Hold Mold-tek Packaging; target of Rs 956: Prabhudas Lilladher

Prabhudas Lilladher's research report on Mold-tek Packaging

We are cutting our FY24/25 EPS estimates by 12.3%/9.2% as we reduce volumes, realization and EBIDTA/ton estimates (Rs41/42 per kg) given mixed outlook in near term. MTEP’s 1Q volumes were impacted due to 1) impact of unseasonal rains on ice cream & dairy segment 2) lower sales value on decline in realizations and 3) sub-par capacity utilization (45%) of Khandala due to expansion/modernization shutdown at Asian Paints unit. While overall volume growth should inch up gradually, high single digit volume guidance in paints, tepid growth in edible oils & lubes will curtail FY24 volume growth to ~10-11% and sales growth in low single digits. MTEP’s long term prospects remain promising given 1) bottomed out EBITDA/Kg driven by price hikes from customers 2) mix improvement with higher growth in F&F segment 3) new plant added at Lucknow & Daman and capacity additions in Mysore & Visakhapatnam to meet demand from Asian Paints 4) expectations of 5000ton demand from Grasim by FY25 (25% of current volumes) with higher realizations and 5) entry into Pharma & OTC business.

Outlook

MTEP is currently trading at 32x FY25EPS which limits scope for re-rating. Retain ‘Hold’ with a target price of Rs956 (Rs968 earlier).