Result Update: Mold-Tek Packaging Ltd - BUY - TP Rs.351 - Kotak

MTPL Q1FY19 PAT was in-line with estimates, but EBITDA was above estimates, due to higher realisation. Despite the increase in raw materials costs, margin during the quarter remained flat QoQ, backed by higher IML sales and higher realisation. MTPL is on its way of sustainable growth story, backed by capacity addition at Mysuru, Vizag, greenfield plant at Hyderabad for Food and FMCG, ramp-up at RAK, increasing share of IML and strong clientele.

Key Highlights

- The recovery in edible oil is visible, with the acceptance of Packs of S.l5 and 17 liters in Edible oil and ghee segments. Management is planning to launch a small (50ml to 1000 ml) retail pack from Oct'18.

- The contribution from IML continued to remain strong at 61.7% in value terms in 1QFY19 and expect the momentum to continue.

- RAK operations will take some more time to break-even, as various products are under development stage and the management is also realigning the product mix in favor of F&F. The current utilisation stands at 30-35%.

Valuation & outlook

- Rising sales of IML in the revenue, has helped the company to report improvement in EBITDA/kg to Rs32.6/kg (standalone) in 1QFY19. We expect EBITDA/kg to remain strong in the next two years, driven by higher contribution from the F&F segment. Increasing share of IML in the overall revenue mix and higher visibility of volume augurs well for the company. Given the company's strong tool room capability and structural improvement in business mix supports our positive view on the MTPL. At CMP, the stock is trading at 20.9x/18.3x FY19E/FY20E earnings, which in our view is attractive. We reiterate BUY with an unchanged target price of Rs351.

Shares of Mold-Tek Packaging Limited was last trading in BSE at Rs.302.45 as compared to the previous close of Rs. 304.4. The total number of shares traded during the day was 161 in over 12 trades.

The stock hit an intraday high of Rs. 303 and intraday low of 300.85. The net turnover during the day was Rs. 48619.

Source : Equity Bulls

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