PL Stock Report: Mold-tek Packaging (MTEP IN) - Q2FY24 Result Update – Worst seems over, expect recovery from 2H - HOLD

Mold-tek Packaging (MTEP IN) - Amnish Aggarwal - Head of Research, Prabhudas Lilladher Pvt Ltd.

Rating: HOLD | CMP: Rs882 | TP: Rs918

Q2FY24 Result Update – Worst seems over, expect recovery from 2H

Quick Pointers:

• Volumes up 5%, Paints volumes decline 8%, while Lubes/F&F Volumes up 8.1%/ ~40%.
• 2Q24 EBITDA per kg at Rs37.2, likely to move to Rs41/42 per kg in FY24/25.

We are cutting our FY24/25 EPS estimates by 17.1%/9.4% and target price to Rs918 (Rs956 earlier) as we reduce volumes & EBITDA/Kg estimates (Rs37/41 per kg) given mixed outlook in near term. MTEP’s 2Q volumes were impacted due to 1) impact of rainfall on ice cream & dairy segment and 2) lower realizations due to softer RM and 3) late festival season impact on paints industry. MTEP expects 2H24 volumes to grow in mid- teens led by close to double digit growth in paints industry, high single digit growth in Lubes, pick up in F&F segment and benefits of pharma entry and supply to ABG group in Paints.

MTEP’s long term prospects remain promising given 1) new units in Panipat & Cheyyar (4000 ton capacity) for supply to Grasim by FY25 2) Start of pharma division by Q4 with superior mix 3) mix improvement with higher growth in F&F segment with sultanpur plant commencing operations. 4) addition of new customer/orders. We estimate 15.7% decline in EPS in FY24 but 35% CAGR over FY24-26. MTEP is currently trading at 32.2x FY25EPS which limits scope for further re-rating. Retain ‘Hold’.

Sales down 6.7%, Volumes grow by 5%: Revenues declined by 6.7% YoY to Rs1.7bn (PLe: Rs1.9bn). Overall volumes up by 5%. Gross margins expanded by 200bps YoY to 42.9% (Ple: 42.5%). EBITDA declined by 5.6% YoY to Rs321mn (PLe: Rs361mn); Margins expanded by 21bps YoY to 18.9% (PLe:19.2%). Adj PAT declined by 19.2% YoY to Rs157mn (PLe: Rs189mn)

Concall Takeaways:1) Volume for Paints/Lubes/F&F share at 50.8%/24.6%/24.6% while value at 46.6%/22.5%/30.9% 2) Paint business volumes declined by 8% amid lower industrial demand 3) Paint business to see pick up in volumes (4000 MT) with Grasim entry from FY25. 4) MTEP is bullish on Pharma segment for the next 5-10 year post its entry in 4 segments (OTC, Effervescent tubes, Canisters and Tablet packs) & higher EBITDA/kg of Rs150-2005 5)F&F volumes grew by 15% as adverse rains impacted ice creams & dairy consumption, further expect 20-25% volume growth over FY24-FY26 6)F&F is expected to grow by~14% in 2HFY24 7) Square pack awarded patent which will aide volume growth of 30% over long term 8)Company expects FY24 volume growth at 8-9% 9) Panipat and Cheyyar plant to be ready for production by 4QFY24. Received land clearance for Mahad Plant 10) 11) Export is contributing to 1% of sales & is expected to reach 3%-5% by FY26 12) Satara plant utilization is at 60% as of 2QFY24 13) Expect EBITDA/kg of Rs40-41/42+ per kg in FY24/25 14) EBITDA declined in 2Q24 amid increase in manpower costs by 15% 15) Capex for FY24/ FY25 budgeted at 1.2bn