moldtek analyst ppt121214
DESCRIPTION
Company PresentationTRANSCRIPT
MOLD TEK PACKAGING LIMITED
Reaching new “labels” of growth
Established in 1985 by J. Lakshmana Rao, a first generation entrepreneur; headquartered in Hyderabad & part of Mold–Tek Group which has interests in structural engineering & KPO (Mold Tek Technologies)
Leading domestic player in rigid plastic packaging (pails, thin wall containers, etc); business comprises of Non-IML (screen printing, heat transfer labels) & IML business in paints, lube & food segments
Recognized for several innovations in the industry; pioneered the concept of IML (In Mould Labelling) in India- the only integrated player in the world ; IML offers major advantages over conventional decoration methods
Blue chip end users ---Asian Paints, Castrol, Akzo Nobel, Kansai Nerolac, Amul, HUL, Shell, etc ; new customer wins an ongoing process (~81 small & medium clients added over last 3)
7 manufacturing units - 4 near Hyderabad, 1 each at Daman, Hosur & Satara (all ISO & FSSC certified) ; state-of-the-art tool room to produce world class moulds & robots
Listed since 1993 (BSE); professionally run company employing ~ 600 people ; strong earnings growth expected with increase in IML revenues in the medium term
Figs in Rs mn (unless otherwise mentioned ) Audited Projected
Particulars FY2012 FY2013 FY2014 FY2015E FY2016E FY2017E
Net Sales 1,751.4 1,918.9 2,551.2 3,210.0 4,140.0 5,150.0
EBITDA 211.7 200.4 295.1 421.0 567.3 747.5
PBT 129.8 88.1 138.8 239.0 375.3 547.0
PAT 93.3 57.8 90.7 157.7 247.7 361.0
EPS (Rs.) 8.3 5.1 8.1 14.0 22.0 32.1
Key Ratios
EBITDA Margin (%) 12.1% 10.4% 11.6% 13.1% 13.7% 14.5%
PAT Margin (%) 5.3% 3.0% 3.6% 4.9% 6.0% 7.0%
Net Debt / Equity (X) 1.15 1.35 1.26 1.05 0.86 0.65
RoCE 21.3% 14.6% 19.6% 26.3% 31.7% 36.1%
RoE 24.8% 12.1% 17.9% 27.3% 34.4% 38.1%
Domestic plastic processing industry
~Rs 850 bn size growing @ 15% CAGR; ~5.3mn MT of raw material processed per annum
Flexible Packaging (pouches, wraps, polybags, etc) ~Rs 510 bn size growing @ 20% CAGR
Rigid Packaging (bottles, jars, pails, etc) ~Rs 210 bn size growing @ 10% CAGR
Rigid packaging in injection moulding requires more intricate technical excellence compared to flexible packs ; it offers a safe mode of preserving liquid, powdered or granulated contents against breakage & pulverization along with tamper-evident properties with various resealing options
J. Laxmana Rao (Chairman & Managing Director); age ~ 54 years
B.Tech (Sri Venkateswara University), MBA (IIM-B) ; has earlier worked in new product development at Nagarjuna Steels Ltd.
A.Subrahmanyam (Deputy Managing Director); age ~ 57 years
B.Tech (REC- Suratkal), has earlier worked with Nizam Sugars, ACC; vast experience in mould design & development
P. Venkateswara Rao (Deputy Managing Director); age ~ 54 years
Post graduate in materials management
Stock Points
Plant locations
Unit Capacity (MT p.a.) Location
I 8750 Annaram (near Hyderabad)
II 3500 Quthbullapur (near Hyderabad)
III 7500 Daman
IV 1500 Alinagar (near Hyderabad)
V 750 Hosur
VII 3000 Satara
Unit VI at Quthbullapur (near Hyderabad) is used for manufacturing labels for other locations (capacity ~5mn sq mt per annum)
Processing capacity ~ 25,000MT* per year with over 55 injection moulding machines (Ferromatik, Engel, etc)
Multi-locational presence for cost efficiency & optimizing logistics
*Present capacity utilization ~70% ; maximum ~ 85% after factoring in mould changeover, maintenance time, etc
By business segment* By clientele
Share of Non-IML revenues gradually declining in favour of IML ; top 5 customers contribute ~ 50% of revenues
*Export revenues ~1% of topline
Volume share in annual demand of key customers
Share of business steadily increasing every year as more SKUs shift to IML
Asian Paints 25%Castrol 95%Kansai Nerolac 55%Akzo Nobel 30%
Indiastar 2012 National Award for Excellence in Packaging (Castrol CRB Turbo with IML)
Old Spout Anti-counterfeit Spout
Anti-counterfeit pail lid comes with a tear-way seal making the lid unusable once opened ; minimizes leakage & improves dispensability of the liquid
Best SME of the Year & Tech Savvy SME of the Year 2012-13 at the prestigious ICICI-CNBC TV18 & CRISIL Emerging –SME India Awards
Screen Printing Stickering /Self Adhesive Label
In-Mould LabellingHeat Transfer Label (HTL)
Raw material –usually Polypropylene co-polymer (PPCP) from Reliance Injection Moulding
Injection Moulding with robotic facility
Screen Printing
HTL Wrapping
Shrink Wrapping
Quality check
Handle fixing & packaging
Dispatching
World class clean rooms & hands free production techniques (esp. in IML) leading to negligible rejections Embedded price variation clause takes care of fluctuations in PPCP rates
Of the non IML sales ~90% of revenues accrue from screen printing ; pails for only lube & paint customers ; commenced HTL for Asian Paints at Satara
Screen printing has lowest per impression cost which is increasing gradually ; preferred for up to 5 colours as high drying time required for each
Mold-Tek provides 100% virgin, food -grade material & has achieved one of the lowest production cycle time ; in-house developed automatic screen printing machines
Offerings range from 1kg to 1000 ml containers; volumes mostly generated from 7.5 litre SKU ; Hi Tech Plast , a key competitor , in this space
Revenues (Rs million)
~79% of revenues ; ~16% CAGR over last 3 years ; average EBITDA margin ~10%
In-Mould Labelling (IML) is a decoration technique that involves robotic label feeder placing pre-printed labels inside the mould & fusing them directly to the container ; this recent development in the packaging industry in developed markets has been introduced in India by Mold-Tek in 2011
Conventional decoration
Photographic quality with no limitation on graphics & complete container coverage Most hygienic as involves direct-to-fill operations with complete automation
Usage should grow exponentially with opening up of modern-day retail trade ; consumption in EU has surpassed 12 bn containers per annum – India only scratching the surface; applications include paints, lubricants, dairy products, toiletries, beverages, biscuits, cosmetics, food supplements, cooking oil,etc
In-Mould Labelling
Minimum linear gap required from the upper & lower ends of pail curves in decoration methods like screen printing & also labels cannot be joined continuously ; no such constraints in IML
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Requires at least ~Rs 40-50 mn investment per SKU (sans land & other overheads)
Mold-Tek’s cost advantage offers an opportunity to scale up export business Technical competence like minimizing rejections, lowering cycle time is extremely critical ;
closest comparable peer at 28 seconds is incurring loss against Mold-Tek’s average of 20 seconds
Mold-Tek is the only injection moulding company in the world with integrated facilities to manufacture container moulds, robots & IML labels thereby offering cost effective solutions
High investments for own moulds & robots
Pricier imported labels
Multi-locational units to minimize logistics ; minimum volumes to sustain operations
Melt Flow Index (MFI) , an important parameter for rigid packaging , implies the rate at which the polymer can melt.& accordingly determines the grade of material that needs to be used. Higher the MFI, the lower would be the container wall thickness & packaging cost more dearer & vice-versa.
State-of-the art in-house tool room with latest CNCs, jig boring & sparking machines from USA, Germany supported by CAD/CAM facilities ; replacement cost ~Rs 500+ mn ; customized & faster mould development by experienced team of engineers
Uses hot runner & berylium copper inserts to make world class multi-cavity hot runner moulds & robots at a fraction of imported costs ; reduced mould downtime & nil supply blackouts
Moulds form ~10% of Gross Block & are changed as per requirements ; many customers co-investing in developing new moulds
Installed necessary facilities in 2012 to manufacture IML compatible labels first time in India ; infrastructure includes 9 colour rotogravure machine & Schober label cutting machines
BOPP films rolls imported; in-house research on various films & inks resulted in labels that sustain all-weather conditions (better heat, moisture & chemical resistance )
Cost of developing them in-house ≤ 50% of price of imported finished labels
Higher setting time for printing machines (maximum ~3 jobs per day) ; minimum stock of labels (~3 months) required based on negotiated volumes
Initially imported 2 robots from Taiwan in 2011 ; reverse engineered them –now has made over 25 static charged robots in-house (only packaging company globally doing this)
Cost of developing them ≤ 50% of price of an imported robot (Rs 13 lakh , for say 2 cavity robot against Rs 35 lakh imported version)
Capable of producing 8 cavity label feeders ; comes with added innovations lie vertical reach, etc ; option to change robot configuration to improve efficiency
Only for lubricant & paint industries ; ~ 72% revenues from the former with ~70% share in overall industry volumes therein
Offerings include 1 litre to 20 litre emulsion packs ; 5 litre to 20 litre lubricant spouts ; better brand visibility to customers
Captive units to cater to demand of key customers (Asian Paints at Satara , planned for Akzo Nobel, etc) ; conversion of new SKUs to also drive growth
~17% of revenues ; ~40% CAGR over last 3 years ; average EBITDA margin ~15%
Pioneered the concept of IML thin-walled containers for food /FMCG segment using 8 cavity hot runner moulds
100 ml to 500 ml sizes in rotolock packs ; prevents any contamination & preserves aroma
Expected to grow substantially on low base (new customer additions like Heinz, Cadburys) ; overall profitability to improve (commands highest EBITDA margins)
Revenues (Rs million) ~3% of revenues ; ~16% CAGR over last 3 years ; average EBITDA margin ~25%
Illustrated for 20 litre lube pail Rs
Maximum Retail Price (MRP) 2300
Pail with non- IML decoration 155
% of MRP 6.7%
Pail with IML 180
% of MRP 7.8%
Despite the cost differential due to higher label prices , IML decoration accounts for 7-9 % of MRP (norm for packaging costs in the industry)
Conventional methods like screen printing suffer from inherent drawbacks like higher area requirements, more labour intensive process & very high drying time for each colour. With both manpower & space getting dearer , the per impression cost gap with IML is narrowing ……….a potent reason for more SKUs (not just premium grades) to convert to IML
Domestic players like Jyoti Plastics ,etc have been doing only lid IML decoration. Among global players, Jokey Plastik GmbH has a similar business model as Mold Tek. Founded in 1989, the Group employs ~ 1400 personnel across 14 plants globally & is known to have reported US$122mn topline in CY2013 .
includes 65% as material cost (assuming 950 gm of polymer required to mould the container) & 5% as label cost
Plant in North India for Akzo Nobel & other companies (~Rs 100 mn outlay)
Expansion of thin-walled container facility (Unit 1) for needs of food/FMCG customers (~Rs 50 mn)
Tool room expansion & modernization to produce more complex moulds (~Rs 50 mn)
Unit at Dubai (first overseas manufacturing foray) to cater to the demand of IML containers for food segment in Middle East (~Rs 100 mn)
Scope to foray into high-end flexible packaging labels
Inorganic growth options (acquisition of underutilized assets )
Increase share of food IML revenues; convert more clients of pails to adopt IML decoration
Rs. in million FY2012 FY2013 FY2014
Net Sales 1751.4 1918.9 2551.2Material cost 1005.5 1067.2 1431.9
% of Net Sales 57.4% 55.6% 56.1%Packing Materials 31.7 36.3 43.2
% of Net Sales 1.8% 1.9% 1.7%Handles 60.7 64.8 71.2
% of Net Sales 3.5% 3.4% 2.8%Printing Materials 34.6 55.8 90.1
% of Net Sales 2.0% 2.9% 3.5%Pigments 31.3 46.7 46.3
% of Net Sales 1.8% 2.4% 1.8%Staff Cost 134.7 153.2 196.7
% of Net Sales 7.7% 8.0% 7.7%Selling & Distribution Expenses 137.8 147.7 187.8
% of Net Sales 7.9% 7.7% 7.4%Power & Fuel 54.7 88.3 92.7
% of Net Sales 3.1% 4.6% 3.6%Other Expenses 48.7 58.5 96.2
% of Net Sales 2.8% 3.0% 3.8%Operating Profit 211.7 200.4 295.1Other Income 2.2 2.5 5.2PBIDT 213.9 202.9 300.3Depreciation & Amortization 44.1 54.6 69.6PBIT 169.8 148.3 230.7Interest 38.0 57.9 84.0PBT & Extraordinary Items 131.8 90.4 146.7Extraordinary Items (Gain)/Loss 0.5 0.0 6.0Prior Period (Income)/Loss 1.5 2.3 1.9PBT 129.8 88.1 138.8Current Tax 36.5 18.1 43.6Deferred Tax 0.0 12.2 4.5Net Profit 93.3 57.8 90.7
Rs. in million FY2012 FY2013 FY2014Equity Share Capital 112.2 112.5 112.8Reserves & Surplus 351.1 378.4 412.2Secured Loans 429.6 664.8 655.1Unsecured Loans 107.2 2.3 13.8Deferred Tax - 12.2 43.7Total Liabilities 1000.1 1170.2 1237.6Net Block 468.5 702.8 720.4Capital Work in Progress 108.3 25.9 24.9Investments 31.6 31.6 31.6Current Assets, Loans & Advances
Inventories 202.5 236.1 281.4Sundry Debtors 286.2 350.3 422.0
Cash and Bank Balance 2.8 4.3 6.0Loans and Advances 102.6 90.6 98.3Other Current Assets 2.8 4.8 71.3
596.9 686.1 879.0Less: Current Liab. & Prov. 205.2 276.2 418.3Net Current Assets 391.7 409.9 460.7Miscellaneous Expenses not w/o - - -Total Assets 1000.1 1170.2 1237.6Net Worth 463.3 490.9 525.0Capital Employed 891.8 1144.3 1212.7
Rs. in mn FY2012 FY2013 FY2014PBT 129.8 88.1 138.8+Depreciation & Amortization 44.1 54.6 69.6-Change in Working Cap 80.8 16.7 49.1-Tax 36.5 30.3 48.1=Operating Cash Flow 56.6 95.7 111.2
-Capital Expenditure 217.9 206.5 86.2-Change in Investments 0.9 0.0 0.0=Free Cash Flow -162.2 -110.8 25.0
+Increase in Equity & Reserves 109.0 3.0 -16.4+Increase in Debt 120.6 142.5 33.3-Dividend 66.2 33.2 40.2 =Net Cash Flow 1.2 1.5 1.7
Opening Net Cash 1.6 2.8 4.3Closing Net Cash 2.8 4.3 6.0
*The damage occurred due to fire accident in FY2013 at Daman is Rs 70 mn against which the Company has received Rs 62.5 mn from the insurance company .After considering the net realizable salvage value of Rs 1.5 mn , the resulting loss of Rs 60 mn has been disclosed as an extraordinary item in FY2014.
Profitability & Return Ratios FY2012 FY2013 FY2014Operating Profit Margin (%) 12.1% 10.4% 11.6%Net Profit Margin (%) 5.3% 3.0% 3.6%ROCE (%) 21.3% 14.6% 19.6%RONW (%) 24.8% 12.1% 17.9%Other Ratios Net Debt/Equity (x) 1.15 1.35 1.26Fixed Asset Turnover (x) 2.4 1.9 2.4Inventory Days 41.6 44.3 39.7Debtor Days 58.8 65.7 59.5Creditor Days 42.2 51.8 59.0Net Working Capital Days 79.9 76.1 64.2Operating Cash Flow / Sales (x) 0.03 0.05 0.04Valuation Ratios DPS (Rs.) 5.0 2.5 3.0EPS (Rs.) * 8.3 5.1 8.1Dividend Payout (%) 60.1% 48.7% 37.2%Book Value (Rs.) 41.3 43.6 46.7P/E (X) 21.6P/BV (X) 3.7EV/EBITDA (X) 8.9
*Return ratios computed on average Capital Employed & average Net Worth respectively ; liquidity ratios based on 360 days ; CMP Rs 174 as on15/9/2014 for valuation ratios
Particulars Essel Propack Time Technoplast Manjushree Technopak
Hi-Tech Plast Mold-Tek Packaging
Net sales (Rs mn) 21490.1 21863.0 4376.8 4600.0 2551.2Operating Margin (%) 17.5% 14.1% 22.3% 10.7% 11.6%PAT (Rs mn) 1,078.3 988.0 263.8 80.8 90.7Net Margin (%) 5.0% 4.5% 6.0% 1.8% 3.6%Net Sales CAGR (5year) 5.9% 20.9% 30.9% 14.9% 20.5%PAT CAGR (5year) 14.6% 2.1% 25.7% -15.3% 5.4%ROCE (%) 15.6% 14.2% 14.9% 17.0% 19.6%RONW (%) 13.1% 11.2% 19.5% 8.3% 17.9%Net Debt/Equity (X) 0.95 0.69 1.67 0.75 1.26NWC to Sales 0.16 0.21 0.34 0.15 0.17Average Inventory Days 37.7 69.5 90.4 26.4 39.7Average Debtor Days 61.6 70.7 64.9 57.1 59.5Average Creditors Days 31.1 48.2 18.3 16.2 24.9Fixed Asset Turnover (X) 2.30 1.84 1.82 3.36 3.42
Mold –Tek commands the best return ratios & asset turnover in the pack ; high earnings growth expected on the back of strong entry barriers , compelling cost economics in IML business
Source : Company Annual Reports ; Return ratios computed on average Capital Employed & average Net Worth respectively ; liquidity ratios based on 360 days Peers selected above strictly do not have a similar business model as that of Mold-Tek . Essel is into extruded plastic tubes ; Time is a conglomerate & derives ~60% of revenues from industrial packaging (includes large barrels, bulk containers, etc as well) ; Manjushree is a key domestic player in PET bottles & preforms . Hi Tech with its non-IML business comes somewhat closest in comparison
Shareholding Pattern (30th June 2014) Price Data (as on 15th September 2014)
Bloomberg Code MTEP IN
Share Price (BSE) (Rs) 174
No. of shares outstanding (mn) 11.3
Face Value (Rs) 10
Market Capitalization (Rs bn) 1.97
52 week High/Low (Rs) 177/29
Non-promoters >1% shareholding (30th June 2014)
Passage To India Master Fund 4.47%G.Aravinda 2.30%JNJ Holdings Pvt Ltd 1.99%Najmuddin Gulamhussein Kheraj 1.76%Ail Kumar Goel 1.43%Dolly Khanna 1.09%Mold Tek Packaging Ltd. Unclaimed Suspense Account 1.05%
*No encumbered shares as on date
Registered Office
Plot # 700, Road No. 36, Jubilee Hills,
Hyderabad -500033; Telangana
Tel : 040 40300300/01/02/03/04
Website : http : // www.moldtekplastics.com
Statutory Auditors
M/s . Praturi & Sriram
Bankers
Citibank N.A. Yes Bank
ICICI Bank
Name Designation
J.Lakshmana Rao Chairman & Managing Director
A.Subramanyam Deputy Managing Director
P.Venkateswara Rao Deputy Managing Director
J.Mytraeyi Non-Executive Promoter Director
P. Shyam Sunder Rao Non-Executive Independent Director
Dr.T.Venkateswara Rao Non-Executive Independent Director
Vasu Prakash Chitturi Non-Executive Independent Director
Dr N.V.N.Varma Non-Executive Independent Director
Board of Directors