Axis Securities
Mold-Tek Packaging (Buy)
CMP: ₹299.55
Target: ₹351
Mold-Tek Packaging (MTEP) Q2FY20 print was strong and beat our estimates on all fronts. The outperformance versus our and consensus estimates was led by healthy 18 per cent volume growth in Q2 driven by strong offtake from Visakhapatnam and Mysuru plants for Asian Paints and Food & FMCG (F&F) segment that consistently reported robust growth for 9 quarters in a row. EBITDA/kg came in at healthy ₹32.8/kg in Q2FY20 as against ₹31.5/kg aided by mix improvement and benign RM prices. Recurring PAT came in at ₹10.5 crore, 44 per cent/12 per cent y-o-y/ q-o-q respectively aided by tax cuts.
IML share was 61 per cent/65 per cent in volume/value terms in Q2FY20 and momentum to sustain. With strong growth in Paints and F&F segment, technological edge (developing packaging solutions which is bio-degradable) and limited competition from peers (small scale of operations) we believe, MTEP provides comfort on earnings growth in current scenario of a slowdown. Further, FMCG, new square pack SKU introduction for Edible Oil and new client wins will drive higher volumes and margin performance. We maintain BUY and revised target price of ₹351 (earlier ₹304) aided by around 15 per cent revision in EPS. We value MTEP at 18x Sept21E.