MOLD-TEK PACKAGING LIMITED
Know the Company
Established in 1986 at Hyderabad, India, Mold-Tek Packaging Limited (Moldtek) is the leader in rigid plastic packaging industry in the domestic market with over 25% market share. The company is a pioneer in the field of In-Mold label decoration in India and the only packaging company in the world to have an in-house robotic facility.
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The company’s product portfolio includes containers for lubes, paints, fruits, food etc. It enjoys long-standing relationships with marquee clients which includes Unilever, Asian Paints, ITC, Amul, Castrol, BP, Gulf Oil, Indian Oil, Akzonobel, Cadbury, etc. The company has 13 plants and two stock points spread across India with a total installed capacity of around 55,000 TPA.
Key Strengths
Moldtek is the only packaging company in India credited with 100% backwardly integrated facilities producing its own molds, IML labels and even “ROBOTS”. Presently, the company is properly forward integrated as well as outfitted with a world-class Design Studio to support customers to virtually understand the various packaging options available to them.
Moldtek’s production technology is considered one of the finest. The company uses robots that place pre-printed labels in the molds before molding the plastic flow into the mold below the label, thereby fusing the label while molding itself. This method of production gives superior picture quality and everlasting decoration that cannot be removed.
As a pioneer and innovator of pail packaging in India, Moldtek gets major portion of its revenue from paint and lube segments. Currently, paint contributes 50% of the company’s revenue, but paint combined with lubricants, the revenue adds up to nearly 70%. To get its products into a wider application, the company is now strategically entering into four segments of Pharma Packaging. The company expects a shift from the current 70% reliance on paints to a potential 60%, with the remaining 40% coming from pharma and food, within the next three years.
Aggressive Expansions
Moldtek has inaugurated three manufacturing plants each at Panipat (Haryana), Cheyyar (Tamil Nadu) and Sultanpur (Telangana) in the first week of January 2024. While the Panipat facility was inaugurated on January 3, the plants in Tamil Nadu and Telangana were inaugurated on January 6. The company has invested over Rs 100 crore on these plants, which will enhance its capacity to 5,500TPA, taking the total capacity to 54,000 TPA. Revenue contribution from these new plants will start from the first quarter of the next FY onwards. The company is planning a greenfield plant at Mahad in Maharashtra where it has already acquired land for setting up a 1,500 MTA unit for supplies to Birla Paints, which is expected to start by October 2024.
So far, the company has invested about Rs 66 crores in its Sultanpur Plant and further plans to invest Rs 40 crores during the current FY to complete the Pharma Packaging facilities and also integrated printing facility. Thus, in total, the company is planning to invest an amount of around Rs 280 crores during FY 23 and FY24 (two financial years) as against Rs 321 Crores invested during previous 10 years.
Apart from the capacity additions in its various plants and new facilities to cater to clients from various industries, the company is planning to expand in-house recycling capacity to evaluate the possibility of using reprocessed plastic from its operations – mostly set up wastage. After the completion of the current expansion projects, the company plans to enter into other sectors to cater them.
Industry Overview
Packaging is one of the fastest-growing sectors in India supported by rapid growth in consumer markets, especially in processed food, personal care, and pharmaceutical end-user industries. Factors such as rising population, increasing income levels and changing lifestyles are expected to drive consumption across various industries, which all are leading to strong demand for innovative packaging products. The packaging industry has experienced robust growth over the past few decades, driven by demographic factors like increasing working class population, rapid urbanization and awareness of better hygiene.
Financials
For the company, Q2FY24 was a flattish quarter, as its income declined by 7% to Rs 170 crore, as against Rs 183 crore in the same quarter of the previous FY. At the same period, net profit dropped by 19% to Rs 16 crore from Rs 19 crore. The company’s performance was adversely affected due to the flattish performance of all the major paint companies, which is the largest contributor of its total revenue. The company’s OPM also stood flat at 19%.
Moldtek has a strong balance sheet with modest debts, manageable inventory as well as lower receivables. The company uses borrowings very judiciously. The company’s borrowings declined from Rs 108 crore in FY2021 to Rs 77 crore in Sep 2023, even after the investments for capacity expansion. It is expected that, within the next two to three years, most of the company’s borrowings will get wiped off.
Risks
The demand for various types of packaging goods absolutely depends on the growth of the end user industry’s growth. So, any reduction in demand from the end user industry, whether it is paint, lubes, or processed foods, will adversely affect the companies in the packaging industry also, which is a cause of concern.
The company may face strategic risks on changes in consumer preferences, loss of market share on account of increased competition or losing a major client also a concern.
Sector: Industrials
Market Price: Rs. 877.50 as on today
FV: Rs 5/-
Stock Name: Mold-Tek Packaging Ltd
BSE Code: 533080, NSE Code: MOLDTKPAC
Market Cap.: Rs 2917 Cr
Book Value: Rs. 179
Segment: Packaging
Incorporation: 1986
Headquarters: Hyderabad, Telangana
