Thread by @ValueEducator

Detailed analysis of #MitsuChemPlast🧪

CMP - ₹237

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1. Company Info:
-Mitsu Chem Plast is established in the year 1990, and it got listed on BSE in the year 2016
-Mitsu Chem Plast majorly provide Industrial packaging solutions for industries like chemicals, agrochemicals, pharmaceuticals, lubricants, food and edible oil

-The company uses Blow molding and Injection molding technologies for manufacturing their products
-Mitsu Chem Plast serves to 30+ fortune 500 Companies. Some of the company's important clients are listed below

-Recently, the company filed draft papers with SEBI to raise INR 125 Crores via FPO

2. Industry Scenario
-The Indian blow molded plastics market is expected to grow at a CAGR of 6.19% in terms of value to reach INR 49.9 Lakh Crores in 2030 from INR 30.9 Lakh Crores in 2022

-The India Injection molded plastics market is expected to grow at a CAGR of 6.98% in terms of value to reach INR 3.2 Lakh Crores in 2030 from INR 1.9 Lakh Crores in 2022

3. Business Segments
-Mitsu Chem Plast has 3 business segments:
Molded Industrial Packaging
Healthcare Furniture
Other Products
-Mitsu Chem Plast doesn’t have any B2C business, all of the company’s business segments are B2B

-Company sells their products in highly competitive markets which leads to reduced operating margins. India is their primary market and the products that they sell are of a commodity nature
-In Molded Industrial Packaging, the company manufactures open top drums, narrow and wide

mouth drums, jerry cans, food storage bottles, pharmaceutical storage bottles and injection molded products like caps, inhalers, handles, rings etc.
-In Hospital Furniture, the company manufactures various parts of the hospital beds like ABS panels, side railings, plastic rods,

plastic buffers, plastic food tables, head immobilisers, spine boards and CPR boards
-Other Products offered by the company include plastic parts of chairs used in the school, bus and sports stadiums, aquaculture floats, and automotive components like air intake ducts,

AC ducting pipes, washer tanks etc.

4. Molded Industrial Packaging
-Molded Industrial Packaging is the largest business segment for Mitsu and its revenue share over the past 3 years is as follows
FY22 - 83.86%
FY21 - 84.89%
FY20 - 87.87%

-Mitsu Chem Plast manufactures a wide range of containers ranging from 100 millilitres bottles to 235 litres. Companies plastic drums and containers are a preferred choice of major pharmaceutical and speciality chemical companies
-Company has indirect exports i.e company supplies

containers to export companies which fill their materials in and then export.

5. Hospital Furniture
-The company manufactures poly based molded hospital furniture parts which are supplied to hospital furniture manufacturing companies and they in turn supply to hospitals

-Mitsu makes Acrylonitrile Butadiene Styrene (ABS) panels for hospital beds which are robust, ergonomic, aesthetic and come with a finish as per the needs of the customers. These panels are made in such a way that they are easy to assemble and dismantle in case of replacement,

transport or if required by patients
-Mitsu also manufactures Spine Boards, these are ‘CE’ certified and comply with the requirements of global medical standards. Even though they are light in weight, they offer better strength than the old metal stretchers

-These boards are scientifically designed to be user-friendly while carrying patients and are widely used in all modern pre-hospital trauma care, ambulance services and lifeguards
-The company faces competition from Chinese players in hospital segment

6. Other Products
-Mitsu Chem Plast also deals with other industries including Automotive and Infrastructure
-In Infrastructure company offers products such as plastic chairs used in the school, bus and sports stadiums, aquaculture floats etc

-In automotive segment, plastic parts are being used in the place of metal parts because plastic parts are typically upto 50% lighter in weight than metal parts which consumes less fuel for end user and converting from metal to plastic can significantly

reduce total manufacturing costs
-Company presence in automotive business is very less due to the low margins, but company may increase the share of this business in future if there is boom in automotive sector

7. Raw Materials
-Main raw materials used by the company are High Density Polyethylene (HDPE), Poly Propylene (Homo Polymer) and Poly Propylene (Co Polymer)
-Besides company also uses LDPE, PET, ABS, Nylon & Polycarbonate
-Applications of different types of polymers are given

below in the table.
-Around 40% of the raw materials are imported by the company
-Cost of raw materials as a % of Revenues over past few years
FY22 - 58.93%
FY21 - 53.09%
FY20 - 52.53%
-Company passes on the raw material prices to their clients

8. Manufacturing Facilities
-The company has 3 Manufacturing plants
Unit 1 - Tarapur, Maharashtra
Unit 2 - Tarapur, Maharashtra
Unit 3 - Khalapur, Maharashtra

-Current total capacity is 23,377 TPA and the overall capacity utilization over the past few years is as follows
FY22 - 63.97%
FY21 - 56.03%
FY20 - 49.61%
-80% utilization of Installed capacity is considered as Full capacity utilization in this sector

-All the machines are fungible meaning one can use the same machines with minor adjustments to manufacture products in other segments

9. Future Outlook
-The company's vision is to achieve 500 crores turnover by FY25 with an EBITDA margin of 15% to 16%

-The company is planning to enter into new business segments such as paints, lubricants, ink and Food & FMCG packaging. Paints industry has been expanding at a significant pace with new players coming into the market and company intend to tap this opportunity

-For this the company has done a capex of INR 6.14 crores at Unit 3 i.e Khalapur plant which increases the capacity by 1650 MT
-From the above capex, The company is expecting 25 - 30 Crores of revenues in half year (i.e H2 FY23)

10. Financials
-Revenues - INR 258 Crores (45% YoY growth)
-EBITDA - INR 26 Crores (11% YoY growth)
-ROCE - 17.87%
-Debt to equity - 1.32
-Revenue share of all the segments over the last 3 years is given below

-In Q1 FY21 (Covid quarter) revenues had slightly dipped but operating margin increased due to the increased revenue contribution from Hospital furniture business. Hospital Furniture business has 5% to 10% higher margins than Industrial Packaging business

-Asset turnover ratio for Mitsu chem plast is between 4 to 5, which is also the industry standard
-Top 10 Customers revenue share over the last 3 years is as follows

11. Risks
-Foreign Currency Risk: Company has negligible exports (FY22 zero exports) and imports around 40% of raw materials, thus company has considerable foreign currency risk

-Government Regulation Risk - Until now Government didn't ban any plastic products in the space where Mitsu operates but in future it may effect the company

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