Mold-Tek Packaging - Q2FY18 Result Update - Religare

Better growth ahead

Mold-Tek Packaging's Consolidated Revenue and Net profit increased at 3.4% and 8.4% respectively on yoy basis. The company reported subdued quarter due to lacklustre demand mainly from paint and lubricant segments on account of GST transition. However, revenue from Food and FMCG segment remained strong with addition of new products and clients. We expect demand recovery in paint and lube segments from Q3FY18E, with normalization in demand post GST. Recommend Buy.

- Consolidated Net revenue for Q2FY18 increased by 3.4% to Rs. 78.8 cr compared to Rs. 76.2 cr led by growth in FMCG segment, which jumped to 15.5% of the overall sales from ~5% in the last financial year. Though paint (58% of sales) and lubricant (26.5% of sales) segments were sluggish on account of GST implementation, we expect both the segments to revive from Q3FY18E. Also sales from its Dubai facility increased by 15% from Rs. 1.9 cr to Rs. 2.1 cr qoq.

- Operational profit increased by 7.5% to Rs. 14 cr against Rs. 13 cr in the same quarter last fiscal led by fall in other expenses (down 9.9% yoy) and lower material cost (up 1.3% yoy). Operational margin improved to 17.7% compared to 17% in Q2FY17, as share of IML increased from 39.4% in Q2FY17 to 49% in Q2FY18 in volume terms.

- With improvement in operational efficiency and rising share of IML in total revenue, Consolidated Net profit increased to Rs. 7.1 cr compared to Rs. 6.6 cr on yoy basis, up 8.4. We expect PAT margin to improve in FY18-20E with rising share of IML, which currently stands close to ~49% in volume terms.

Outlook & Valuation:

After subdued growth in paint and lubes segments post GST, normalization in sales has been seen from September onwards. The construction of two new plants for Asian Paint at Mysore and Vizag is on track and commercial production from the same will start in the next fiscal. It is also expanding its Food and FMCG capacity at Hyderabad facility from 1,400 tons to 3,000 tons with an investment of Rs. 25 cr. We expect strong sales to continue from Food and FMCG segment, while paint and lubricant to revive from Q3FY18E. Also Dubai facility is getting good orders from many clients and is expected to break even in Q4FY18E. Considering improving demand outlook, strong balance sheet, robust return ratios, low debt and proactive management, we recommend a Buy on the stock with a target of Rs. 374.

Shares of Mold-Tek Packaging Limited was last trading in BSE at Rs.309.6 as compared to the previous close of Rs. 315.35. The total number of shares traded during the day was 1825 in over 71 trades.

The stock hit an intraday high of Rs. 317 and intraday low of 309.25. The net turnover during the day was Rs. 573408.

Source : Equity Bulls

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