MOLD-TEK PACKAGING! Good potential multibagger

MOLD-TEK PACKAGING

Mold-Tek Packaging Limited (MTPL) (www.moldtekplastics.com) is a pioneer in inflexible plastic bundling in India, was incorporated in the year 1985. Mold-Tek Packaging Limited is included in the assembling of infusion shaped holders for lubes, paints nourishment, FMCG and different items. Mold-Tek Packaging Limited is the pioneer in inflexible plastic Packaging in India with 20% market share.

What is common in stocks like Hawkins India ,Cera Sanitary,Wimplast,Selan Exploration,Manjushree Technopack,RS Software ,TTK Prestige ..etc.The obvious answer from an ordinary retail investor may be – “ All these stocks turned as  multi baggers in past 2-3 years” . But for someone with some academic interest in stocks and spending some time to explore ,it is easy to find out the presence of a common name in the public share holding of all these stocks ie, the name of  Dolly Khanna.

Some high profile individual  investor’s are  equally interested in publicity and hence they are frequently appearing in TV interviews and celebrating their purchases through ‘Bulk Deals’ .But on the other hand  some are interested to hide behind curtain ,media-shy  and buying stocks in bit by bit to avoid any unnecessary publicity and market attention.Dolly Khanna belongs to second category and because of this reason ,frankly speaking I have not much idea about the whereabouts of this investor. But if we go through the history of shares owned by this investor ,it is clear that she/he is an investor with Midas touch and with special blessings to pick future multibaggers at an early stage. Having said ,since this investor buying without any publicity and in small lots it is difficult to get information about her/his activities in any stock at an early stage. But now ,this week let us look into one stock in which she entered only recently or may be still in the process of accumulating .As on latest June quarter share holding Dolly Khanna holding  123010 shares in Mold-Tek .This recommendation is not only due to the entry of this investor but taking into consideration of reasonable valuation based on its fundamentals and its potential.

Mold Tek Packaging

This Hyderabad based company is a market leader in Moulded plastic packaging and commanding close to 25% market share. Company mainly concentrating in manufacturing of Pails(cylindrical type  container) used in industries like Paints,Lubricants,food products..etc.This leakage free,easy to handle, and attractively decorated rigid plastic containers already dominated paint and Lubricant industry and replaced metal containers in these sectors.All major companies in these sectors are customers of Mold-Tek which includes Akzo Nobel,Berger, Kansai Nerolac, Castrol, Indianoil, HPCL,Shell,BP ..etc.In the rigid packaging space itself Mold Tek is the pioneer in  In-mould Labelling technology .This technology is used  for decorating plastic surfaces with color and labels to make it more attractive.As of now company manufacturing various products from its seven manufacturing facilities – 4 units in Andra Pradesh ,one each in Daman,Tamilnadu and Maharastra . Moldtek is the only molding company in the world having  in house mold designing mold making, IML label making and ROBOT making facilities.Company initially imported  robots from Taiwan and later started to build robots in-house for its use .A robot made by the company costs only one third of the cost of an imported robot  and its spped is higher than the imported robots.These robots are used in in-mould labelling (IML) process and by this company eliminates human intervention and contamination.( At least some of you may dreaming  Mold Tek as a commercial robot manufacturer too when there is shortage of workers in India few years down the line  - fine ) 

Company now aggressively tapping emerging opportunities from food and beverages sector . Small size IML decorated containers gaining acceptance in packing ice-creams and jams and company started supplying this products to  Vadilal,Amul and HUL..etc.. Due to attractiveness and easy to handle features more and more items from food segment may opt for this product in future.

For the past many years ,Mold-Tek packaging was a company reporting decent growth but ignored by the market participants and always trades at  lower price earning multiple.There is no bad mark for the company management so far and they  handsomely rewarding its share holders with decent dividend without interruption.I believe ,entry of a highly successful  investor like Dolly Khanna will really change the image of this company and results in sharp re-rating in the years to come .The only negative point is its slightly higher debt with debt  equity ratio of over 1.3 . If its stock price reaches a decent valuation there is options for debt reduction through diluting some equity to investors at a premium. In FY 2013-14 ,Company reported a turnover of Rs.256 Cr ,net profit of Rs.9 Cr and an EPS of Rs.8  .In recent months company’s stock price appreciated  and it may be  due to overall improvement in small-caps and accumulation by the mentioned investor.But ,still this Rs.256 Cr turn over ,profit making  and dividend paying company is available at a market cap of less than Rs.90 Cr.Considering the potential of Industry,innovation led growth,decent management and possibility of a change in the image of company in market circles due to the entry of proven investor , risk takers may take some exposure in this indirect proxy of consumption theme  it at CMP of Rs.78

Key Pointers:

• Major customers: Asian paints, Castrol, Vadilal, Berger, Amul etc.
• Recently awarded by CNBC and Crisil as an emerging SME in 2012-13
• Revenue growth: 131 cr (Mar ’10) to 255 cr (Mar ’14) – CAGR 18%
• Last year revenue growth is 34% (from 191 cr (Mar ’13) to 255 cr (Mar ’14))
• Last year profit grew almost 60% (from 5.7 cr (Mar ’13) to 9 cr (Mar ’14))
• EPS has gone up by 60% YoY

Results Update –

The company came with good set of numbers. If they keep the growth on track, the sales this FY 14-15 will be around 300 cr. Net profit will be 15 cr at 5% margin. That means EPS of 16 at the end of the year. At the current P/E of 20 the share price will be hovering around 300+ at March end 2015.  

Key Numbers	Sep ’14	June’ 14	Mar ’14	Dec’ 13	Sep ’13	June ’13	YoY% (S)	YoY% (J)
Sales	79	75	69	63	66	57	20%	32%
EBIDTA	9	8	5.8	5.7	6.3	4.8	43%
EBIDTA (%)	11%	11%	8%	9%	10%	8%
Net Profit	4.5	3.8	2.1	2.5	2.6	1.8	73%	112%
Net Profit(%)	6%	5%	3%	4%	4%	3%
EPS	4.02	3.4	1.91	2.22	2.33	1.6	73%	113%

Credits to: VP

( Researching upon the sister company Moldtek Technologies, Add moderate quantities on both )