Mold-Tek Packaging Ltd
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Earnings Call Analysis
Summary
Q2-2024
In Q2, growth was marginal at 5%, with H1 showing a 3.4% increase in volume terms. The quarter saw declines in paints but growth in other sectors like lubricants (9%), Food & FMCG (15%), and square packs (80%). Overall, the company anticipates a volume growth slippage to 8-9% rather than the projected 10%. Strategic moves into pharma packaging are expected to drive growth in the next 5-10 years, with a targeted EBITDA improvement. Commercial production in new pharma segments is set to begin in the coming months. CapEx for FY '24 is approximately INR 120 crores, with INR 54 crores already spent in H1.
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Ladies And gentlemen, good day, and welcome to Mold-Tek Packaging 2Q FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.
I now hand over the conference over to Mr. Abhishek Navalgund from Nirmal Bang Institutional Equities. Thank you, and over to you, Abhishek.
Thanks, Michael. Hello, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to MOld-Tek Limited Q2 FY '24 Earnings Conference Call. We have with us Mr. Lakshman Rao, the Chairman and Managing Director of the company, along with the finance team. Without further ado I would request Lakshman sir to start with his opening comments, post which we can open the floor for question and answers. Thank you, and over to you, sir. Hello. Do we have the management online?
Hello?
Yes go ahead.
Good afternoon, everybody. Thank you very much for your interest in our company's operations and results. I wish to state that we have a flattish quarter in Q2. Growth was marginal at about 5% in terms of volume terms in the Q2. Overall, H1-on-H1, we had a 3.4% growth in volume terms. This basically, we have growth coming up in our square packs and lubricants and also Food & FMCG. But paints continue to be on the decline. As I have stated in the past, we are not chasing the small term paint companies and letting go some of those paying companies. And also, there's a flattish performance of all the major paint companies, if you noticed in the market. And that has resulted in our paint sales dip [indiscernible] by about 8%.
Being the largest contributor at around 50% of our total sales -- this has impacted our growth to a reasonable extent. However, the positive thing is the lubricants have grown 9%. Food & FMCG is at 15%. And Qpack, which is our scrap as we've gone up by a huge 80% growth in volumes because of the new segments have been opened up and other details, which I will talk over your Q&A session.
So I now would rather go back to the operator to let us take the Q&A so that we can cover more details.
[Operator Instructions]. The first question is from the line of Avadhoot Joshi from Braynston Investments.
Am I audible?
Yes, Mr. Joshi.
Sir three questions. First, on the lubricants, we have seen an increase in the volume I would just like to know what has contributed to it. And there are 2 or 3 major companies are also getting into the lubricant businesses like [ Amara Raja ] getting to African business plus [ Goodyer ]. So are we able to add new clients into this segment? That's first for the lubricant. And do we expect this growth for the lubricants to keep on going further also?
[ Amara Raja]. A [ Goodyer ], we are just in touch, but then we have to go into commercial production in a big way. And the growth we are seeing is mainly because of continued movement of companies into IML. And also some of them into QR coding coded IML container. Shell is moving 1 by 1 of its grades into QR code. And apart from that, I would say IML movement from dry decoration to IML declaration is what's causing the growth in the lubricant sector. .
Adding new clients will be still on the plate for next few quarters. So we expect the lubricants to do well. In spite of the lubricate sector volumes may not grow considerably we may still have about 7% to 10% annual growth for the next 1, 2 years.
And on the Food & FMCG, the Qpack segment has been doing well for the last 2 quarters. it could be majorly due to the reduction in palm oil prices. How do we see growth into the core FMCG sector that you have mentioned in the beginning that core FMC has grown 15% do we expect to grow more going further because we were expecting 2% plus growth into this segment? How do you look at it?
Yes. Even in the half year, the growth of 14% is much lower than our reputation. Basically because the ice-cream sector in the first quarter especially was really affected due to the rents in the summer season. which impacted the sales consumable, you might have noticed and read the news items also on that, which is a major contributor to our top line growth. So having said that, the quarter -- this quarter, 15% growth is also because of the ice-cream -- slack in demand. Otherwise, we have added several clients. And it could have been more than 20% as [indiscernible].
Coming to the Qpack, the demand drive is not just because of edible oil at all. It is mainly because of our other sectors like [ cashews ] use and fertilizers, nutrients and other applications, which our marketing could open up is the contributor towards the increase in the Qpack sale.
And 1 news, which we also gave in our press not is that A few months ago, we received patent for the square packs, which we have been fighting for the last 4, 5 years. And that has been [ vetted ] to us a few months ago. And then we completed some legal formalities. And through various codes, I don't want to name the codes, we have got the injunction orders again a couple of duplicator. We have copied our container as it is and manufacturing in them in a very [indiscernible] unhygienic last year offering lower prices impacting our margins on directly and also our market size. So those effects just started a month, 2 months ago. From September, we started taking action on people who are copied or patented design. And courts are also supporting this time because the Delhi High Court has given us an injection order to seize 1 of the completers. Similar artists are now being given by other high courts and we hope to stop at least 3 or 4 very low-end competitors were happy of design in total. And that may also gradually improve our margins and volumes in that segment in the next few quarters.
Lastly, on the guidance, you have added that in the last quarter, the volume growth would be around 10% for this year. Do you still maintain that guidance?
Yes. The third quarter is moving good. We are looking at around 14%, 15% volume growth in this quarter. There's also the volume growth in this 2 quarters is only 3.4%. So even if we can do at least 15% growth in the next 2 quarters, we can still be there. But we may slip a little bit to the extent of 8% to 9%, but not severally down because our pharma packaging will start production from December in 1 of the segments. And the second segment will start from January. So in the fourth quarter, there could be numbers added in both pharma and also ABG plants, 2 plants of ABG, 1 at Panipat, 1 at [indiscernible]. They will go into production by the end of December, beginning of January. So there will be some numbers, not huge numbers or some numbers will be added in the first quarter. So I'm still positive that we may be able to reach a double-digit growth in the overall volumes in the full year.
The next question is from the line of Jaiveer Shekhawat from AMBIT Capital.
So firstly, on the pharma packaging side. Can you update us where are you in terms of your plant production, customer audits and client sign-ups?
We are really bullish about our entry into pharma packaging, thanks to the good guidance and some of the market research and then by our marketing team, we are instead of coming out with just the tablet packs, which we leased 1.5 years ago. We are now coming out in the 4 segments that is OTC. Of course, it was there in the beginning also that we over-the-counter products. and then the regular tablet packs, which we have initiated in the beginning itself. And -- but we have added [indiscernible] tubes and canisters, which are also very critical inputs for the pharma industry. And there are very few suppliers and some of these products are still imported at least canisters and distributed by some companies here in India.
So these products will give us the edge in terms of quicker entry with the pharma companies, we hope. And that will open up the avenues to get into other areas of pharma packaging like nasal drops, eyedrops, inhalers gradually. But going forward, 1 thing we feel in our management is that pharma is going to be the torchbearer were for our growth in the next at least 5 to 10 years. Like what IML did 10 years ago, we hope pharma will be able to do for our company in terms of improving EBITDA, especially and taking us forward in revenue growth later.
So we have done the starting and we have created the team in place. The final stages of clean-room work is going on now. We hope to start commercial production in the beginning of December for 1 of the lines. And probably by January, we'll have all the 4 segments up and running. So we have created the team of technical people, quality control, and we are in the search stage for a couple of -- a couple of marketing people also joining, but we are still in the search for a top 1%.
And meanwhile, our initial talks with some of the pharma agents has indicated that they will be welcomed to join the club because there are very few operators 3G and [indiscernible] and Dr. Pak like that, there are only 3, 4 known operators of decent size. And there is a [indiscernible] growth coming up and even Indian like there is a council for midstream medical production and packaging. They are also becoming more stringent in terms of packaging production, packaging, quality of the mine and mandating practices of packaging companies also apart from just Pharma.
So if that happens, even in a country like China it happened now. They have strong standards like FDA. So if the standards in India starts tightening, the domestic market is a very huge opportunity. So we'll be placing ourselves in time to grab those opportunities apart from the huge pharma [ city ] coming up with ideas. Of course, the work is still going on and probably [indiscernible] we see pharma companies ramping up production capacities in Hyderabad in that pharma city.
So it will also take us a year or 2 to build up our capabilities, numbers and relations with these pharma companies. and will be well set for a long inaction pharma tracking is a growth strategy.
Sure, sir. That's helpful. And moving on to your lubes and F&F business. So while on a Y-o-Y basis, you've grown 10 to 15 percentage but that's also because of a low base in the base quarter. Because if I see quarter-on-quarter, the decline is roughly 15% to 20% in your lubes and F&F business. So can you just explain the reason behind that? And what is your outlook for the rest of the year in lubes and F&F?
In Food & FMCG, you mean?
Yes, in your lube pack as well as the new Food & FMCG.
Compared to Q1, you're saying?
Yes.
Yes. Compared to Q1, Q1 is always our best guess in terms of F&F, mainly because dairies and ice-creams and all other products continue to be the best year. so when it comes to the Q2, you have a lot of rains and the consumption of mainly the ice-creams and dairy products will come down sharply. That is the reason. Otherwise, Q1 is historically highest all the time. But if you compare our current performance with the last year performance of Q2, we have grown by 15%.
Yes. I see that. And lastly, sir, in terms of your guidance for F&F business. So I understand this year, you've seen challenges in terms of your expectation about this business over the next 2 to 3 years, do you still material 3 percentage plus volume growth guidance is happening?
Yes. Going forward, we always aim at 20% to 25%, at least, if not 30%. 24% is possible because now we are going to set up our first plant in Panipat with a basis day of about 4 to 6 machines by February, March this year '24. By then, the summer also will set in, and hopefully, we'll catch up with the summer season in Panipat area, and that is not an area. So we hope to maintain that 25% guidance in F&f going forward for the next couple of years.
In Qpack we'll continue to grow in something like 30% to 40% at least, if not '18. And that is because we are not only getting new segments coming into this back, but you might have noticed to [ Germini Oil ], which is 1 of the largest oil management which in the country and adopted our 10 liters in a big way, and they're advertising the pack and pushing the quantities very -- in a very big way. So there is a lot of inquiries coming in our way for the edible oil fats also now. Because 1 of the leaders has adopted so far, midsized companies only adopted. This is the first time the -- I mean, a company like gemini Oils have adopted this pack in their portfolio and giving it a very good test. So we hope that this will create further demand for the -- in the coming quarters.
[Operator Instructions]. The next question is from the line of [ Jinesh Karia ] from Antique Stock Broking.
The first question is with regard to recent if you could just help us with the volume and value share and Food & FMCG lubricants and paint statement volume and value growth
Sorry? Volume and value growth in Lubes segment?
Yes, paints, lubes and Food & FMCG
okay. The value is INR 7.32 crores, tonnage is 4,460 lubes INR 37.7 crores, tonnage is 2,160, Food & FMCG, 32.86%, tonnage is [ 17 ]. Qpack is INR 19 crores, tonnage is 8,779 in.
Okay. And sir, similar numbers for IML or non-IML?
Sorry Qpack is 1,117 and food is 1,040, Qpack 1,040, 1-0-4-0.
Okay. Okay. And similar numbers for IML, non-IML segment.
Yes. IML -- we have 62% IML, 38% non-IML in terms of value terms, 66.7% and 33.3%.
Okay. Sir, second is on the CapEx. So we have -- we are guiding for around INR 120 crores CapEx for FY '24, in first half, we have spent approximately INR 25 crores. So if I can have the...
Sorry, we have spent around INR 54 crores.
Okay. I was referring to the cash flow statement.
In the cash flow statement, you have showed only INR 25 crores for CapEx.
The intangibles as a separate line item, sorry. .
Working process is not [indiscernible].
That was mine. Okay. So -- and so how do we plan to fund the second half CapEx? So .
We have applied for INR 2 crores of [indiscernible] from Citibank and the rest will be coming through our internal generations. So our overall total INR 122 crores to INR 125 crores investment is planned, which is on card as for the [indiscernible]. [indiscernible] are added to the worth of INR [ 140 ] crores as of today, they'll be activity arriving in the next 3 months. and there will be construction activity still going on at Panipat [indiscernible]. And Panipat -- sorry, [ Mahad ] has to start from probably end of December because we just got the land clearance, and now we need to complete the registration formalities to the government Maharashtra. And then probably in December, we will be able to start construction at Mahad. That plant is supposed to go into production by June next year. So all these expenditures will be crossing the projected INR 120 crores.
Okay. That's helpful. Sir, any guidance on the EBITDA on 4G basis for this year and in the long term? .
See, this year, we noticed that there is increased pressure on mainly because we have to take people and trying them for various plants across India already, people have been taken for Panipat and -- key personnel, not have everybody, key Personal have been taken in there under various levels of timing. Some of our internal people are being transferred to those areas. And these new people will be absorbed in the plant either ways.
So the team, both in pharma, both in pay, there is increased manpower that's reflected in the increase in manpower cost by more than 14% this quarter. So that is 1 of the reasons for the reduced EBITDA. And also, we have the challenge of adding RCP material for the paint and lube industries, especially because they are under the government statutory obligation to use the recycled plastic. And in turn, they ask us to mix as material.
And of course, the pricing was they take advantage. But more than the pricing, the involves lot of price to establish the products and changes in the malls. So last several months, at least, say, 7, 8 months, we have been doing these changes and bringing those molds compatible with the RCP. So that work is now just getting completed. So this is another reason where we are finding more rejections and more trial work going on as a percentage when I'm not saying it is very high. Let's say previously now is in the range of 4% to 5%. So that is indirectly caused to little extra costs. So this is why the EBITDA is a little decline towards 37, 38 levels. And I hope this year will continue to be in the similar range. Probably in the fourth quarter, it may look up a bit because of pharma adding. But for the next full year, that is INR '24, '25, we certainly want to see it in the range of 41, 42 with the addition of pharma business that will add at a very high EBITDA and also improving Food & FMCG through our North plant.
And just 1 last thing. In your earlier question, you were applying that October has started on a good note, and you should close the quarter at 14% growth. So it is across the event? Or is it driven majorly by Food & FMCG recovery.
Yes. It is mainly in the Food & FMCG and QP. Links and paint will be probably stagnant our little bit growth in lots. Paying also might grow by a few points, but not much because Diwali is the season when in October, they pick up the MAX. But in November onwards from [ Devarney ] paint industries volumes depart. So third quarter is generally the worst quarter for us if you see the past regard -- but this time, it is not bad. So we hope there will be a decent double-digit growth in the Q3.
[Operator Instructions]. The next question is from the line of Harsh from Marcellus.
Yes, Harsh.
Right. So sir, just wanted to say what is happening in the Pain segment, I mean volumes are down -- and we also traction print and Berger paints. And their volumes are sort of flattish. And even on of the competitors reported number yesterday, and even from the numbers saying that gas volumes are also sort of flattish. So what explains this disconnect?
Yes. As I told you in sale in the beginning -- we have [indiscernible] dropping some of the low-end paint companies from our customer fees, we are not trying to change them. because of the pricing pressure. One of the main reasons is that, and we wish to use that capacities for better products and use that for our -- mainly maybe our Qpacks which are recollect in terms of EBITDA or better than some of the small players.
So that is 1 of the reasons we're moving away from small paint companies, which has impacted to some extent of value, not only just this quarter, for the last 2, 3 quarters. Now the [indiscernible] plant of Asian pain is back in operations, but the numbers are still catching up. So that is another setback continue to be there. There are much better than in previous quarter. But with the flattishness, I would say whether there is a little decline also in the case of paint companies other than Asian paints by 2% to 3% volume terms. So that has also caused the reduction in our paint sales.
And where would the utilization levels be for the [indiscernible] plant?
[indiscernible] plant is insane.[indiscernible] Close to 60%.
Okay. And sir, regarding the past. Why won't be able to pass on the pricing to the paint companies? And since you have a better product quality and we have been sort of the market leader in the pain segment then are we seeing an increased competitive intensity in the paint segment? Or is there some other reason, sir?
No, I missed your first part of the question. .
So basically, sir, my question is that if you are seeing pricing pressure, then ideally pass on the pricing to the end customer. So why haven't we been able to do so? .
We are able to pass on the prices of raw material increase or decrease very easily. That is common understanding. In the smaller paying segment, there are companies who are manufacturing paying at a lower price with the lower overheads and they're competing with us in those segments, we don't want to further compete and reduce our margins. So whether we use these capacities for over 2 pack, which is a much better valuation than those plans. So that's where we are shifting our capacities towards but at a 201 square tax.
My question is, sir, basically, have you seen increased competitive intensity in the lower-end paint market?
Yes. There is not only now, which has been there for the last several years. It's getting more and more aggressive because the smaller clients don't mind adding second RCP material arbitrary and they will be cutting the prices to save their cars. But not so the major clients. They always go for better materials and consistent quality. So we still sit 4 companies in the paint industry.
And what would be our current volumes from these small customers in the paint segment? Like are we still envision .
On to, I would say, 5% of our overall paint sales. not even 5%. It's coming down. It used to be 7%, 8% last year, it's almost come down to [ mill ] now. .
Okay. Got it. And sir, regarding the explanation for lower EBITDA per [ KGs ]. Now I understand that because you're using the skein material, we have to go through a lot of rejection rates. But I thought that this would be sort of temporary and -- but from your commentary, change that for the entire year, EBITDA per gold be at the lower end. So let me explain [indiscernible] also explained [indiscernible].
We have already taken the staff for farmers for open or who are working on their current plans to pick up their knowledge and adopt our way of working. So their costs are also 1 of the reasons. But that won't be too much, maybe a couple of rupees dropped may, it may be around INR 55 to INR 75 due to that factor. Due to the increased prices and reductions and some of the -- I would rather attribute this drop to the drop in our growth in Food & FMCG, which we anticipated to be a is only around 15% in the first half, 14-point something. So that is mainly contributed because the Food & FMCG or [indiscernible] in terms of highest EBITDA as of today, but that didn't grow the way we anticipatate.
Where I was coming from is the gross profit per KG, the gross profit per kg number has gone down from around INR 89 to INR 83. So -- and that is -- so employee portion, everything won't be a part of this. And this decrease is right, this is mainly because of the protection rates increasing, right? .
One of the reasons. Another reason is also this is also part I don't know whether you added maintenance estimate. Use of more RCP increases the maintenance costs also -- so because there will be more wear and tear of the machine and there will be a process to be used so power consumption may go up. So indirectly, this target higher cost of production. Actually, we are taking up this point with all the top pain companies, even our competitors are speaking that if you need to add RCP material, you also need to change the conversion prices. So that discussion has just started probably in the next few quarters, we may try to convince them for increasing the solution costs.
Okay. Okay. Got it. And sir, lastly, in the Food & FMCG segment, are we seeing some increased competitive intensity in this segment because the volumes in this quarter are 15% growth compared to same quarter last year. However, the same quarter answer also the numbers are pressed because we were facing some issues on the labeling side. So to that extent, actually, the volume growth is more like 10% to 12%, sir. So are we seeing any increased competitive intensity in this segment?
Yes, definitely, competition has started picking up in Food & FMCG also. There are small players here and there who are 5, 6 containers they are competing. But none of the big players would go for that because they need in season capacities and volumes and also uninterrupted supplies. So like what we happens in the paint industry might happen over the next 5 to 7 years in the food industry, where you will have more pockets of competition coming up. That's why we're also setting a plant in North. We are also planning a plant in an like that, we will also try to be based locally present so that we will be competing because our cost advantage comes from announced manufacturing of labels, managing of molds and our which will always give us an edge over even a local supplier.
So that will continue to be there in our favor. But as you said, the competition is definitely increasing, where there used to be only 1 or 2 completers 5 years ago, there are at least 7 or 8 competitors now. We are having a small, small product range. It's not that they make were as big as ours, but they have 7 or 8 or 9 products for ice cream or alone like that. So that competition is also slowly growing, but that I won't add it as a reason for our dip in growth. The main bit in growth is because of the complete washout of in business during the summer months. Up to June, July, we used to have excellent demand from this industry that are deed by almost 40%, 50%. So that is the reason in the first half, you see this number. But I'm confident that in the second half of November, will be more than 20%, 25%.
The next question is from the line of [ Richa ] who's from [ EquityMaster ].
So my question is ice cream and a washout has been 1 of the key reasons for a decline in FMCG growth. What is the share of ice cream related products within the FMCG for you? And within Food & FMCG, what is the share of Qpacks value-wise?
No, I'm not counting Qpacks in Food & FMCG. We're treated as a separate entity, though they are using soon products because their EBITDA margins are at par with the paint. It's not as high as on -- that's the first -- second thought part, I'm answering.
The first question of food and I've seen as a percentage in Food & FMCG, in the first 4 months or 6 months of the year, they contribute almost 50% of our sales. So that has fallen by about 30%. So 15% of our growth in the first half -- or 10% to 12% of the growth in the first half has been operated due to that fact. .
Okay. So -- but sir, typically, your Food & FMCG and FMCG segment margins in terms of EBITDA per kg is around 80%, if I'm not wrong. And with all this impact, what kind of margins do you -- are you making within that segment? .
No, we are still at around 80%, not much of a price pressure on that. Coming to the volume growth, we are now entering various other factors, mainly restaurants and sweet boxes growth is console in this quarter that is starting from March, September till October, there will be a good growth even November on the beginning Thereafter, they will tap off because of Neotel over. And that might pick up again in the New Year time. So the seasonality of the product is always there. That's why you need to have a wider range of products to compete and stay fit in the Food & FMCG segment, which we are doing, we are every year adding top of new segments so that we stay a bit and widen our product range.
Okay. And sir, if you could also talk about the installed capacities at the end of 1H FY '24? And where do you expect your capacities to be by the end of FY '24 and '25?
I would tell you by the end of April '24, that is March was that is the end of this year, we'll be reaching almost 55,000 to 57,000 tonnes from 45,000 tonnes at the beginning of the year. So almost 23%, 24% jump because of the investments that we have made both last year and this year. So we'll be catching somewhere around 55,000, 60,000 put together.
[Operator Instructions] The next question is from the line of Amnish Agarwal from ad Prabhudas Lilladher Private Limited.
Sir, I have a couple of questions. Firstly, I aged out on the numbers, which you have given for volumes for paints, lubes and Food & FMCG in 2Q. Can you please repeat the same?
sir your voice dropped.
Yes. I'm talking about that I missed out on the volume numbers, which you have given for paint, lubes and Food & FMCG in second quarter this year. In volume terms and value terms?
You want the terms is it. Volumes -- quantities you want?
Yes, yes, yes.
Okay. In paint, it is in 4,460 tonnes, lubes it is 2,162, and FMCG 1,040 and Qpacks 1,117. .
And sir in value terms?
Value terms INR 78.3 crores, INR 37.7 crores, INR 32.86 crores and 19.1%.
Okay. And sir, my second question is that we are making a lot of investments further, you can say, in a thing 1 site in North and another site for 1 of the large new paint and trends. So what is the progress on that? And by when it will start contributing to our top line?
Yes. We'll be starting commercial trials in December this year at Panipat and commercial production may start from January 2024. Similarly, sales in January will happen in [indiscernible] and probably end of [indiscernible] at the beginning of February. [indiscernible] plant also will be upward ready for supplies. Whereas the third plant, [ Mahad ], we had just acquired the land. Clearance has come from the government of Maharashtra and then we need to get the registration done and probably start the construction from December. And by June, July, we should be ready there for the first phase. So these 3 plants will be going up in the commercial production from January 2 plants and the third 1 in June, July. .
Okay. And sir, how much capacity will lease 3 plants set for us?
Starting with, we are going very -- buildings and land have been acquired for huge capacities. But for the present plant, we have with 1,500 tonnes each at Chur and Panipat and the third 1 also may be starting from around 1,000 tonnes because smaller requirement there. So it will start with about 4,000 tonnes, Let's say. .
Okay. And how much will this capacity be as a proportion of the total capacity for paints, which we are having today in the system?
See, today, paint and loses together, we have about 3,000 maybe, and that is going up to 40,000. So the 4,000 contributes to around 10% to 12%. --
The paints and lubes put together.
The paint and lubes put together. Paint containers and look contents are more or less tangible. .
Okay. Okay. And sir, finally, on the -- how much has been the EBITDA per kg in 2Q? And what is the outlook for 3Q and 4Q?
See, we have achieved only INR 37.2 in Q2 and INR 38 for the H1 overall. I think it will be similar for the next half year also. Probably a little bit of improvement can be seen in the Q4, where we hope that the pharma and ABG products, which will be starting commercial production sometime in January might start adding some numbers and better EBITDA for the Q4. And going forward, next year, we are positive that it should be in the region of [ 41 minus 1 ], mainly is possible with the pharma sales picking up numbers and also our northern Food & FMCG products going on stream. Unfortunately, we have a decent price agreement with BG, at least in the first 5 years. So that will certainly also help us in improving our EBITDA.
[Operator Instructions] Next question from the line of [ Rich ] from EquityMaster.
Yes. Amd And I audio?
Yes, you are. Go ahead.
Yes. on my question is on the pharma capacity that we start producing from last fourth quarter. So for FY '25, do you have any kind of visibility or can you give any guidance of the range of revenue that we can expect from this segment? And also with the 3, 4 products, do you expect the margins to be in the range of I think you have suggested INR 150 per casing. So would the existing basket or the products that we have planned will be able to get those kind of margins on this?
Yes. Coming to the margin side, I'm confident it will be in the region of at least INR 150 per KG for any of these products are at least the average of all these products put together. But I can't give exact detail of the sales for the next year because -- it is a new time entry. The overall capacity wise, we can achieve INR 60 crores to INR 70 crores turnover with the product mix that we are starting. But how much capacity relation would happen, I would only be able to comment probably after 1 quarter at least, that is end of March 24. So by then, probably we'll have a picture how the demand is emerging and how many big clients are really giving us orders. So more clarity will come probably in the next 4 to 5 months.
Okay. And sir, for the new paint client, we have around 4,000 to 5,000 kind of capacity planned. So by the end of FY '25, what kind of utilization do you expect in these incremental capacity?
See, as you know, these 4,000 tonnes are meant for a new player who is coming into the paint industry. So sales numbers are very optimistic, but I would only know as again, how the market responds to their product and how well they will be able to penetrate into the paint industry. So that is a little bit uncertain as of now. But given the fact that Panipat and [indiscernible] are their first 2 plants out of the 6 locations they are planning, there will be certainly demand from these 2 plants to start with and feed market in the rest of the country. By the time they go ahead with the rest of the plants by middle of June '24 or March and June, I think they have plans. There will be good reasonable demand for these products from the first plant that is Panipat and [indiscernible]. But it all depends upon how aggressively and how well their products are refueled in the market and how the market then that depends upon the utilization
Okay. And sir, given all the developments that are happening in terms of capacity addition and whatever is happening with the pay segment. Would you like to -- is there any kind of revision warranted in 18% to 20% kind of growth guidance that you had hinted in the earlier call? .
No. I'm still bullish that we will be able to be in that growth region from 24, 25 onwards because of all these several plants and the new segment of Pharma is opening up. we are still aiming at that range of growth for next year.
SP1 The next question is from the line of Avadhoot Joshi from Bryanstone Investment. .
Two questions. You have -- in the press release, you briefly mentioned about the export potential also. So which -- I think the focus would be on the Food & FMCG packaging. So what's the value proposition when we are approaching the clients overseas? And how do you want to go ahead with which areas we are focusing? And how do we plan to export it? What's the price differential we have with the people at other overseas players. If you can elaborate on that.
Yes. This is a very nascent stage, but I'm glad that we are reaching at least INR 5 crores, INDR 6 crores of turnover in exports which is about less than 1% of our overall sales. But we noticed that there is quite a good demand for not oil defense products, but also the proposed products of our pharma division. So we are now participating mainly in the food segment as of now because that is an area where we have a range of products to offer for different industries abroad like restaurants, ice-creams or food products and dairy products.
So all these -- while our focus and even now for the next few months, we'll continue to be on exporting Food & FMCG containers. But once our products, canisters and Qpacks come out. They will be also having a good export potential, not only in Middle East and the African countries, but also in Europe and developed countries because we are manufacturing them under [ DMF ] certified plant. Our products will be acceptable in even U.S.
So we would like to take the focus to bring the experts also a growth area here and have a team working on it in the near future so that they will be able to start contributing to the growth. So going further, let's say, 3 to 5 years now, how do you see the potential from this business? Yes, it certainly can grow to at least 3% to 5% of our sales with better margins and better utilization.
Okay. And lastly, in the annual report, you had mentioned about the medical equipment manufacturing also for the Pharma segment. Is there any such plans going further you have?
Not medical equipment, medical devices.
medical devices, sorry. Yes.
Yes. Devices means the inhalers and products like that, which fall under injection modeling or IBM or maybe a combination.
Understood. Understood. So it is in line with our current cost.
Yes, yes. That will be a long shot, not in this next year because next year, we have to augment our capacity to expand in the product range, what we are already entering into core segments. And definitely because it's a huge market. In my opinion, it is overall, including the export market itself is around INR 5,000 crores, that is FDA exports and through our -- I mean, exports of forward pharma products into U.S. and Europe uses about INR 4,000 crores to INR 5,000 crores of packaging materials like bottles and caps. So apart from the segment, we are entering into canister on shuts under our CFO, local product. This will be able to generate growth that can be really needing higher investments and faster improvement of the capacities, if things go well. So that's what we will review this sometime in March, April. By then, we will have at least 3 months of experience in the pharma market.
The next question is from the line of Ganesh [indiscernible] who's a private investor.
I just want to bring you back to that particular point almost 1.5 years back. You had mentioned that the second line of leadership, the young guys, I think it was your son and the person they were working on certain projects, which is primarily, they were working in terms of exploring markets that is international markets. And just talk about building business that the export business has been kind of in talks for some time now. So I want to really know what's actually happened to is quite some time now. And by now, we should have done some meaningful work on that, right? That's one.
And second thing, sir, is about the pharmaceutical business. So I just want to understand, you also -- you had mentioned that some kind of prototypes we have made and you would have got some kind of feedback. So I wanted to understand how do we as a company start -- how was it received? And how -- what is the kind of traction that you're either preliminary interaction that you're getting from these pharma companies. And are these like big pharma companies? Or these are like typical biotech companies? What are these companies?
And third point is the packaging, which you mentioned about in terms of medical devices and also in terms of those caps for FDA. Where are we on that? And are these some sort of a differentiator products that we are creating, which is not available in the market right now?
Yes. I'll answer the first question of exports. If you notice 3, 4 years ago, our exports were struck to only Middle East and the 2 only 1 or 2 companies like Shell and [indiscernible]. Total not [indiscernible]. So now we have exports going to U.S.A. in the last 1 year. The numbers have shot up, not very big numbers from INR 1 crores, INR 2 crores per annum to INR 5 crores, INR 6 crores now. which is a reasonable increase, but that gives us noncreation and references to case and try to get more and more export opportunities. I will never say that the exports will be a major contributor, which will also add to the growth numbers even in the future.
But in pharma, we have better export opportunities because most of the developing countries and even some of the developed countries have restriction, I mean, restricted capacities are high costs associated with pharma products. That is where we can pitch in and try to grab a part of the import business. So going forward, expense can grow up to, let's say, as I said, 3% to 4% of our sales in the next few years. But it will never be the top contributors like 20% of our sales and all that unless our product range changes practically in the next few years.
So coming to your second question about the pharma, our interactions are with big companies only. We also have small companies, 1 or 2 of them showing interest in our products. But we also met with one, I can say, a very large company. I can't name it now. And there are 2 auditors in December probably they'll come for anion January. Once we have completely set our product lines and plant. So the traction looks good because 1 of our products is an import substitute, Other 2 are, of course, already there in the market, but with limited capacity in 1 of them. So we hope that the traction in pharma will start picking up in the next couple of quarters. And we'll be a better picture to see the performance maybe in April when we have the Q4 results, then we'll be having some names to tell you.
And then coming to the last question of caps and devices, there is a long shot, I just said, it's not for the next year. We'll be looking at devices when the time comes up because the moment we start our association with big pharma companies with typical products that I mentioned, all these products, there will be demand an opportunity to develop devices for their particular medicines. And they could be different from the current designs available in the market or could be somewhat similar. But that is where we can second because we have a design studio with about 7, 8 engineers working on product development for several years. And we are also planning to add 1 or 2 with the pharma background. So that will be a little longer shot. But certainly, Mold-Tek with its ability to design new concepts and work with tenancies in various product development has the necessary background and most service concept. That main skill set is mall development after all the end of the day in injection-molding at IBM, the mall development defines your ability to develop new products.
Of course, the designing of a product itself is an art, which we need to acquire. So that is why I'm saying this is a little longer sharp, yet down the line. And coming to our second condition, their main focus as of today is in the pharma and taking the new footprint FMCG products, widening the product range. These are the areas where we have been assigned to work on. And until now, the contributions look good. And as I said, after maybe another 4 to 5 months, we can have a review on how pharma is shaping up.
As there are no further questions, I would now like to hand the conference over to the management for the closing comments. Go ahead, sir.
I take this opportunity to thank Nirmal Bang, and thank all the participants who have taken their time to hear our story and our future plans. And thank you also to the operator for -- Malcolm, for being here and assisting us. Thank you very much. And I take this opportunity to wish you all a very happy Diwali and a great year ahead. Good luck.
Good luck. Wish you happy Diwali as well sir. On behalf of Nirmal Bang Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.