 2000 tonnes per annum.”
“More details I cannot share because they are also going with another supplier so they will be having two suppliers at each plant.”
“By October 2023-2024 that is October 2023 we are expected to start commercials of our production there and the numbers will stabilize in the year 2024-2025 and apart from setting up the plant only for ABG, we are also planning to have our food and FMCG product manufacturing in Panipat also which will be able to cater to the Northern clients who are huge in size like say Baddi very near point to Panipat.”
“It is close to 300 kilometers, 250 kilometers to 300 kilometers from Panipat so we will be able to cater to the fillings companies in and across the North region for our entire dairy products, food products, ice cream products, and packaging products which will be manufactured here in Hyderabad so those facilities also will be set up in Panipat by end of the calendar year 2023.”
“If it is successful the machine will be listed right in December itself so that will further enhance our label printing capacity and take care of our next three to four years of capacity expansions so that is one of the challenge we are having, machine supply in time.”
“May be there are asking few weeks here and there but probably they will be in time hopefully.”
Risks & concerns — 10 flagged
In fact there was some problem in their supply chain where there was some proved cases of adulteration so there is a concern now in their minds and they have come forward now to take it little actively so hopefully in this quarter or at least end of this year we may have one of these players starting into QR code.
— J. Lakshmana Rao
If it is successful the machine will be listed right in December itself so that will further enhance our label printing capacity and take care of our next three to four years of capacity expansions so that is one of the challenge we are having, machine supply in time.
— J. Lakshmana Rao
Another idea in the long term if not immediately may be two to three years down the line is to even have the IBM facilities in those plants so that our product range is wider and our risk is mitigated.
— J. Lakshmana Rao
Typically Q2 and Q3 quarters are weak because in the Q2 there will be heavy rains.
— J. Lakshmana Rao
Got it but from a demand standpoint customers across the three segments we are not seeing any slowdown?
— Vikram H
I had this question on our lube business so even though we had strong growth year over year sequentially there is quite a sharp decline from Q1 to Q2 from over 2600 tonnes to less than 2000 tonnes so what lead to this decline in volume?
— Kuvam Chugh
Typically Q1 to Q2 there will be a drop in lube consumption all over the country because the movement of goods slowed down in monsoons and number of miles a truck clocks in a day comes down due to monsoon and disruptions on the travel so generally Q2 and Q3 are weak for lubricants.
— J. Lakshmana Rao
What 27% growth I projected or what we achieved whether it is 30% growth in FY2022 over the Q2 of last year so on Q1 it is very difficult to reach such numbers because in Q1 we hit Rs.55 Crores and now it is Rs.40 Crores in the Q2 so that is almost a 25% drop which is normal in our sales trend.
— J. Lakshmana Rao
Another 20% to 30% of them will drag on it for a while but certainly may be in six months to one year time they will definitely cover up those costs.
— J. Lakshmana Rao
There is a revived enquiry from Castrol because they have found some issues in their supply chain related to tampering and misuse of containers but they are asking for a complete solution including the cap or spout to be QR coded which is a little challenge we are trying to address.
— J. Lakshmana Rao
Q&A — 13 exchanges
Q
I have two questions for you. My first question is with respect to injection blow molding IBM business? Now the IBM business is a very competitive business with a lot of players in India? What special advantage does Mold-Tek have in entering the business? Unlike IML it is a very competitive business? Also the Pharma companies are currently buying their packing material from other IBM suppliers? Why should they come to us? Why should they shift their supplies to us so what advantage do we have in entering the IBM business and why should the Pharma companies buy from us that is my first question
J. Lakshmana Rao
There are quite a few players. It is not that there are very huge players. Only few to my knowledge are CG, Pravesha, Grasimar and Gopal Das. The area where we are focusing is not only just in cosmetics, dairy and food and FMCG but also in pharmaceutical export market. In this market majority of the manufacturers of pharmaceuticals are located in and around Hyderabad. Hyderabad is kind of a hub I would say second or third hub in the country and there is a huge expansion of 16,000 acres of land is being allotted to various multinational companies including Indian companies to manufacture pharma
Q
Sir any updates on the QR code type any more info?
J. Lakshmana Rao
Yes we have been asked by both Valvoline and Castrol for lines trials. In the case of Valvoline we already submitted the caps and clear coated jars and they will be able to come out with a proposal by the end of this month. In the case of Castrol from the top management there is a request for us to prove the concept online. Those products also are being produced. They wanted a cap to be having the clear coat not only on the jar so we are getting that work done so that they will want to link both jar and cap. In fact there was some problem in their supply chain where there was some proved cases
Q
Sir just a couple of questions. One on a bit more of a strategic side and I believe our total volume is going up from let us say 44,000 tonnes at the end of last year to about 70,000 tonnes by the end of next year so out of this incremental 25,000 to 26,000 tonnes that we are adding could you classify as to what would go towards thin wall and what would towards paints and lubes just an overall classification if you have done something on this?
J. Lakshmana Rao
Yes I think we have already put up the slide in the BSE website. While thin wall is around 47000 tonnes, bulk packs about 2600 tonnes, IBM about 2000 tonnes so these are the plans for this year that means about 11,5000 tonnes will be added during this year in these three areas thin wall, bulk packs and IBM and coming to the next year we will have that Panipat plant of IBG to be set up and we are also in discussion with them for another plant. I cannot disclose the quantities because we have not received the LY so if that happens that plant also needs to be set up before the end of 2023-2024 so
Q
Thank you for the opportunity. Sir if you can just help us with the volume and value numbers for IML and non IML segment?
J. Lakshmana Rao
IML and non IML segments as I told you are more or less stable. Last Q2 it was 58.7% for all the labeled containers. Now it is 62.5% which is also similar to Q1 which was 61.8% so there is a marginal improvement in the total IML and labeled containers from 58.7% to 62.5%. And the value wise? This was volume? In terms of value wise from 62.3% to 66.6%. Sir if you can just go ahead on value wise numbers for three segments paints, lubricants and FNF? Yes paints has dipped from 59% last year to 53.8% but lubes have gone up from 19.3% to 22% and food and QPACK that both come under food and FMCG has
Q
A couple of questions from my side so my first question is on the debtors front so in FY2021 our debtors stood at around Rs.90 Crores? That went up all the way to Rs.143 Crores in FY2022 and in H1 FY2023 it has again gone up to Rs.159 Crores so why are we seeing this rampant increase in debtors?
J. Lakshmana Rao
See debtors increase is related to sales as you all know and if you see two years ago the raw material price was low and the sales number as per se was around Rs.400 odd Crores. Today our sales number for the first half itself is close to Rs.400 Crores. For the full year it may be Rs.780 Crores to Rs.800 Crores so when you have doubled your sales automatically debtor levels also will go up that is one reason and one of the other reasons for the increase in debtors is though we are restricting all the new clients to either advanced payment or 30 days credit older clients like Asian Paints and o
Q
Good evening Mr. Rao and thank you for the opportunity. So first of all Sir given that we are already mid way through the Q3 any sense across your various business segments in terms of demand?
J. Lakshmana Rao
Demand wise touchwood we are on a pretty strong wicket. The problems of printing labels and getting the labels in time is still continuing till October, but situation might improve from November because our machine is under trials now and probably it will reach our site in the second half or end of November so from then things will improve because there are not much depth. Typically Q2 and Q3 quarters are weak because in the Q2 there will be heavy rains. Movement of goods and painting activity comes down and even consumption of frozen and dairy foods comes down in the Q2 and Q3 though the fest
Q
Good afternoon. Thank you for taking my question. I had this question on our lube business so even though we had strong growth year over year sequentially there is quite a sharp decline from Q1 to Q2 from over 2600 tonnes to less than 2000 tonnes so what lead to this decline in volume?
J. Lakshmana Rao
Typically Q1 to Q2 there will be a drop in lube consumption all over the country because the movement of goods slowed down in monsoons and number of miles a truck clocks in a day comes down due to monsoon and disruptions on the travel so generally Q2 and Q3 are weak for lubricants. What 27% growth I projected or what we achieved whether it is 30% growth in FY2022 over the Q2 of last year so on Q1 it is very difficult to reach such numbers because in Q1 we hit Rs.55 Crores and now it is Rs.40 Crores in the Q2 so that is almost a 25% drop which is normal in our sales trend. That is why typically
Q
Good evening Sir. I just had one question as you mentioned about the volume growth and plus the plans which would be coming towards the Pharma and the IBM can you also give some color on the EBITDA per kg how it will scale up looking from a two to three years perspective from currently?
J. Lakshmana Rao
From the basic EBITDA impact as I mentioned in my note to BSE and NSE is that maintenance and breakdowns in our printing and printing capacity could not be ramped up in time. We have incurred additional costs in procuring those labels from outside with higher price and lower quality which has impacted our output reasonably not very badly but certainly about the tune of around Rs.1 Crores to Rs.1.5 Crores additional cost has been incurred and there is an increase in the power cost in all three states where major shares where we are operating that is Daman, Hyderabad and Andhra Pradesh. These th
Q
So my question the first one is regarding the export orders so can you brief on quantity involved in export orders, I can see from the quarterly presentation so what are the margins for the shipping costs?
J. Lakshmana Rao
Shipping costs are now under control not only for Middle East but also for the USA and I am glad to inform you though they are not very huge orders beginning has taken place with our exports to USA. The numbers are slowly scaling up. I do not have the exact revenue number but I think in the region of about this year we might do at least Rs.2 Crores to Rs.3 Crores or may be Rs.3 Crores to Rs.4 Crores worth of exports to USA. That is for various food products and even restaurant packs in the Indian restaurants mainly and also may be other stores. With this entry we are even planning some BD effo
Q
Good afternoon Sir. Is there any update regarding QR coded IML? Have any clients launched it from the market?
J. Lakshmana Rao
Yes I explained about QR coded IML just a few minutes ago. There is a revived enquiry from Castrol because they have found some issues in their supply chain related to tampering and misuse of containers but they are asking for a complete solution including the cap or spout to be QR coded which is a little challenge we are trying to address. Meanwhile Valvoline is also taking steps in the direction but concrete things have not yet happened. Hopefully in this quarter we will be able to move a little bit ahead. My next question is regarding IBM Pharma? Is it also possible to manufacture Pharma bo
Q
Good afternoon. Just one more question from me, could you share the volume breakup by paints, lubes and FMCG?
J. Lakshmana Rao
Yes volume breakup in paint is 4850 tonnes, lube is about 2000 tonnes and 1520 tonnes in food and FMCG including Qpak. Okay that is very helpful. Thank you.
Q
Thank you for the followup. Sir if I look at the realizations for the food and FMCG they have rather been flattish for the quarter or any specific reason for the same?
J. Lakshmana Rao
That is what I mentioned to you. In the note also we have given to BSE and NSE that due to the purchase of IML labels from outside we have incurred costs in this quarter particularly because maintenance space especially electronic spares and semiconductor spares are not coming in time leading to longer breakdown of machines which pushed us to buy the labels from outside at a higher cost. It is not only higher cost with lower quality and higher rejections which has caused stagnation of EBITDA in this quarter and even we lost some sale to the tune of 3% to 4%. So the additional cost incurred is
Q
Thank you very much for all the participants in taking interest in our company’s Q2 performance and thanks for the interest shown and the time spent. I also thank Manish of Antique and their coordinator for their time and opportunity. Wish you all a good day and enjoy the evening. Thanks and bye.
Opening remarks
Manish Mahawar
Thank you Faizan. On behalf of Antique Stock Broking, I would like to welcome all the participants on the call of Mold-Tek Packaging. From the management, we have Mr. J. Lakshmana Rao, Chairman and Managing Director on the call. Now, I would like to hand over the call to Mr. Rao for opening remarks. Post which, we will open the floor for Q&A. Thank you and over to you Mr. Rao!
J. Lakshmana Rao
Thanks Manish and thank you all participants who are interested in our company’s performance. I am glad to inform you that in spite of challenging times and extended monsoon which generally impacts our paint industry demand, we could post a decent growth of 11% in terms of volume growth though in rupee terms it is higher by 14.4%. In volume terms it is around 11% growth in the sales volume and about similar 11% growth in the PAT level 10.5% to be precise, the PAT level. The main highlights of this quarter or rather impediments during the quarter were maintenance costs have shot up because semiconductor shortage in the automated machines like printing lines and to some extent robotic and their non availability has lead to loss in productivity and sales actually. In fact the demand is still better. We could have easily posted a 15% volume growth had we got the spares and support in time, but unfortunately worldwide there is a shortage of semiconductors and electronic parts, spare parts o