Thread by @ValueEducator

Detailed Analysis on the business of #Mold-Tek Packaging

CMP - ₹980

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1. Company Overview
- Mold-tek packaging is established in 1985 and it is one of the leading player in the rigid packaging industry in India
-Mold-tek was the first company in India to launch In Mould Labelling (IML) technology in 2011 Financial Year

-Mold-tek is 100% backward integrated meaning they make their own molds, labels and robots
-The company has blue chip clientele such as Asian Paints, Akzo Nobel, Kansai Nerolac, Castrol, Shell, BPCL, Cadbury, Amul and HUL

2. Industry Overview
-The global packaging market valued at USD 1002 Billion in 2021 and is expected to reach USD 1275 Billion by 2027 with a growth of 4% CAGR
-Global rigid packaging market is valued at USD 187 Billion in 2020 and is expected to reach USD 270.6 Billion by 2028

with a growth of 4.7%

3. Business Segments
-Company has 3 business segments
i. Paints
ii. Lubricants
iii. Food & FMCG
-Both for Paints and Lubricants segments the company manufactures pails, which is nothing but a bucket

-Food & FMCG is completely IML but in Paints and Lubricants there is a mix of IML and Non IML (HTL, Screen printing etc.)
-IML revenue share in FY22 is 67% as against 65% last year, and it is more or less stagnating
-IML volume share in FY22 is 63% as against 61% last year

4. In Mould Labelling
-IML is a process where Label is put inside the mold into which hot plastic is injected. IML Label have a heat activated adhesive applied to them which gets activated when molten plastic is injected. After cooling, The label becomes molded on to the

container’s surface
-In Mould Labelling process eliminates the post-labelling operation which saves both time and labour, Because of this it is suitable for mass production
-In Mould Label also gives Photographic Quality

5. Paints and Lubricants
-Paints segment contribute majority of the revenues, The contribution of paints to the revenues for the past 3 years is as follows
FY22 - 54.5%
FY21 - 53.5%
FY20 - 52.5%
-Asian paints is the largest client for the company, which contributes to 25% of

total sales
-Under Lubricants, recently the company has launched pails for Diesel Exhaust Fluid (DEF) and bagged orders from players like Gulf Oil, Valvoline Cummins, Apar etc

6. Food & FMCG
-The company has two divisions in this segment
i. Q packs
ii. Non Q packs

-Q packs or Square packs which are mainly used for edible oil packaging, but recently it’s applications are increasing viz detergents, tea, protein powder and micronutrients
-Q packs provide excellent tamper evidence and it is very easily removable pack

-Non Q pack have products such as containers for chocolates, ice creams, sweet boxes, coffee cups and heat sealable products
-Food & FMCG containers are thin walled when compared to pails for Paints and Lubricants

7. Manufacturing Facilities
-Currently the company has 10 manufacturing facilities across India and the current installed capacity is of 45,000 Tonnes per annum
-All the machines are fungible, so for example if food demand drops they can make paint containers on the same

machines by changing molds
-The molds only cost around 15% of total project, so incase of demand fall in a particular segment, wastage is minimal

8. Raw materials
-The company uses Polypropylene Copolymer as raw materials which is made from Crude Oil

-Mold-tek procures raw materials from Reliance (75 to 80%) and IOCL (15 to 20%), So the company procures 95% of raw materials domestically and the remaining 5% they import from Basel, Europe
-Company always pass the change in raw materials to their customers on a monthly

basis i.e Average raw material price from the month of January is charged in February and average raw material price form the month of February is charged in March month and so on

9. Unique Selling Point of Mold-tek
-Backward Integration : It is one of the few Indian companies which make their own molds, labels and robots. Which gives them significant cost advantage over its competitors who import one or all of them

-Deep rooted Customer relationships : Track record of quality and reliability of supply which has helped it become one of the preferred supplier for the leading companies in Paints, Lubes and Food & FMCG
-Company also has received the green channel clearance from Asian Paints &

Reckitt Benckiser. Green channel clearance means supplied products would not be quality checked they will directly go into manufacturing lines for further processing
-Innovation in Packaging and Widening Product range : Launching new, innovative, value added products in both

existing and new industries by collaborating with companies to make company specific products

10. Upcoming Capex
-At the time of time of QIP i.e Dec 2022, the company has announced Capex plans of 250 Crores in next 2.5 to 3 years
-The company has raised 103.6 Crores during

the QIP
-FY23 capex is 125 Crores, which is 2½ times the average of past 5 years capex
-After completion of capex for FY23, the company capacity will become 54,000 Tonnes from the existing 44,000 Tonnes
-Detailed capex plan for FY23 is given below in the image

11. Future Growth Engines
-The company is entering into Injection Blow Molding (IBM)
-Capacity for IBM is being constructed at sultanpur, telangana
-Primarily IBM facility is for manufacturing of pharma products because of high margins, which is shown in the image below

-Second, Pumps for sanitizers, shampoos etc. Wipro is the largest client in this segment, In Pumps company have 66% gross margins
-Currently pumps are used in sanitizers but the company is planning to use them in other consumer products like shampoos and sprays as well

-Third, QR Coded IML which was developed by the company in FY21 - Mold tek supplies each container with 2 unique QR codes, one on the surface and another under peel off. Surface QR code provides tracing & tracking information while beneath QR code gives loyalty benefits such as

cashback when the end customer scans it
-Recently the company has received a letter from Grasim Industries Limited (Birla paints division) for supplying pails, accordingly a co-located plant will be set by the company at Panipat, this requires a capex of 30 crores which is

expected to be operational by the end of CY 2023

12. Financials
-Revenues - INR 631 Crores (31% YoY growth)
-EBITDA - INR 122 Crores (28% YoY growth)
-ROCE - 23%
-Debt to equity ratio - 0.08
-Historically EBITDA per Kg has grown quite significantly

-Revenue share and Volume share of all three business segments of the company is given below

13. Succession Planning
-Company’s planning for the company's succession is thorough, and young talent is being developed to operate the business successfully in the future
-Mr. Rana Pratap, he is the son of Chairman & Managing director Mr. J Laxman Rao

-He has been in the company for the past 8 - 9 years and he currently oversees the company's marketing and new business development
-Mr. Sandeep A, he is the son of Deputy Managing director Mr. A Subramanyam
-He has been in the company for the past 9 -10 years and he currently

oversees the company's Production planning and Controlling & Coordination

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