We recommend ?BUY? on MOLD-TEK PACKAGING LTD for a target of INR 332 – valuing the company at P/E 28x of FY19E Earning.
Investment Rationale:
- Increasing IML revenue share, demonetization impacted reduced.
- Expanding revenue share in Food & FMCG space.
- Full-scale commercial production at RAK subsidiary & capacity expansion for paint company to drive volume growth.
- Market leader in Pail Packaging.
- Pioneer in InMould Labeling (IML).
- Diversified sector focus to deliver growth.
- Expanding capacities to meet the demand.
- Healthy growth expected in India’s packaging industry.
- Asian Paints? plant on track, to contribute from 1QFY19.
Valuations And View:
Mold-Tek Packaging is pioneers in the field of In-Mold label decoration in India. Its position as market leaders in Indian plastic packaging industry is a result of various competitive advantages. The Company is a domestic leader in injection moulding with esteemed clientele across the sectors.It specializes in both standard and made-to- order packaging solutions for leading brands. We value the business at 28x FY19E EPS and recommend a BUY rating on the stock with a target price of INR 332 per share.
Risk & Concerns
- Financial risks – It includes foreign currency rate fluctuations, liquidity and leverage.
- Legal and statutory risks – It includes contractual liabilities & statutory compliances.
- Competition risks – New competitors may enter the markets in which your Company operates.
Company Background:
Established in 1986, Mold-Tek Packaging Limited (MTPL) is a two-decade old Hyderabad-based leading manufacturer of high-quality rigid plastic packaging product with over 25% market share in Lube and Paint packaging segments. The Company is a domestic leader in injection moulding with esteemed clientele across the sectors. It specializes in both standard and made-to- order packaging solutions for leading brands in Paints, Lubricants, Pharmaceuticals, Cosmetics, FMCG, etc. The Company has 6 plants with huge injection moulding capacity of around 25000 TPA in 2013. It has 3 stock points spread across India to ensure shorter lead time.
As a pioneer and innovator of pail packaging in India – Mold-Tek has introduced spouts and In-Mold spout concepts for the paint and lube pails. With in-house manufacturing capability in place, we are not dependant on imports. They are pioneers in the field of In-Mold label decoration in India. Its position as market leaders in Indian plastic packaging industry is a result of various competitive advantages.
Products-
- Lube Packaging
- Paint Packaging
- Food Packaging
- Bulk Packaging
Industry Overview:
Including packaging machinery, the global packaging industry turned over around USD485bn with packaging container sales of almost USD460bn and machinery sales of around USD25bn. Used in a wide range of industries across food and drink, healthcare, cosmetics and other consumer goods as well as a range of industrial sectors, packaging has become an essential everyday item, with its usage growing broadly in line with the global economy. As such, the health of the packaging industry is linked to that of the world economy as a whole and global trade.
