Mold-Tek Packaging Ltd
NSE:MOLDTKPAC
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
673.55
929.8
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
You don't have any saved screeners yet
Ladies and gentlemen, good day and welcome to the Mold-Tek Packaging Limited Q2 FY '23 Earnings Conference Call, hosted by Antique Stock Broking. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking. Thank you, and over to you, sir.
Thank you, Faizan. On behalf of Antique Stock Broking, I would like to welcome all the participants on the call of Mold-Tek Packaging. From the management, we have Mr. J. Lakshmana Rao, Chairman and Managing Director on the call. Now I would like to hand over the call to Mr. Rao for opening remarks, post which we will open the floor for Q&A. Thank you and over to you, Mr. Rao.
Thanks Manish, and thank you all for participants who are interested in our company's performance. I'm glad to inform you that in spite of challenging times and extended monsoon, with general impacts on paint industry demand, we could post a decent growth of 11% in terms of volume growth, though in rupee terms is higher by 14.4%. In volume terms, it is around 11% growth in the sales volume and about similar 11% growth in the PAT level, 10.5% to be precise, the PAT level.
The main highlights of this quarter or rather impediments during the quarter were, maintenance costs have shot up because semiconductor shortage in the automated machines like printing lines and to some extent, robotics and their non-availability has led to a loss in productivity and sales actually. In fact, the demand is still better. We could have easily posted a 15% volume growth had we got the space and support in time. But unfortunately, worldwide, there's a shortage of semiconductors and electronic parts, spare parts or maintenance parts and supply of printing machines not come in as expected by us, even machines which are supposed to be delivered in July, August are postponed in November and even December. So -- but now we are taking time for those machines. So hopefully, by end of this month and November, we'll be having those printing capacities added, which would be able to provide us the necessary labels in time to cater to the growing demand.
So these are the -- and another additional feature of cost increase is power cost. Unfortunately, both Telangana, Andhra and even in Daman, there is an increase in power cost which shot up 12% to 15%, which on a cost of 7% of cost of manufacturing has taken a toll of almost 1% in terms of increase in costs. So these 2 are major and there is, of course, transport cost increase due to diesel price increase, which has also impacted certainly. So in spite of these 3 cost or disruptions, I would say, cost and disruptions, company could post a decent 11% volume growth and maintain an EBITDA around INR 41 and hope to see that these hurdles are cleared once the new capacities are added in the month of November and December and for a stronger performance in the coming quarters.
So this being said, I would rather like to go through the question and answers more, so that more clarity would come to you in terms of performance and what you wish to know. So back to operator to start the question and answers, please.
[Operator Instructions] The first question is from the line of Chandrika from Rika Enterprises.
I have 2 questions for you. My first question is with respect to injection blow molding, IBM business. Now the IBM business is a very competitive business with a lot of players in India. What special advantage that Mold-Tek have in entering the business? Unlike IML, it's a very competitive business. Also, the pharma companies are currently buying their packaging material from other IBM suppliers. Why should they come to us? Why should they shift their supplies to us? So what advantage do we have in entering the IBM business? And why should the pharma companies buy from us? That is my first question.
Yes, you go ahead with the second one or you want me to answer this?
No, you can please answer.
In IBM, yes there are quite a few players. It's not that there are very huge players. Only few to my knowledge, are [ Shreeji, Manjushree, Pravesha, Gary Shimmer and Gopaldas]. The area where we are focusing is not only just in cosmetics, diary and food and FMCG, but also in pharmaceutical export market. In this market, majority of the manufacturers of pharmaceuticals are located in and around Hyderabad. Hyderabad is kind of a hub, I would say, second or third hub in the country. And there is a huge expansion of 15,000 acres of land is being allotted to various multinational companies, including Indian companies to manufacture pharmaceutical products here in Hyderabad. And those land allocation started in October this year. And hopefully, within next 2 years, those plants will be up and running.
And apart from that, there is a huge market value addition in these products, unlike ordinary cosmetic or food and FMCG IBM products. So that is the area where Mold-Tek is planning to concentrate. And we have the wherewithal to process materials at a much higher -- lower cycle times or higher productivity, which is a key for our success in the field of injection molding also, having the tool room background, having the processing abilities and nearness to the market, especially the pharma market, where the EBITDA margins are -- EBITDA, I won't call, let's talk about valuation addition is in the tune of INR 200 to INR 250 per KG. So these are the points where we are considering, and we wish to penetrate and become a player of considerable size in the next 4 to 5 years.
My second question is with respect to dispenser pump. Our performance in dispenser pump has been truly abysmal. I know that Wipro contract has been delayed a bit. But even taking that into account, our performance has been below par. That is another very commoditized segment. I don't know why you entered it. Last time I asked you the same question, you told me that it is because we have leak-proof, tamper-proof, leak-proof dispenser pumps so the companies -- clients will buy from us, but that has not happened. What is the outlook for dispenser pump and when will you improve your performance? And are we going to continue in that business? What is the outlook for the dispenser pump over the next 2 to 3 years?
Yes, I agree and admit that the dispenser pumps business is not at par with what we anticipated. Because we started this mainly keeping Wipro in mind, which has a plan to set up a big plant in Hyderabad with a requirement of 2 million to 3 million pumps per month, which is now just they are picking up 2 lakh to 4 lakhs per month. So that sharp drop in Wipro's requirement has really impacted our performance in dispenser pumps. But now, of course, our pumps have been accepted by Himalaya and several other small players. But those volumes still put together are below 1 million per month, while the capacity created is close to 5 million to 6 million per annum.
As I explained in the previous call, these capacities are fungible. That means whatever is investments that are made in the pumps, out of, let's say, INR 12 crores to INR 13 crores investments made, other than the specific molds that are meant for dispenser pumps, that is to the tune of, say, INR 2.5 crores to INR 3 crores, all the rest of the equipment are fungible with our food and FMCG products. So keeping that in mind, we are continuously utilizing those capacities for our other products.
So if at all there is a hit on the company, it is to the tune of INR 2 crores to INR 3 crores of molds and assembly machine, what we specifically invested for the pumps. So having identified that this could be an area of not so great performance in future, we are holding it for a couple of varieties of pumps what we invested on and trying to break-even and recover our costs of the investment.
Thank you. Mr. Chandrika, may we request that you return to the question queue for follow-up questions. [Operator Instructions]
The next question is from the line of [ Saketh Reddy from Polasani Enterprises ].
Any more updates on the QR coded IML products. Can you hear me? Hello?
Yes Mr. Reddy, you are audible now. Please go-ahead with your question.
Sir, any updates on the QR coded IML, any more info?
Yes. We have been asked by both Valvoline and Castrol for line trials. In the case of Valvoline, we already submitted the caps and QR coded jars and they will be able to come out with a proposal by end of this month. In the case of Castrol, from the top management, there is a request for us to prove the concept online. Those products also being produced. They wanted a cap to be having a QR code, not -- only on the jar. So we are getting that works done so that they will be -- want to link the both jar and cap.
In fact, there was some problem in their supply chain where there were some proved cases of adulteration. So there is a concern now in their minds, and they have come forward now to take it little actively. So hopefully, in this quarter or at least end of this year, we may have one of these players starting into QR code.
And regarding the AB, Aditya Birla Group's Grasims paint order, regarding this product. Can you disclose the capacity for the plant that you're putting up in Daman?
Not Daman, it is in Panipat. The Daman is an expansion for our food and FMCG.
Yes Panipat, sorry, yes sir.
ABG has given a Letter of Intent for us to go ahead with setting up a plant at Panipat and their initial projections for the year 2 is around 2,000 tonnes per annum. More details I can't share, because they are also going with another supplier. So they will be having 2 suppliers at each plant. However, our portion is expected to be in the region of 1,500 tons to 2,000 tons from year 2, the year 2 is '24, '25. By November -- October '23, '24, that is October '23, we are expected to start commercial production there. And the numbers will stabilize in the year '24, '25.
And apart from setting up the plant only for ABG, we are also planning to have our food and FMCG product manufacturing in Panipat also, which will be able to cater to the northern clients who are huge in size, like say, Baddi is a very near point to Panipat, it is close to 300 kilometers, 250 kilometers, 300 kilometers from Panipat. So we'll be able to cater to those filling companies, even across the North region for our entire dairy products, food products, ice cream products, packaging products, which we manufacture here in Hyderabad. So, those facilities also will be set up in Panipat by end of the calendar year '23.
Right. And all of the CapEx programs that you've got regarding pharma and even paints, all of them are on track, right? There's no delays, right?
They are more or less on track, due to machinery supply. See, everybody is talking about semiconductor shortage. And all these automatic lines, all electric machines what we use, robotics, they all have somewhere or other semiconductors or electronic components. But of course, they are not hugely delayed, but definitely delayed. In the case of printing machines, which we ordered and supposed to come in August, in this month, we are able to take trials, and hopefully by end of this month, the machine will be commissioned in our plant. And one more machine was supposed to come in September, October, is now coming in December.
So in fact, if you ask for machines now, they're talking about a 1-year delivery period. But these 2 machines will adequately cover us for next 2, 3 years. And notwithstanding with that, we are also planning a high-end technology machine, which will be able to cater to our kind of needs in a much faster way. So that mission, we have selected and picked up, some trials are going on it. If it is successful, the machinery will be lifted right in December itself. So that will further enhance our printing -- label printing capacity and take care of our next 3, 4 years of capacity expansions. So that is one of the challenges we are having, machine supply in time.
We have ordered several machines on Japanese Sumitomo. They're okay. They are -- maybe they're asking a few weeks here and there. But probably, they will be in time, hopefully, some of the machines are already on the ship, they will be coming by mid of December. And some of them are coming -- which are supposed to come in Jan, maybe coming in Feb, March.
So these challenges of machinery coming a little late by a couple of months if something is impacting the time lines, otherwise we are more or less on track. For example, the IBM OTC product, molds are at final stage of approval. After that, there will be at least 1 month, 1.5 month of delay for expanding the number of mold cavitation from -- currently, we do for 2 cavities to 8 and 32, respectively. So that may take a couple of months, but they are on track.
Coming to the pharmaceutical, we are supposed to start in the first quarter. Probably it may slip to April, May, that I already indicated in the previous quarter because of the machines coming in a little late by about a couple of months. So instead of January, they may arrive in March and commercial trials may start in April. So, other than that, the plant in Daman land has been already acquired, contraction is yet to start, but that will start by May, June anyway. So that will be hopefully on track.
And the plant in Sultanpur, where we are all -- apart from IBM, we are add -- also adding food and FMCG capacity. There, we have taken very quick care and all those machines and robots are much in advance. So they started coming in. So hopefully, they will be running time for our season starting in March. So this is the update on the products.
Right. And one last question, sir. The 15% impact that we've seen on sales, is it for the overall revenue or only for F&F?
What you said 15% impact means?
The 15% due to the maintenance of the robots during the quarter.
No, no, that -- what I mentioned is, the cost of maintenance and cost of acquisition of labels in the absence of additional capacity is 15%. It's not the overall. So 15% of that cost, that means if our labels constitute, let's say, 4% to 5% of our cost, that cost has gone up by 15% due to the capacity being not created and the machines have arrived late -- arriving late, and some of the electronic parts are not coming in time. So there's a tune of 0.6% that has contributed to the cost.
So you didn't have any issues in sales within the quarter because of this?
No, we lost some sales. We lost some sales during this quarter, because we could not supply the labels -- IML label, we could not get the IML labels in time, because our machine maintenance, which requires some electronic parts, they came late. Let's say, earlier, they used to come in a week's time, 10 days' time, now it took about 1 month, 1.5 months to procure those spares. So the machines were lying idly longer. And then we are forced to buy these labels from outside. But as you know, there are not many players in IML label manufacturing, and they were not able to give quality or quantity in time. So we lost at least -- I would not say 15%. 15% of our 23% of food industry is around 3% to 4% of sales we missed in the quarter because of this.
And just one more question, sir. So the -- with the client additions this quarter, can you sort of tell more about the industry they cater to, because there is newly heard names, Sherwin Export and --?
Yes, these area all new names, they're all and medium companies, which we are adding rapidly. On the bigger side, more or less, all the FMCG and food companies are with us already. So most of these names, what we have announced today in the BSE, NSE report, most of them are old names. Any names of -- because we didn't make some of this. I also didn't notice, but as my knowledge goes, there are a couple of food and agro side, we are getting a couple of major players interested in it. But for that majority of them are small and medium players in the food and FMCG.
Thank you Mr. Reddy, may we request that you return to the question queue for follow-up questions. We'll take the next question from the line of Vivek Tolat from Acme Family Office.
Sir, am I audible?
Yes, yes, you are clear.
Okay. So, sir, just a couple of questions. One on a bit more of a strategic side. I mean I believe our total volume is going up from, let's say, 44,000 tons at the end of last year to about 70,000 tons by the end of next year. So out of this incremental 25,000 tons, 26,000 tons that we are adding, could you classify as to what would go towards thin wall and what would go towards paints and lubes, just an overall classification, if you have done something on this?
Yes, I think we already put up the slide in the BSE website. While thin wall is around 4,700 tons, bulk packs and IBM -- bulk packs about 2,600, IBM about 2,000 tons. So these are the plans for this year. That means about 6,600 tons and 11,500 tons will be added during this year -- in these 3 areas, think wall, bulk packs and IBM. And coming to the next year, we will have that Panipat plant of ABG to be set up. And we are also in discussion with them for another plant. I can't disclose the quantities, because we are not yet received the LOI, so if that happens, that plant also needs to be set up before end of '23, '24.
So next year, again, we will have about 4,000 tons to 5,000 tons of bulk packs expansion. And IBM will be -- this is the first phase where we are starting with 2,000 tons, probably, if not in pharma, in the other file IBM, there may be some expansions in the year '23 to '24. So another 2 to 3 -- 2000 tons of IBM and about 4,000 tons to 5,000 tons of thin wall will be added. So another 11,000 tons to 12,000 tons will be added in these areas. And as per Asian Paints' projections given to us, again, another 2,000 tons of bulk pack production has to be added in Mysore and Vizag. So all this put together, we will be reaching our 24,000 tons, 25,000 tons of expansion during the next 2 financial years.
Okay. That's very helpful. And my second question, sir, if you could throw some light on what sort of approval process do we need for the pharma IBM? I mean, is it as rigorous as the U.S. FDA expansion or is that already started? I mean what sort of time lines are we looking for that?
Yes, it's a good question. It's not equal to FDA, but it is definitely a rigorous process, which will take at least 3 months to 6 months from client to client. So I won't be projecting any big numbers even for next financial year. There will be some numbers to come in, because by the time we start in April, then the approval process might take 3 months to 6 months. So that means only by middle of next financial year, we'll be in a position to start commercial invoicing of pharma products, but not starting -- stopping with it. We have already acquired one major order from IODEX for OTC IBM products, the production of which is expected to start in Jan-Feb, probably in Feb. And that will be adding numbers in the next financial year. If all goes well in that the value -- order value is close to about INR 7 crores to INR 8 crores per annum.
And we are also having some dairy products our clients are asking us to develop. And in those products, orders also confirming. They will be produced on the pharmaceutical machines, because in the same premises manufacturing other products is rather a luxury, but we would do that instead of keeping the machines idle. And hopefully, those numbers also be added in the next financial year. But coming to pharma in a big way, the numbers will start a little bit in the second half of next financial year, but definitely in a decent manner from year '24, '25.
The next question is from the line of Jenish Karia from Antique Stock Broking.
If you can just help us with the volume and value numbers for IML and non-IML segment?
Yes, IML, non-IML segments, as I told you are more or less stable. Last Q2, it was 58.7% for all the labeled containers, now it is 62.5%, which is also similar to Q1, which was 61.8%. So there is a marginal improvement in the total IML and HTL labeled containers from 58.7% to 62.5%.
And sir, value-wise, what value might be?
In terms of value-wise, from 62.3% to 66.6%.
And sir, if you can just provide a value-wise numbers for 3 segments paints, lubricants and F&F?
Yes, pains has dipped from 59% last year to 53.8%, but lubes have gone up from 19.3% to 22%. And the food and Q pack, that is -- both come under food and FMCG has gone up from 21.4% to 24.1%. Okay. That's it from my side, congratulations on [indiscernible].
Thank you. [Operator Instructions] The next question is from the line of Harsh from Marcellus Investment Managers.
Yes, A couple of questions from my side. So my first question is on the [indiscernible] front. So on FY '21, our debtors stood at around INR 90 crores, that went up all the way to INR 143 crores in FY '22. And in H1 FY '23, it has again gone up to INR 158 crores. So why are we seeing this rampant increase in debtors?
See, debtors increase is related to sales, as you all know. And if you see 2 years ago, the raw material prices were low and the sales number as per se, was around INR 400-odd crores. Today, our sales numbers for the first half itself is close to INR 400 crores, for the full year, it may be INR 800 crores -- INR 780 crores to INR 800 crores. So when you have doubled your sales, automatically debtor levels also will go up. That is one reason. And one of the other reasons for the increase in the debtors is though we are restricting all the new clients to either advance payment or 30 days credit, our older clients like Asian Paints and others, they are on the way to increase their credit period, not only for Mold-Tek, but with all the suppliers other than FSIs. So we are kind of committed to their philosophy, and that is where we are extending our credit.
But when it comes to the new clients and especially small and medium clients, we are very strict about it. So we are maintaining 0 to 30 days credit. That's what has made the credit debtors situation still under control. So INR 90 crores to INR 158 crores is mainly because your sales have gone up from INR 420 crores or INR 430 crores 2 years ago to INR 800 crores or INR 780 crores this year. That is the main thing.
And how much of Asian Paints increases with OFMs?
I can't give you exact details, but definitely, they increased.
Okay. Okay. And my second question was that in the paints industry, in the paints industry, we have set up a specific plants only for Asian Paints till now, and now we are setting up plants for Grasim. So the Asian Paint has done well over the years, but however, what is Grasim doesn't do as well, and we are paced with the plant, which is not utilized its optimum capacity. So what will be our plan of action in that result?
See, as I told you, we are very careful in our assessment for setting up any new plants. And we also have a plan B like producing our food and FMCG products in that region. So our selection of fortunately, Grasim has a lot of faith on Mold-Tek and they have in kind -- I can't say that they've given us an option, but they were respecting our options, and they've given us Panipat where we wanted to be in the north to cover our food and FMCG clients in that area, which is very far from Hyderabad, where we have these facilities as of today. So food and FMCG will be growing rapidly once we have a plant in North and able to capture those clients in that area.
Similarly, we are also planning to choose another location if they offer, which is towards South and gives us more access to those markets. So that way, we are prudent in our investments, and we'll have other products also other than just paints to make sure that our investments would benefit. And another idea in the long-term, if not immediately, maybe 2, 3 years down the line is to even have the IBM facilities in those plants, so that our product range is wider and our risk is mitigated.
Okay. Okay. So sir, any particular reason why we are waiting for Grasim to allow us to open a plant in south, like why can't we open a food and FMCG plant even without Grasim?
See, today, we are in a position to go ahead with the current expansions, and there are so many things on hand. We have the IBM going on at Sultanpur, pharmaceutical unit coming up at Sultanpur. We have a new land taken at Daman where we are forced to complete the plant there in the next 6 months for our western -- west-based food and FMCG majors, and we have Panipat to be completed by end of '23. And there, we are planning a food and FMCG. So with so many projects on hand and so many molds and robots to be installed and erected, South can wait for a little bit. And sooner or later once we have the commitment from any of clients like ABG or others, we'll be in a position to take a call on it. And south being not so very far from Hyderabad, we'll be in a poison to handle till then.
The next question is from the line of Vikram H, an individual investor.
Could you hear me?
Yes, yes, I can, go ahead.
Okay. So first of all, given that we are already midway through the third quarter, any [ surge ] across your various business segments in terms of demand?
See, demand-wise touchwood, we are on a pretty strong wicket. The problems of printing labels and getting the labels in time is still continuing till October, but situation might improve from November because our mission is on the trials now and probably it will reach our site in the second half or end of November. So from then, things will improve because there's not much depth. Typically, second and third quarters are weak because in the second quarter, there will be heavy rings, movement of goods and painting activity comes down and even consummation of frozen and dairy foods comes down in the second and third quarter.
Though the festivals are there, some areas like sweets and some consumable products will improve, like edible and others. But soon after the festival, that is from October, November onwards, again, there will be a lull period till December. So if you look at the historical data of Mold-Tek performance, we always have the best of Q1 and the best Q4. And Q2, Q3 are typically below these 2 quarters.
So by the time, end of Q3, we will be coming out of the problems of printing capacity problems, and we'll be adding huge capacity. In fact, out of 3 machines we have -- from 3 machines we have, will be 5 machines by end of November or middle of December. And we are also planning a 6th machine with a much larger versatility. If it is selected and trials are successful, it also will be added by January end. So that means we are more than doubling our IML and label HTL printing capacity by January. And then we don't foresee any problem of losing sales, which happened to some extent in this Q2.
Got it. And -- but from a demand standpoint, customers across the 3 segments, you're not seeing any slowdown?
Yes, there's not much slowdown. Paint has not so grown in this quarter. I think the paints are up by only 4%, whereas lubes are pretty strong, they have gone up by 26%. But not just because lubricant sales have gone up, that's basically we are able to bring in more clients into IML and also won some long-term orders from the private sector giants like Valvoline, Pennzoil and others. So that has enabled us to improve our overall numbers in the lubricant industry.
Got it. Second question, sir, is really on the following year, which is FY '24. Any sense of what top line growth you're looking for at a very broad level, for '24 and '25, given many of your initiatives will actually come through, some in '24 and more so in '25. Any broad guidance?
See, our target has been always to be in the bracket of 15% to 20% of volume growth. I think in this year, '22-'23 we'll achieve that, because we have a strong beginning and fourth quarter will certainly be strong. So this year, we'll be achieving historical growth in our company. We never crossed 15% volume growth in the past, at least past 20 years. So this year, I'm confident our growth will be very close to 20%, unless any drastic things happen in the economy, we should be able to reach 20% volume growth for the first time in the history of the company. And we are aiming at maintaining that for the next 2, 3 years in a row. The confidence comes from the fact that next year, IBM ordinary products and a little bit of pharma products would be adding around 2% to 3% growth. And we continue to grow in thin wall and food packs by 50%, 40% growth. But on a 24% is also around 9%, 9.5%.
The indications from the paint industry are they will be certainly in a double-digit growth. If that happens, we will be adding another 4% to 5% to the top line growth. So all put together, my calculation comes for a 15% volume growth for sure. And if the pharma picks up a little bit and Panipat start from production numbers, and Daman adds some Asian clients, we may be very close to 20%. So for next year, 15% looks very easy -- I mean, definitely possible to achieve. As we currently said, the year '24-'25 would be, again, a strong year for us because the Panipat will be contributing in a big way, a reasonable way. And pharma will certainly be adding numbers in a decent manner. So for the next 3 years, I can see the range of 15% to 20% volume growth is possible.
And the last piece was really around your capital allocation. In terms of all the CapEx that you're planning, how are you planning to fund that? Because you obviously have internal accruals, you have debt, you could even do an equity raise. So any broad sense on that?
See, we have more than INR 100 crores of -- INR 100 crores, INR 120 crores of internal accrual and net of dividend, it may be in the tune of around INR 90 crores to INR 100 crores. So that will be more than adequate to take care for next couple of years. But if any shortfall in that, we can easily borrow because our debt to equity is less than 0.1% as of now, including the debt of working capital. So there is a tremendous scope to borrow in case of any big needs arise.
I foresee the needs arising rapidly from '24, '25 in the field of pharma, IBM. But till that time, it will be the plants for paint companies. Even Asian Paints is talking about -- I mean today don't take to word, they're also having some expansion plans in the next few years. And definitely, we may get an opportunity to take part in those opportunities. But that may not happen in the next year, but maybe in the next 2, 3 years. So looking at that, our internal generation and debt will be more than adequate to take care of annual investment in the tune of INR 100 crores, INR 120 crores.
Mr. Vikram, may we request that you return to the question queue for follow-up questions. We'll take the next question from the line of Kuvam Chugh from Aditya Birla Sun Life Mutual Fund.
I had a question on our lube business. So even though we had strong growth year-over-year, sequentially, there is quite a sharp declines in Q1 to Q2, from over 2,600 tons to less than 2,000 tons, so what led to this decline in volume?
So typically, Q1 to Q2, there will be a drop in lube consumption all over the country, because the movement of goods slowdown in monsoons and number of miles a truck clocks in a day comes down due to monsoon and disruptions on the travel. So generally, Q2, Q3 are weak for lubricants. What 27% growth I projected are what we achieved, whether it is 30% growth in FY '22 over the Q2 of last year. So on Q1, it is very difficult to reach such number because in Q1, we hit INR 55 crores, and now it is INR 40 crores in the Q2. So that is almost a 25% drop, which is normal in the -- in our sales trend. That is why typically, our Q2 and Q3 numbers are at least 7%, 8% below the Q1 and Q4 numbers.
Q4 will be again an active part of the year, where lot of transportation happens, storage and consumption happens and movement of goods happens, painting goes on a full brisk speed during summer and pre-summer. Lubricant momentum and consumption increases. Food and FMC, mainly frozen foods and dairy shoot up in the summer. So that is why our first quarter and fourth quarter, that is, I would say, rather Jan to July or June ending is the best period for our product demand. And the remaining 6, 7 months, they taper down, they pick up a little bit briefly around Diwali, but again, there will be a lull for a couple of months. And then the storing for the next season starts from January. So Jan to June is our best time, then things will be slower in Q2 and Q3 because of the reasons I explained.
Okay. And in our first quarter conference call, we highlighted that there was a best brand of lubes that would drive in growth. So that trend has continued into Q2? Or was that more of a one-off that we had in Q1?
You mean that DEF product I mentioned?
Yes.
Yes. That has continued to be one of the reasons for our recent growth in the lube sector. Actually, lube sector has not grown more than 5%, 6% in this year, but we grew by 30%. That's an indication that still the DEF growth is coming in. And also, some of the majors in the private sector have given us long-term agreements like what they did, 1 or 2 did last year. This year, again, another 2, 3 clients have given that and by shifting more of their products into our gamut, also including some of the IML conversions. So that has given us good growth in lubricants.
Okay. And on the pumps side of the business, in an earlier conference call, you highlighted that Wipro has decided to scale up in volume towards the end of this fiscal, starting next fiscal year. Is there any updates there? Is that still going strongly?
Actually, in fact the indication from them is, there will be a further delay. So in the pump segment, we are not seeing a great future. But definitely, we are penetrating into Himalaya and other majors, but with them, even though they have committed volumes to some of the suppliers, so a part of the volumes, they have started taking as a trial lot was supplied, but major volumes would start from December, January. Even then, the volumes would not cross more than 1 million, 1.5 million per month, as against our capacity of about 6 million per month.
So on the front, we are still on the defensive, but as I said, the capacities are fungible, all the machines, auxiliaries, land building, everything that has been set for the project or product, within our Unit 1 at Annaram, are being used for all other products and whatever are possible on those machines, like thin wall products and caps and other closures. So absolutely, the machines are put to best use. The only thing is that investments on the mold and assembly machine that is costing, put together, INR 3 crores are partially utilized. And that will continue to be so for next few quarters is what I guess, because until Wipro sets up in Hyderabad and start picking up their committed volumes of 2 million to 3 million, the production requirements of pump may not go up.
Mr. Chugh, may we request that you return to the question queue for follow-up questions. The next question is from the line of Rahul Maheshwari from Ambit Asset Management.
Hope I am audible?
Yes.
I just had one question. As you mentioned about the volume growth and plus the plants which would be coming towards the pharma and the IBM, can you also give some color on the EBITDA per kg, how it will scale up more, looking from a 2 years to 3 years perspective, from currently at a -- near about INR 40 per kg?
Yes. From the basic EBITDA impact as I mentioned in my note to BSE, NSE is that, maintenance and breakdowns in our printing and printing capacity could not be ramped up in time, we have incurred additional costs in procuring those labels from outside with higher price and lower quality, which has impacted our output reasonably, not very badly, but certainly about a tune of around INR 1 crore, INR 1.5 crore additional cost has been incurred. And there is an increase in the power cost in all 3 states where major states where we are operating, that Daman, Hyderabad and Andhra Pradesh, these 3 places, they shot up the power cost by around 12% to 15%. So we need to now go recover it from those -- our clients, which would have -- take few months, but certainly, we'll be in a potion to recover in the next few months. So these are the reasons for the dampened EBITDA, otherwise, the EBITDA would have been healthily at around INR 42 crore, INR 43 crore by now.
Having said that, with the addition of pharma in the year '23, '24 to a very small extent, but from '24 to '25 in a decent manner, we'll be in a position to ramp up the EBITDA numbers towards INR 45 crore levels. So as I indicated last quarter also, in a couple of years, we can look at EBITDA in the region of INR 45 crore. And another reason for my confidence is, we are ramping up our printing capacity by almost 100% by this December, which will enable us to make all the labels in-house and stop buying labels from outside, even HTL labels from outside, which itself will be a saving of about INR 3 crores to INR 4 crores per annum even at the OPM level. So that will improve the margins for the next few months, soon after the capacities are created by January. So with these 2 points, one is the in-house making of entire labels; second is getting into pharma over the next 2 years, would be a driver for our EBITDA improvement.
Sir, as you mentioned, because of the sharp jump in the power cost, how much leeway of pass-through we can recover from the clients? How the agreement or how the terms is being set so that whenever going forward also any such situation of higher cost takes place, what is the lead time takes place to recover the entire high cost which has been borne by us?
This kind of conversion costs, we talk to our clients once in a year. So we won't take them on a monthly basis. See, whenever the labor costs are enhanced by the Department of Labor and power costs are increased by the Electricity Boards, we take up the matter with the clients, and they typically take 3, 4 months to approve it, 70% to 80% of them approve it, another 20%, 30% of them will drag on it for a while. But certainly, maybe in 6 months to 1 year time, they will definitely cover up those costs.
The next question is from the line of Rohit Reddy, an individual investor.
Hello, everyone. Can you hear me?
Yes.
Hi sir, So my question, first one is regarding the export orders. So can you brief on quantity involved in the export orders, as I can see from a quarterly presentation, so a lot of them are not [indiscernible]?
Yes, shipping costs are now under control, not only for Middle East, but also for the U.S.A. And I'm glad to inform you, though, they are not very huge orders, a beginning has taken place with our exports to U.S.A. The numbers are slowly scaling up. I don't have the exact revenue number, but I think in the region of about, this year, we might do at least INR 2 crores to INR 3 crores or maybe INR 3 crore, INR 4 crores worth of exports to U.S.A. That is for various food products and even restaurant packs in the Indian restaurants, mainly, and also maybe other stores. With this entry, we are even planning some BD efforts, business development efforts in U.S.A. later in the year. So that there is -- there are enough customer references for us from our Indian clients or NRI clients who are now currently buying from us. And thus can we use it to even get into the -- lead from the direct to consumer clients in U.S.A, unlike B2B. So that opportunity can only add sizable numbers, but this will be an opportunity of maximum INR 5 crores to INR 6 crores per annum. But that will be with a decent margin and decent quantities.
Yes. Regarding [indiscernible] for FMCG or are you looking into IBM [indiscernible] these orders now?
No, no, currently, it's all FMCG because in IBM, we are new entrants. So food and FMCG is the one area where we have pretty strong presence, pretty wide product range. So that is where we can convince foreign buyers on our strengths. Talking about IBM at this stage is too premature, because we are just entering with 1 or 2 products and maybe another 10, 12 products of pharmaceutical. Though they will be exported, they'll be exported to Indian pharma companies, who fill their products and export.
Of course, we may get some export recognition for that, but direct exports, we can only start after our products are adapted by pharma companies in India. Then we can directly find exporting of these containers to various countries, not only U.S.A. for other filling companies, which fill their tablets and powders, and sell to U.S. and Europe, they will be buying from us. So that is another opportunity, but that's a long shot, sometime after the '24, '25 onwards.
My next question is regarding the raw material cost. Also, how much is a mix of the recycle and raw materials?
Our raw material is stabilizing, the prices are stabilizing in the region of INR 105 to INR 110 for the last 4, 5 months, which shot up to INR 140 during February, March last year, I mean, in this year, last financial year. And now they are hovering around INR 105 plus or minus INR 3, INR 4 for the last 4 months. So there is some kind of stability there.
Mr. Reddy, may we request that you return to the question queue for follow-up questions. We'll take the next question from the line of [ Karam Chand from Value Adicative ].
Is there any update regarding QR coded IML, any clients launches from the market?
Yes, I explained about QR coded IML just a few minutes ago. There is a revised inquiry from Castrol, because they have found some issues in the supply chain related to tampering and misuse of containers. And -- but they're asking for a complete solution, including the cap or spout to be QR coded, which is a little challenge we are trying to address. Meanwhile, Valvoline is also taking steps in that direction, but concrete things have not yet happened. But hopefully in this quarter, we'll be able to go a little bit ahead.
My next question is regarding IBM pharma bottles, is it also possible to manifest this pharma bottles by a [indiscernible] molding? If yes, then what is the market --?
There are bottles which are beyond 1 liter or beyond 800 ML are produced by EBM. Even we may have to have 1 or 2 machines of EBM ultimately, once our product range is established.
Okay. So just for large capacity, or for more than --?
Larger bottles, not for bottles below 500 ml, it's not viable, and it won't give the kind of finish which IBM can give.
Right. So like is there any margin difference between IBM and EBM for small bottle size?
There will be definitely a EBM, within EBM, EBM pharma bottle will fetch you, anybody much higher margin than the regular bottles, because of the care you need, because the hygienic conditions you have to maintain because of consistency you required to deliver. Whereas in other products like edible oil packs or shampoo bottles, not that nobody is bothered, but definitely, they are not as much concerned about the hygiene and consistency as a pharma company would require. So definitely, there will be a difference in value addition, pricing between different segments.
Mr. Karam Chand, may we request that you return queue for follow-up questions. We'll take the next question from the line of Kuvam Chugh from Aditya Birla Sun Life Mutual Fund.
Just one more question. Could you share the volume break-up by paints, lubes and F&F?
Yes, volume break-up in paint is 4,850 tons, lubes is about 2,000 tons, and 1,520 tons in food and FMCG, including Q pack.
Okay. All right, this is very helpful.
The next question is from the line of Jenish Karia from Antique Stock Broking.
Thank you for the follow-up. Sir, if I look at the realizations for the food and FMCG segment, do you rather than [indiscernible] for the quarter or any specific [indiscernible]?
Yes, that's what I mentioned to you. There are -- in the note also, we have given to BSE, NSE, that due to the purchase of IML labels from outside, we have incurred additional costs in this quarter, particularly because the maintenance spares, especially electronic spares, semiconductor-based spares are not coming in time, leading to longer breakdown of machines, which pushed us to buy the label from outside at a high-end cost. It is not only higher cost to lower quality and higher rejections, which has caused stagnation of EBITDA in this quarter. And even we lost some sales to the tune of 3% to 4%.
So the additional cost incurred is reduced from the revenues for the segment if I am correct, by what you say?
There are 2 impacts. One is, we could not execute all the orders in the, mainly IML product range, and thereby we lost some sales revenue. Second is, we have incurred higher cost by getting these labels printed outside and having the issues of quality and rejections, which would have been avoided had our capacity expansion happened in time or had this spares for our machines were available in time. Both these 2 issues have caused a little loss of revenues and increased the cost of in IML label overall.
Okay, sir, I will take it offline.
Seeing that Improvement in the EBITDA.
Okay, I'll take it offline with the [indiscernible]. And second question is regarding IBM pharma project. So the realizations are more targeting and this, will it be at par with the competitors or at discount or how we will be positioning others in that market?
See, this is too premature to talk about the pricing strategy for pharma products. But definitely, there is an entry point through competitive pricing. But that whatever we pass on can be easily achieved through a proper productivity management, which Mold-Tek is having a strong in-depth knowledge. So we hope to be maintaining the similar pricing and enjoy the similar EBITDA margins, which the current competitors are enjoying. There is no need to offer huge discounts and try to get into a price war, because there is an expected increase in the demand for these bottles and caps in the coming quarters.
As I said, in coming years, at least in a couple of years, huge plants are coming up at Hyderabad in the pharma park. Already the city is moving towards that, a lot of lands, real estate activities started towards that part of the city. And land allocations have been started in October. So we will be definitely seeing clients coming up by '24, '25 in 2 years' time. And being located in Hyderabad and well established contracts with the pharma companies in supplying some of the bulk packs, 10 liter, 20 liter packs in a small way. And our reputation being one of the best modelers in the country. We don't need to compete on pricing front to enter. But if that be the case also, we have the wherewithal to maintain our EBITDAs and improve our EBITDAs level.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Rao for closing comments.
Thank you very much for all the participants, taking interest in our company's Q2 performance. And thanks for the interest shown and the time spent. I also thank Manish from Antique and the coordinator for the time and opportunity. I wish you all a good day and enjoy the evening. Thanks, and bye.
Thank you. Ladies and gentlemen, on behalf of Antique Stock Broking, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.