Established in 1986, one of the leading players in rigid plastic packaging in India. It is involved in manufacturing injection molded decorative packaging containers, mainly pails (cylindrical containers), food and other products.
The company has an integrated manufacturing facility to manufacture the packaging products and apply different kind of labels. The company also has in-house facilities to design and manufacture molds, labels for In Mold Label (IML) products, and manufacture robots used for IML process.
Market Leaders in Rigid Plastic Packaging
Pioneers in the field of In-Mould labelling (IML) in India.
The company has manufacturing facilities at multiple locations in India, with a combined capacity of 46,000MTPA in FY23. The present expansion is expected to bring capacity to 60,000 MTPA by FY2025.
The Company commands a strong presence across all major customers like Asian Paints, Castrol, Shell, Mondelez, HUL, etc. Innovation has been a cornerstone of Mold-Tek’s success over the years.
Segments
Paint
The company manufactures Flat Lid and Spout Lid categories for the paint industry. It generates ~50% of revenue from the paint industry, out of paint customers Asian Paints generates 30% of revenue.
Contract signed with M/s. Grasim Industries Limited (Birla Paints Division) for setting up THREE (3) new Plants at Panipat, Cheyyar, and Mahad during this F.Y.
The company has setup 2 plants for Grasim (Birla Paints) and is expected to complete the required expansion by FY25. It is expecting another 10% revenue from Grasim. Other than that overall paint industry is a mature industry that follows industry growth.
There are small companies that manufacture paints at a lower price with their lower overheads. So, the company consciously dropped some of the low-end paint companies from the customers list to focus capacity for better products over completing with lower margins. The company could switch capacity to Q PACK, which are equivalent in terms of EBITDA or better than some of the small players. So, the company sticks with the top four, and five companies in the paint industry.
Other players
''Hitech Corporation Ltd'' Completed 33 years in the packaging industry (capacity of 50,833 metric tonnes per annum). Company revenue ~80% is from Asian Paint.
''Mitsu Chem Plast Ltd'' Established in the year 1990, in FY23 company has built an initial small capacity to cater to the Paint industry and the company has a plan to grow 3X of its present revenue and reach a 1000 cr top line.
Lubes
The company manufactures CCD Lid and Flat Lid categories for the lube industry. It produces a range of lubricant pails over various quantity levels ranging from 5ltr-25ltr with long-term contracts with giants like Gulf, Shell & many others.
IML movement from ordinary decoration to IML decoration is what is causing the growth in the lubricant sector. In spite of the lubricant sector volumes may not grow up principally, the company may still have about 7% to 10% annual growth for the next one to two years.
Food and FMCG
It is mainly contributed by ice creams, restaurant packs, and sweet boxes. HUL, Hatsun, and Arun Ice Creams each would contribute more than 10%. Cadbury's around 7%, 8%. That is M2K Lickables chocolate around 7% to 8%. Rest all spread over more than 500, 600 clients.
Impressive 36% overall annual growth in Food & FMCG sectors.
Till FY 23 company used to fulfill all the orders from the south they have now expanded the capability to manufacture in the North and west. In the South itself, the company can do 120 Crores, 140 Crores last year in food and FMCG, and 50 Crores in Q pack they are about almost 200 Crores in South and West.
Food and FMCG contribute 1,000 tons and it is a high-growth segment internally where the company aiming at 20% growth in the next financial year.
Q-pack
Q pack is the company's square pack for edible oil, cashews, and other segments. The company has widened its product ranges, and it has now 2, 5, 10, 15, and 17-liter Square Packs.
Overall Square pack Sales grew by 24%.
The reason for resistance from companies like Gemini or Adani or all these big players, who need to switch from tin which requires change in filling and lidding. Which company is now solving starting with Gemini.
Gemini Oil, which is one of the largest in South, in Hyderabad. They have adopted our 10-liter pack and they've also taken some 5-liter later packs.
Strong growth was observed due to entry into new segments - cashews, growth protein, fertilizer & other chemicals. Company aiming around growth of 40% in next year.
Pharma
The company entered into a new segment Pharma packaging. It is believed that the impact on pharma from what IML did to its EBITDA ten years ago will be comparable. With the understanding mold manufacturing process better than any of the leading players company confident they could surpass within a year or two.
The company started with caps and HDPE bottles and worked on Effervescent Tubes and Canisters. It hopes that will open up the avenues to get into other areas of pharma packaging, like nasal drops, eye drops, and inhalers, gradually.
Company USPs
Effervescent Tubes, we are the first company to establish IML, in-mold labelling. There is a company that is not so successful in developing the IML solution. The process has already started. And that's not very long because most of them are for domestic consumption. Hence, stability tests could be completed in a month's time.
Canisters also, we have come out with a single-piece canister as against 2-piece canisters that are prevalent in the country. Regulatory market where we expect it to be exported, like canisters and tablet packs, the stability test and the process of commercial supplies would take 3 to 6 months. That process just started.
Other players
Shaily Engineering Plastics which is the plastic packaging industry entered the pharmaceutical segment back in 2000 and generated 8% of its revenue from it. They have built a good place in Injectors.
The Company sold around 11 million pens. The Company plans to manufacture around 15 million pens in FY 2023-24.
Back in 2014, Shaily did a tie-up with Global Closure Systems to offer closure solutions with lot of optimizations to manufacture CRC Caps and HPP bottles. As per management comment in 2022 companies do not actively market those products anymore. The same capacity is fully being utilized to manufacture the pen injectors and the other devices that we have.
The track record of Mold-tek execution is positive but segment failure by other companies suggests being watchful. I expect another year or 2 before get clarity on how Mold-tek build the pharma segment.
Key risk:
Ban on plastic packaging
The talk around a plastic ban in packing is getting louder by the day with many governments across the globe taking steps to ban some grades of plastic materials. At present, plastic below 50 microns is banned in India. However, Mold-Tek seems insulated against this threat due to:
Alternatives to plastic are equally harmful to the environment or lack utility. For example, metal’s carbon footprint is debatable plus it suffers from some deficiencies like reaction to moisture, prone to leakages, and difficult to transport.
At present, containers below 50 microns are banned in India. Rigid containers made by Mold-Tek are at least 400-500 microns which is far away from the present limit.
Rigid containers have higher recyclability. For the recycling reverse supply chain to work, rag-pickers should have higher incentives. A higher micron has a higher scrap value which acts as an incentive for the rag-pickers to collect the used container. Hence, containers made by Mold-Tek support the economics of the reverse supply chain of recycling.
Summary
The company continues to make good progress in the sales volume and improve margin. One looking at the unit economics PAT per KG or PAT growth consistently better over the top line.
The patent case has gone in the company's way, this would help to stop some of the players who have copied its IP and get better dominance in the market.
A major part of the business is matured business which could only grow with industry - Paint which is 50% of revenue and Lubes which generates 25% of revenue.
With subdued growth in its key segment Paint and a bit of intense competition in the Paint players, the growth and margin in Paint are challenged for the company.
Decorative Paint Competition
The Indian paint industry exhibits an oligopolistic structure, with the top five players (Asian Paints, Berger Paints, Kansai Nerolac Paints, Akzo Nobel, and Indigo Paints) dominating approximately 90% of the organized market, estimated at Rs 62,000 crore as of the end of FY23.
With the focus on Food & FMCG company is able to expand customers and SKU to gain better growth. F&F will help the company to grow in volume further in the coming years.
Pharma is the new venture which will be a low sales volume but a higher margin for the business. It is expected another year or 2 to establish in the pharma.
The company has shown it can execute and build business in different industries. If a company could execute the pharma there could be a great opportunity for the company to grow.