Mold-Tek Packaging Limited — Q1 FY27 earnings call

Ladies and gentlemen,

Good day and welcome to the Maltech Packaging Limited Q&F by 27 earnings conference call hosted by MK Global Financial Services Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch tone phone. Please note that this

Conference has been recorded. I now hand the conference over to Mr. Rajesh Kumar from MK Global Financial Services Limited. Thank you and over to you, sir.

Good evening everyone. I would like to welcome Mr. J. Lakshman Rao, Chairman and Managing Director, and also thank him for this opportunity. I shall now hand over the call to him for the opening remarks. Over to you, sir.

Good afternoon gentlemen, thank you very much for your interest in our company's quarterly results conference call. I'm glad to inform you that we have made a historical quarter. The turnover crossed 300 crores, partially helped by increased raw material costs. However, one of the most important points here is the per kg EBIDA has shot up to 46.7 per kg, which is historically around 40-42.

was the best in the last several years. So this is a good turnaround because of the increased sales in Pharma and Food and FMCG which are high value add products and also mainly driven by the consolidation efforts we have taken up in bringing down the number of units in Hyderabad to only two units from five units earlier. So this consolidation and improved sales of high margin products has enhanced our EBITDA margins considerably.

In spite of the economic disturbance all around the globe due to the war situation. So that's fairly a good quarter where in spite of the price hike we could successfully pass on the raw material price hike to all the clients and with internal efficiencies and consolidation we could improve our profit margins considerably.

This is briefly the introduction and I hope we can discuss more on question answers. Over to operator.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two.

Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment for the question to assemble.

We take the first question from the line of Vidhyansh from Trinetra Asset Manager, please proceed.

Hello sir, thank you for the opportunity. So my first question is, over the last few years the company has diversified beyond like decorative paints and looking ahead the what would be the ideal revenue mix across like what portion will be except our decorative paints over next few years?

it is currently value wise 46% but volume wise is around 50% paint alone and probably it will start stabilizing around there or it might come down to 40% over the next two three years because of the increase in food and FMCG and Q pack is much sharper than Unforma are much sharper than growth in paints. So I hope in three four years paints as a segment might contribute around 40% from current

50%.

Okay, and any other segment in which we are looking to enter?

Yeah, we are already growing in food now. Food has now contributing to almost 24 and if you consider Qpack also, it is around 28, 29% of their products are sold in food. Pharma is only 2% in terms of weight, that is volume, but about 3 and a half percent in the overall sales. So, these numbers will shoot up rapidly, like say 40, 50% CAGR for next three, four years. And

Food and FMCG might grow at least around 18 to 20% CAGR. So whereas the paint might grow around 8 to 10%. Currently it is 10. So at that rate, paint will slowly lose the share from 51% currently to probably 40% in next three four years.

Understood. And could you, okay. And could you help us understand like what percent of incremental revenue this quarter comes from new customer or any addition?

Okay.

New customers, several customers have been added in food and pharma, not one or two. In paint, of course, it's a more matured market, where we have the top brands with us for last several decades, I can say. So, in the paint and loops, there's not much of new additions, but in the food and FMCG and the pharma, there are several clients. I can't list. There will be more than 10, 20 clients added in this quarter.

Okay, and in percentage terms, can you give like in food and pharma, how much has been came from your customer?

percentage terms probably if you can send a mail we'll reply to you. There may be three to five percent. But overall food and thin wall growth is 24.2%. which is considerably much better than what it was in the last two three years.

Okay, thank you, sir.

Thank you. We take the next question from the line of Deepak Saha from Ashika Institutional Equities, please proceed.

Yeah, thanks for the opportunity. I'm already

Yeah, right.

So just a couple of questions. First on the volume side, if you can help us understand this 6% growth, is it because did we apply a selective approach as far as the current market conditions are concerned? Is this the reason that the volume growth was relatively low? And second on the EBIDA per kg side, how sustainable this number is? Because one part is obviously lube has come down and makes us change, but if you can share some color and attribute the reasons behind this EBIDA per kg improvement. These are the questions.

Question.

Yeah, volume growth is tampered, tampered a bit because of drop in lube segment. Lube segment has dropped by 17%. It's mainly because of base oil unavailability with couple of private companies who could not due to the war in Iran, their base oil procurements have been affected, which impacted their sales and volumes and which in turn affected our sales in lube segment.

So, Lube being almost 17 to 20% of our sales, a 17% drop has impacted almost directly 3% to the volume growth. So the 6% volume growth what we achieved would have been 9 had even Lube remained at the same level. So Lube is a disappointing performance this quarter, which is beyond our hands because of the input problems of oil, base oil to the sum of the performance.

private players. So they could not get their oils in time and in turn we lost the volumes. So,

That is.

is about the volume growth, but I also

Told you and that's it.

in the last quarter as pharma growth is 38%, but it won't reflect too much on the volume because they are lightweight containers, lightweight components. So on the volume side, it will now anything around 10% is a great volume growth given the war scenario. But what I I'm very glad about is the EBIDA growth that has been achieved through consolidation of our units and improved efficiencies and a little bit better capacity.

cost utilization compared to the last financial year. So all these three are long term in nature and as you asked, we are bullish that we may able to cross our projected ₹42-43 EBIDTA for the year marginally. Maybe we are now aiming at ₹44-45.

for the full year.

Got it, sir. So, so the way to look at it is that incremental YY EBITDA per kg growth would more normalize from 46 that we have seen in the current quarter. In the Q2, Q3, Q4, we'd have a little bit of a, you know, normalized growth on the EBITDA per kg side compared to last year. Is that the right way to look?

It will be better than last year certainly because Q2 and Q3 of last year it was below 40, but we are aiming still at around 45 because the cost advantages and the consolidation benefits will continue to accrue. And we have other areas of automation which we are start recently, which will also start contributing in couple of quarters. So, things are looking brighter because the corrections what have been done are long term in nature. Consolidation of units is a one time thing.

But its benefits will last forever. That's why we are kind of .

I got it.

Increase food and FMCG and pharma, we are confident to sustain momentum in the EV market.

Got it. So one last question on the paint side, 11% volume growth, 30% revenue growth. Uh, this 20% value growth that we that we have secured, uh, if you can just share some color, is it more one off or uh, this is more looking sustainable? How should we look at the volume and value growth going ahead on the paint side?

No, no, no, this 31% growth rate in paint and 10% in volume is basically eaten away by the raw material price rise. So, this sustainability of this will depend again on the raw material movement. If the raw material stabilizes or comes down, this gap will slowly come down. So, whatever what you should appreciate is company could immediately get the price rise due to the war. The raw material shot up from 110, 105 range to almost 150.

So, the company could get that money with quick time frames from their clients and able to sustain or enhance our EBITDA. Otherwise, we would have seen EBITDA affected. So, this shows the relation what we have with our top clients in the paint or lube or even food industry and also the confidence they have on Moltech. So, we are able to pass on the price rise.

As and when the price rise happened and able to sustain our margins, rather improved our margins.

So, uh,

So got it, so that's really helpful. Thank you and all the best for upcoming quarters.

Thank you.

Thank you. We take the next question from the line of Raj Shah from Fident AMC, please proceed.

Hi, thank you for the opportunity. My first question is on our QPAC volume. So they have come down sharply, growing at close to 20% last quarter to 2%. So what was the reason for the same? And secondly, in terms of

You can see.

So yeah sir. And secondly on pharma also I mean on a quarter on quarter basis our volumes are up like two three percent. So how do you see this ramping up and in terms of our target of close to 55 crores of revenue from pharma. So I mean what what what kind of growth do you see in the next couple of quarters?

Yeah. the price the rise in sorry, the growth is only 2% mainly because QPAC is a little price sensitive segment. It is mainly used for edible oil and cashew and edible oil industry has been under stress because of the increased freight costs and oil prices on one side and with such a short up of raw material price from 100 level to 150 they were

Little hills tend to increase their sales and volumes. So that is one of the major reasons. Even companies which have moved into our square packs have gone back to tin or other forms of packaging tentatively. And that is one of the reasons why QPAC is a little growth is disappointing. But now we set up our QPAC facility at north, which has started adding numbers and also in south in Cheyar.

We hope that coming quarters we'll see double digit growth in QPEC again. That is your first question. Coming to the second question, Pharma we reached 41% growth, which is a sizable growth compared to last year Q1. Even in the volume terms it is a 38% growth, which I'm sure you will appreciate is a big jump given the scenario. And at this stage, we already have about a quarterly

projection of 11 to 12 crores which can go up to 14, 15 crores towards the end of the year. So we are still looking at a 50, 55 crores target for our pharma. So which will be like almost a 50% growth over the last year number 34 crores what we achieved. So in pharma we are definitely on a strong wicket and we also have plans to get into ophthalmic range of products for which trial molds are completed.

And commercial mounts may take another five to six months to arrive. So hopefully from beginning of next calendar year we'll be entering into that. And we also are looking at other medical devices like dressing pens for which we are looking at ways to shorten the development period. But no firm plans as of today, but certainly that is another product we'll be landing in in the next financial year.

secondly on your finance cost we have seen a sharp increase on a quarter on quarter basis close to 20%. So what is the reason I mean last quarter I think we have said that we will not be increasing debt from here on. So what was the reason for the increasing finance cost?

The increase in finance cost is two reasons. One is the raw material cost goes up, our working capital needs to go up. So on that the on a higher volume of material cost, we will be paying the interest to the bankers. So overall working capital the raw material cost is shot up if you compare it to last year fourth quarter is 97 rupees average price is 130 rupees. So almost 35% there is a jump in the raw material cost. So our raw material inventory cost

and carrying costs also will go up accordingly. So that is one of the major reasons why the interest is gone up. It's not because of term loans. Term loans also of course are there but not to the extent of this much difference. This 20% rise what you see there compared to the Q4, 20% rise is mainly due to the cost of raw materials and goods which shot up in the war period. So that has to be that is the reason you are increasing finance cost.

So lastly, just on Vibe, is there any update in terms of after JV, I mean, when do we see Vibe?

Yes, I'm glad to describe we have developed three products now which they have got applied for patent. And another six products three products which consist of six components are also getting onto the pilot stage, probably in next two months. They will also be ready. And together they want to go for they already applied for IP for these three products and another two products also they want to go for IP and they already

taking the call on IP expenditure and marketing efforts and even they've agreed to participate in the new mold cast to the tune of $50,000. So all this augurs well but as I said it is a long call probably towards the third quarter we'll be starting some commercial products for Vibe.

Any targets for this year? Any shares?

This year probably a couple of crores we may do in the last four last quarter because these products are very high value add. They are even better than or at least equal to pharma products in terms of EBITDA. So once they are launched, the volumes also can shoot up and probably next financial year we'll certainly see decent numbers coming from Weib.

Haanji. Okay, Thank you so much.

Thank you.

We take the next question from the line of CA Kaushal Sharma from Equinox Capital Venture Private Limited. Please proceed.

Hello, yeah, I am audible, sir.

Yeah yeah that's it.

Yeah, very good evening, sir. I just want to understand that you suggested that you have passed on the prices, but if I see your quarter on quarter marking of the result and your revenue growth, your revenue growth is around 46.3%, but your gross profit is down around 12% and EBITDA is grown 16%. So there is some cost absorption. So there is a drop in gross margin from 46.3%.

0.60% to 41.31%. So what is the aim of this?

No, if you notice our EBITDA has shot up by 12%, which is a very big jump from 40.7 rupees per kg to 46.7 compared to the last full year. So that is a very considerable achievement. The price, the revenue rise looks high because of the inflationary trend in the raw material, which we could successfully collect. Otherwise, it would have impacted our EBITDA per kg. So EBITDA per kg has gone up because of the efficiencies and consolidation work.

what we have taken up in the last financial year. So, these are the reasons and we could effectively pass on the price rise of raw material from if you notice the raw material cost, it was ₹97 in the Q4 for the full year, ₹107 in Q4, become ₹130 now. So, the revenue growth is partly due to the inflationary raw material price, but the proof of the pudding is EBITDA growth. So, EBITDA growing by almost

₹6 over the last year number is a big relief or proof that our efficiencies and consolidation are adding to the bottom line.

Okay, so could you please explain what kind of value-added products in Pharma that we are going to launch or planning to launch as of the month?

Yeah, currently we have three set of products, you know, that bottles and caps, variety of caps. we have EV tubes, and tubes and canisters. And now currently we are working on some other products including dosing pens wherein IP requirement is there. So we are trying to work out with a suitable IP holder who will be able to give us the IP rights and able to bring the product here in India.

So that will cut our development time from 3 years to 1 year and enable us to get into this business within a year's time. Even some imports can be done during this period to do the market seeding. So in that way we are going, sorry.

And that way we are going.

Yeah yeah please sir

So that is one product wherein we are putting efforts. We are also looking at semiconductor trays that will be a little longer short because by the time semiconductors and chips are made in India, we will they will be needing a lot of packaging support and this packaging is very high end if you I mean accuracy and high end raw material requirement, understanding of the technology is very much needed. So that is one very high end value add product we want to look into.

Coming year.

What kind of without a computer?

Okay, and then

the field could be very high, something like 350, 200 rupees. I guess we are still having basic data. And that again depends upon the capacity utilization, but it will be at least double that of pharma is my guess because the material used, the dimensional accuracy required and temperature characters, all that are very demanding. It is a step ahead of pharma. So, there are

Very few players in the entire world who are doing this, but Taiwan and Korea are the main countries. Of course, China also there are suppliers with good technology. We are trying to find some good technology partner to enter into this. That is a little longer shot, but Pens is one area where we are focusing now and hope to get into that business in a year's time.

New product

And so what kind of capacity are we putting in for these pens and what is the capacity?

So currently the capacity requirements are shooting up in India, not only for diabetes but also for semaglutide and other products that are expected to move into disposable pens. So once that volumes come up, the volumes in this country or even exports to the African and other countries can be of sizable numbers. So we we are still at the dying table stage now, depending upon the plans, it could be

10 pence per month will be the minimum capacity we'll be starting with.

And this revenue will come from the next financial year, right, as you said.

Yes, it will take at least one year to get the validations and clearances from clients. If any tie-up happens with a couple of foreign suppliers we are working with, in that case, probably some imports can be done in this year itself. Otherwise, it will take at least a year to get into that business.

Got it sir, thank you very much for answering my question.

Thank you.

Thank you.

We take the next question from the line of Shirish Pardeshi from Motilal Oswal BCC.

Good evening Mr. Rao and thank you for the opportunity. As usual you surprise us. Now I just wanted to check few things. This quarter our loops volumes were lower and because of that our EBIDA has shot up to 46 and a half. Now what I'm trying to understand if you can give me a number what is the loop quarter one EBIDA per kg and in in future once loops order comes back will this EBIDA looks like total

towards 45 or will be lower than that.

loop as it is is not a bad contributor. It is average somewhere around 35 to 40 level. Yes, loop coming down is not the reason for improving the EBITDA. Improving the EBITDA is mainly due to consolidation of our units which has reduced overheads, wastage, inter unit transfers and rejections which were happening in printing especially. because our printing units were spread in three locations. Now we brought them under one roof instead.

Sultanpur. And also a couple of units closure reduced our overheads considerably, right from power cost to the supervisory and managerial staff, they could be used elsewhere or we let go some of the people. So the overheads have come down considerably. Inter unit transfers have come down and wastage and rejection rates have come down. So these are long term in nature. So that is why we are confident about a consistent EBIDA growth in the current year in spite of

Uh, moderate volume growth. And you must appreciate that in spite of the war situation all around, uh, other than loops, all our other segments have done well, especially Pharma and uh, Food and FMCG grown by 38% and 24% respectively and paint by 10.8%, which is a fairly good number. So only loops are down due to the base oil disruption in couple of our uh, uh,

locations they could not get the base oil because of their dependency on Middle East. And of course QPEC as I explained is a price sensitive market edible oil and main users. And so they they were little hesitant when the raw material shot up by 50 rupees per kg. But they are coming back now we are seeing the trend is returning for at least a modest 10% growth in Q2.

Okay. My second question, our core business, paint has grown about 11% and its food and refresh has grown 26%. However, there could be a vibration because quarter one overall volume growth was about 6%. Now, in this setup, how we should think about the full year volume growth because I think the core business will continue to grow at that speed. So I just want to understand, is this price is now settled and the growth looks better in second half?

For volume.

Yeah, for volume growth, as I said last time, we are aiming at 10 to 12%. Even today, I still feel 10% is possible because in spite of the war, we are very the clients are sticky with us and rather some more clients who left us are coming back because they know Moltech can afford to maintain the material, produce at good efficiency and ensure supplies in time. So when any disturbance is there in the markets or

general atmosphere around, they will fall back more on Moltech. and the trend of IML adoption in paint industry is growing because the leader has started using more and more IML brands. So and Aditya Birla also using more than 25, 30% of their fields in IML. the trend is spreading into the lower players also and they are coming back to us and hopefully paint and

Paints especially, you will see a double digit growth for the full year. If paint remains at that level, if loops even come back to a zero level of growth, food and pharma will pull up the numbers to make sure we are at 10% volume growth at least for the year. What you should appreciate is pharma numbers are in weight wise, they are very less compared to pails. So even if growth is 10%, it's equivalent to a growth of 15%.

volume if pharma is growing at 40%, which I think the trend is already in line with that. So now more than volume I would look at one is definitely volume up to even 9-10% volume growth is equivalent to 14-15% of the past volume growth and EBIDTA growth of ₹5 we achieved ₹6 in fact for the compared to the last year full year 40.7 we did 46.7.

is mainly due to the consolidation and efficiencies and better capacity utilization, which will be long term in nature. So that's why I'm confident this year we will be crossing our target of 4243 we set for the full year.

Okay, that's really helpful. My last question, uh, have we taken any further price increases or passed on any raw material increases in the month of July?

You see, whatever happens in the month, we pass it on in the next month. So if July, the prices have come down in the beginning, and again last two weeks they've gone up. And now today they're back to 145, 146. Compared to the peak of 155, they reached in end of May, March. So again the price is rising, but we don't know if the war comes to an end, I'm sure it will come down to 120, 125 at least.

Yeah, I understand. The reason why I'm asking because you also eliminated the in-house printing labels. So there is a cost lever also setting there and there is a margin lever also setting there. So I was just saying that 46 you're saying 43, 44. But I I would expect the margin to remain stable the same same level at 18 and a half, 19%.

I hope so.

Okay. Okay, all right. Yeah, thank you and all the best.

Thank you. We take the next question from the line of Chirag from Keynote Capitals. Please proceed.

Yeah, thank you for the opportunity. So my first question is related to the price parse form that we are talking about. Tomorrow if the price reduces, will it be fair to assume that our gross profit per kg would still remain in the range of ₹100?

Grass Pro.

Profit per kg at ₹100.

Where are you seeing that?

So calculating this.

So calculating level.

Yeah, dividing gross profit by the volume.

Because this is the entire pass on verse, right? If you are passing or if the price increase in raw materials is about ₹30 from 100 to 130 and we are selling it ₹150, so it increases by ₹30. It's ₹180 to increase from ₹150 to ₹180 due to which by eyes we look that the margins are down. However, on unit economics basis, the realization is still better.

Yes, yes. That's why I always encourage people to look at the EBITDA per kg, which is a correct sign of profitability in our line of business because raw material is a variable which is not in our control and the price goes up or down, we pass it on to the client in the following month. So that is still happening. So tomorrow if the prices come down, it will come down and the percentage looks higher. But if you look at the absolute figure EBITDA per kg, that is what matters and that's

Today we are, I'm very happy that we got almost 12% jump compared to the last year number. In spite of the war situation and in spite of the loops being impacted.

Institute War

So this is through consolidation and efficiencies which are, you know, long term and permanent in nature.

Right, I got it. So second question that we are talking about the lives as a segment, if I'm not wrong, in Q2 we lost a big client in last year Q2, which led to a normalized rate of 1800 to 2000 metrics and volume on a quarterly basis. So, one thing is that it is still a normalized level. Second I wanted to know was the if if a the Q pack segments volume normalizes which was wasn't any growth because of the competitive intensity.

It has. That is the reason why you are talking, no, that the EBITDA per kg which is around ₹46 will come down to about ₹44, ₹45 as a range.

Yeah, yeah, because not only that, when the capacity utilization remains at the same level or maybe a little less, you will automatically a bit of per kg will come down. So I'm sure that loops will compensate this quarter. They're not if not fully back, they're improved a lot. Maybe they made some alternative arrangements of the base oil. So a couple of clients who are impacted during the war are now back into market in terms of quantities.

And we hope Loopsy will get back into shape in this quarter.

So, that will overall reduce the I mean, improve the capacity utilization at the at the 75% level. If that happens, again we may reflect on similar set of EBITDA per kg. Otherwise, probably marginal reduction here and there. But overall yearly projection of 42 which I gave last at the end of last year, will certainly be surpassed in this year.

Right, right. So, next question is related to the new lines that we are getting into, the ophthalmic and looking to get into the doses bench too. I wanted to understand what kind of size this industry has and like even when we started to get into pharma, the quality requirement that the plastic product should not mix with the ingredient, maybe the the capsule or something else. We face that issue to bring up to that quality. Similarly, I guess,

is that this is similar for the doses spends too because there is an API liquid API included in that, right? So just wanted to understand the learning curve that would be required and as you're saying that once the IP will, will we will get the IP done, the time frame can reduce from 3 years to 1 year. Just wanted to have a ballpark view of how you're looking at this.

No, what I'm saying is, in case we find a partner who is willing to share his IP and the validation data, which is, which will like a tech support or a tech understanding, then the timelines can come down from three years to one year itself, because then the testing already some of the suppliers abroad we are in touch with, they already are in Indian market at various levels of testing.

So if we tie up with them, things can go faster, like few months or max 1 year. But if that fails and we have to come out with our own design and IP, it will certainly take 2 to 3 years. So at this stage it's too early to comment, but we are on a track to see both options.

And the assets of civil nation are good for that new plant and machinery for this.

No, that, you know, we already have the land, so we'll be needing at least 50, 60,000 square feet of area to start with. And that will be around 10 crores investment and the machinery to start with would be also in the region of around 10 to 15 crores. So minimum 25 to 30 crores minimum plant size is required in the beginning and which need to be ramped up depending upon the growth in the business. But the pricing and EBIDA margins are double, more than double that of regular form of .

products.

I think I need to get a new one.

Right, right. And for this ophthalmic product that we are talking about, for that we can make it on the same assets that we have today with ourselves.

Yes, Aptalmik, we don't need any special level of safety or ambience. Our current facility where we are now already has taken up a construction of 25,000 square feet area which will be completed in six months time. So that is where we will be setting up the Aptalmik range. The new land which we acquired a year ago will be kept for devices. It is mainly pens and some other there are some more devices also.

under consideration.

But it will be too early to comment. We are working on feasibility and market demand.

But let me assure you, Maltech is now focused on Pharma and Diagnostics in a big way and devices in a big way and coming forward in the years or quarters, if not quarters, years, there will be certainly more focus and growth in those in that segment. It's a huge potential area and we just touched the tip of it, so we have a long way to go.

Right, right. Just last question from my side, sir. Generally, after reaching a 75% capacity relation, we generally look for a new capacity addition. We are currently at about 77000 MTPA. If you could just highlight what kind of 57000 MTPA.

67000 I guess. Our total capacity is 67000.

Yes.

Correct, 67000. Right, so what are we looking at for the by the end of the year, what are we looking at as capacity and down the line about 2 years down the line or 3 years down the line, how are you looking at it?

Yeah, there will be certainly at least 10 to 12% capacitation every year, that is to capture the growth and better utilization at three units which are Chaiyar, Panipat and Mahad. This is where we are now trying to focus by enhancing the product range there. For example, in Panipat, we already started test marketing our Thinwall products with four machines last year and the response is pretty good. Already

the goods worth of around 70 lakhs to 1 crore are being sold every month and now we are doubling that from this month August onwards to catch up for the festive season. So hopefully North Panipat unit will be utilized better in food and FMCG Q packs. Already Q packs we are selling more than 1, 1 and a half crore worth of Q packs from Panipat in this last 6 months. So whenever there is ups and downs in the paint department,

demand there will be fungibility with the Q pack. So, same thing we are doing at Chiar. Now a set of molds are going to Chiar for Q packs and that and also paint industry molds which will enable us to use the capacities in those in that unit also better. So our focus now is utilizing this capacity from 75 to probably 78 or even 80 in the coming years and apart from that create another 8 to 10% of capacity.

ready to catch up with the growth.

Perfect. Thank you, thank you so much, sir. I'll join back.

Thank you. We take the next question from the line of Bhargav Buddhadev from Ambit Asset Management. Please proceed.

Yeah, good evening team and congratulations on a good set of numbers. Sir, my first question is that, is it fair to say that we would have seen some volume decline, obviously because of elevated RM prices, they might be destocking. But now with crude coming off, is it fair to say that we can in the ensuing quarters see volume growth coming back in twins?

paint actually we have 10.8% in spite of the severe conditions what we are experiencing. The main culprit is loops. That is where I explained 17% dip compared to the Q1 last year.

So, I'm talking about the condition.

I'm talking on the phone.

Volume Growth, Volume Growth.

Yeah, yeah, even volume growth in paint is 10.8%. The loops was -17%. So that is where the stunt or volume growth has been stunted to some extent, otherwise it would have been close to 9, 9 and a half percent. So the 17% dip in loop is the culprit for our volumes being moderately less compared to what it used to be. And once the war situation becomes normal,

Even now, I think Loopes, they have found some alternative arrangements of base oil so that their sales will come back to normal. And hopefully, in the coming quarters also, we'll be able to achieve double-digit growth.

Okay.

Okay

Uh, given our growth patterns in food and QPAC and Panipat and CRR capacities are being improving, utilization being improving, we are aiming double digit growth in the coming quarters.

Okay.

Secondly, sir, with Asian Paints also increasing the IMIL share, and within that, Moltech is also now seeing incremental business, given that our capabilities are far superior. Is it fair to assume that within Asian Paints are gross profit per kg as well as EBITDA per kg should sort of increase from here on?

Yes, yes, it is increasing because the volumes are increased, capacity utilization is improving. The molds are molds and machines are being kept for better use. I can't singletize I mean, can't tell you the exact number, but we have a very good growth in Asian Paints in this quarter.

And their IML share is rising, is that fair understanding?

Yes, yes, I am also rising and their volume growth is very considerably high, which used to be down in the previous couple of years. Started positive from last quarter, that is Q4, and this quarter it's one of the best growth numbers.

And this 10% volume growth in paints which we have seen in the first quarter, maybe in the next 9 months it should only accelerate, is that a good understanding?

it should at least remain at 10 to 15% range. we are confident this time paint will go in double digits. and the signs so far are good. But but for you know, at least the war stops in couple of months time. Hopefully, we'll be seeing even 15% growth is possible because of very handsome growth in Asian paint sale for us.

Uh, 15% for the full year, you are saying.

Sorry?

You're saying 15% in paints for the full year can be a possibility. Volume to that.

10 to 15. Okay.

And great sir, thank you very much and all the very best.

Thank you.

Thank you. We take the next question from the line of Shaurya Yadav from Growth Fair Ventures, please proceed.

Hello, am I audible? Yeah.

Uh, thanks. Sir, I just one question. Earlier our team was planning certain visits in China for tech tire related to Semra glutide pan. Any update on that?

Yes, we are in talks with a couple of them actually, not even one. And there could be some visits in the coming months and talks will start in September. If things work out with at least one of them, there could be.

Some initiative, initiative in that direction.

Very good sir, friend also.

Thank you.

We take the next question from the line of Arnav Sakhuja from Ambit Capital, please proceed.

Hi, thank you for taking my question. So, my first question is that, uh, we had a strong growth of 11% in volumes for the paints sector. So, um, if you could tell us how much of this growth would be due to our current clients and how much could be due to some new client that we might have onboarded in quarter one?

Uh, we don't, uh, onboard any new client in paint. This growth is all through our existing clients only.

Okay, so and what is the, what is the total CAPEX that we can expect in FY27?

Zoom page.

Yeah, this year we hope to bring it down from 130, 135 crores to around 90 crores.

Right. And, um, one of the points that you mentioned in your opening statement was that, uh, the consolidation of the Hyderabad facility was a major factor in improving the EBITDA per kg. So, uh, is there scope for any other consolidation of some of our facilities or was it just this facility which in which we were able to do this consolidation?

Yeah.

Yes, I think as far as the consolidation of units is concerned, Hyderabad is the only location where we had several units earlier, which we brought it down to two. The same thing is not possible elsewhere because everywhere we have only one unit. But there are a couple of other areas where we can still see improving the margins and efficiencies. One is automation wherein we can reduce the manpower and improve the accuracy and

rejection dates, reduce the rejection dates. We are working on that. A team is currently planning to visit our partner or a good friend in China who have similar manufacturing facilities running with very lean manufacturing methods. So that study will enable us to implement the same here back in the next couple of quarters and that also should improve our overall efficiency.

efficiency.

Okay, thank you for answering my questions.

Thank you. We take the next question from the line of Akhil Parekh from 361 Capital. Please proceed.

Yeah, thanks for the opportunity. Congratulations on this set of numbers. So my first question is, we are seeing 19% of our overall value growth, right? 6% volume growth, well almost 19% growth in sales per kg. Would it be possible for you to bifurcate how much of that growth is because of the price inflation and how much is because of the product mix change?

See, if you can see directly that the sale in tons is only 6%, 6.25% increase. So the rest of all 18% is mainly due to raw material price increase.

Is the inflationary price increase?

Okay.

Okay, but won't there be any change because of the product mix as well, given that student FMCG and

Yeah, you are correct. There will be definitely change in the product mix, which will improve the net revenue per kg. Due to pharma increased by 40%, their per kg rates are much higher. So, yes, you are correct to the extent that if the raw material would have been the same level, the difference of 25% would have been somewhere around

12-13% because from 6% volume growth, the value add in revenue would have been 10 to 12% at least because of the product mix of food and FMCG and pharma increasing compared to previous quarters.

Sorry, just to confirm with you, 12-13% growth will be because of the mix.

Uh, yeah, volume growth have resulted in at least 10% growth in the revenue because product sold.

Okay

But the change what you're seeing from 6 to 25 is mainly because of the inflation. At least 15% is inflation in the raw material price.

Okay, okay. So listening to your commentary, right, how our nature of business is changing. We are focusing more on pharma and medicine devices and now food and which is also growing at a faster rate. Would it be fair to assume going forward overall profitability growth or EBITDA per kg improvement should be the right metric rather than rather than the volume growth number.

Yes, I would always encourage people to look at the EBITDA per kg and of course volume growth also as secondary. Because going forward volume growth might be close to 10%, but EBITDA can grow around 18 to 20% also, given our product mix changes and efficiencies that we are bringing in in our operations.

So, would they be set to assume we should maintain this 19 percent of EBITDA growth for the rest of the year as well?

Yes.

Great sir, and lastly if you can please share the IML versus non-IML absolute volume and absolute sales number for this quarter.

Uh, it's around 75.8% in tons, uh, and 77.8 in terms of value for this quarter.

Great Sir. Thank you so much and best of luck to the company.

Thank you.

We take the next question from the line of Devang Mayur Bhatt from SPARC PWM, please proceed.

I would request Mr. Devang to unmute and then speak.

It seems like Devang's line has been disconnected. Till then we'll proceed with the next question. We take the next question from the line of Chirag from Keynote Capitals. Please proceed.

Yeah, my questions are answered. Thank you.

Thank you.

We take the next question from the line of Sandeep Modi, an individual investor, please proceed.

Yeah, thanks for the opportunity. Uh, sir, I wanted to ask a few questions. Uh, total how many pharma companies have visited and how many are actively giving orders?

Uh, how many means, uh, the number of pharma companies that visited are more than 50 and the current orders may be coming from around 20, 25. Okay.

Formal Company Business

₹2000

Okay

Companies. Okay, okay. Another 10 companies are also slated to be shutters in the next couple of weeks or months.

Okay Okay

Okay, okay, okay. Yeah, sir, one more question. 2.5 acres land which we have, we have got, and when will the building construction start and when it will be operational?

As I said, current growth will be contained within the current premises of our Sultanpur land, old land. And future growth will be for devices. So probably it will be once we have a plan, as I said, we are two ways of going into devices. One is tying up with a existing patented patent owner, which will reduce our time frame. In that case, we have to start immediately and complete the buildings within years time.

or 8-10 months time. In case we are going for our own internal IP and development which has a long time period, it could start later.

Yeah.

Okay.

Sir, 2000 medical devices.

Yes, medical devices like dosing pens and other items, similar in nature.

Okay, okay, very good, thank you. Yeah, one more thing, how many new moles are being made for Pharma and Vibe?

See, for the number of molds are increasing every quarter, like say, I don't have a count now because number of products have crossed 100 now. maybe every quarter we are adding at least five to eight new sizes bottles or caps every quarter. So, I think yearly we'll be adding at least 15 to 20 products of different sizes or within the same size, different weights and neck sizes.

Okay, okay, okay, yeah. Sir, any good news about pharma and semiconductor packaging?

Yeah, there are a lot of things happening in the background and probably in a few months time we'll be in a position to talk about it.

Okay, okay. And so the any CAPEX for 2027?

Yes, there will be a CAPEX of about ₹20 crores for this current year, assuming ₹25 to ₹30 crores for pharma and the remaining for balancing and replacement.

Okay, okay. And only the medical device is the new business we are entering or any other business also we are planning?

We are open to consider white goods. We are even looking at electronics and semiconductor packing. These are all long shots. They're at the drawing board stage now. And based on how we tie up or how we get the partners in this field, the time frames can be decided.

Okay, okay. And sir, the 5 to 2 units which we have consolidated, so now other 3 units, what business is going on there right now?

The currently the lands are available for us, probably in a year or two when a good price comes, we may sell off at least a couple of them.

and use the funds.

Okay Okay Okay Thank you very much Sir Ya

Thank you. We take the next question from the line of Devang Mayur Bhatt from Spark PWM, please proceed.

Yeah, thank you, thank you for taking my question. So, my question was what was the benefit to EBITDA per kg from higher realization?

Uh, for a higher realization of FMCG and pharma together, it should be at least ₹3 to ₹3.30 per kg would have come from those two lines and another ₹3 from the consolidation and efficiencies, improved efficiencies.

Okay, and since, you know, our RM cost, RM will be higher in the near term. So what is your outlook for working capital?

Yeah, that's what the one of the questions, that's what the reason the interest has gone up considerably with increased raw material costs, inventory costs, we end up paying more working capital, use more working capital and hence pay more interest on it. So current working capital is 100 and

125 crores, uh, which was around 110, 112 at the end of March, I think. So it's gone up by around 16, 18 lakh crores.

So you see this continuing for FY27.

It may stabilize there because the raw material is now not as much as it was in end of March. It is now currently trading around 10% less than what it was in the peak months. So hopefully it will stay there. It may not decrease much, but it won't increase. It may decrease to the level of

5 10%. but it may not increase given the raw material price. If the war worsens and further crude prices shoot up then maybe a different point. But given this current scenario it looks like it will come down a bit.

Okay, and what was your CAPEX in Q1 FY27?

Q1 already 20 crores we invested, I guess. 20-22 crores.

Okay, okay. Thank you, thank you. That's it from my end.

Thank you. The next question is from the line of Dhruvin Doshi from NV Alpha, please proceed.

Yeah, hi sir, thanks for the opportunity. Uh, so since you mentioned that raw material cost spiked from ₹107 per kg blended in 4K of 26 to around 130-ish in the first quarter of 27, if I heard it right. Uh, so sir, just wanted to understand if there's any inventory gains that we got in the gross margin of say ₹103 per kg from ₹97 last quarter.

Inventory gains will be there to some extent, but not huge.

Uh, would you be able to quantify, say, ₹2, ₹1 per kg?

Uh, probably yeah, ₹1 to ₹1.50 paisa you can say.

Understood sir, got it. So and currently what is the raw material cost you said?

Current raw material is 145.

Uh, the peak was 160, I think, in the end of March or early April.

Got it, sir. Understood. Uh, that's it from my end, sir. Thank you so much.

Thank you.

We take the next question from the line of Amit Kumar.

And from Determined Investment, please proceed.

Yeah, hi, uh, can you hear me?

Yeah, yeah.

So just one question, you know, what your suppliers are saying in terms of, you know, availability of raw materials. Because again, you know, throughout, you know, this month, which is July. So, you know, just about 15, 20 days, you know, State of Hormuz was open. And now, you know, we understand that, you know, US Congress Senate, they have also sort of passed a bill which will restrict, you know, imports of, you know, Russian crude oil, you know, all.

also into the global market. So have you had any sort of conversation or you know, have your suppliers have had any sort of conversations with you in terms of, you know, supply availability?

Supply availability they are not worried about but the price they are not able to confirm. That's volatility will still continue. But as of now PP is calling copolymer which is our main raw material availability is still I won't say it's plenty but it is available as of today and even the worst days of March and April the material was available and there was some shortage and there was some rush to get it from Reliance or other .

manufacturers. But as a as such I think the situation now is better than what it was in March, April in terms of availability. In terms of pricing, yes, it depends on crude at what price they get the crude and they will change it up or down. So that volatility is still there, but availability wise we are much better off now than what it was 3 months ago.

And in terms of, you know, inventory, your own, you know, inventory holding as well as your, you know, customers, there is, I mean, it's sort of lower than normal, higher than normal. How do, where do we sort of stand there roughly? If you have any sense of it.

We don't have the details of our customers or competitors, but our standards are around 1 month inventory.

Three weeks to one month.

This, this you're talking about raw material or finished goods or total?

I'm talking about raw material, including finished goods and SFG, probably one month.

Okay, okay, understood. Thank you.

One month, one month, few days. Yeah.

Thank you, thank you. That's it from my side.

Thank you.

Ladies and gentlemen, we dig that as the last question for the day and would now like to hand the conference over to the management for closing comments. Over to you, sir.

I take this opportunity to thank MK team for arranging this meeting with all the investors who have shown a lot of interest in our company and its operations. I thank you everybody one and all and wish you a great evening. Bye. Thank you Rajesh.

Thank you. On behalf of MK Global Financial Services Limited, that concludes this conference. Thank you for joining us in U Minard as connect your lens.