This power-packed stock delivered 1,567% returns in a decade

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The adage “big things come in small packages” aptly fits Hyderabad-based Mold-Tek Packaging. The company that was listed in November 1993 on BSE with a market capitalization of just Rs 12 crore today is valued at over Rs 1,300 crore. Investors have made hand over fist in this counter as the stock has rallied 1,567% from Rs 27.71 on May 9, 2011, to Rs 462. In other words, a small investment of Rs 25,000 in this stock made in May 2011 has grown to Rs 4,16,817 today.

Focused innovation

Laxman Rao founder of Mold-Tek Packaging is to be credited for the phenomenal shareholder returns. His ability to develop plastic containers and convince the paint industry to switch to plastic pails from metal containers has helped the company to emerge as a leader in rigid plastic packaging. By tasting success in the paints industry, Rao started to address another lucrative market; lubricants, FMCG and others.

Another breakthrough for Mold-Tek Packaging came in the year 2011 when the company introduced in-mould labelling (IML) technology. There were huge takers for this technology as it gave branding longer life since the artwork was printed on the container and not labelled. Apart from this the company also launched a slew of products with innovative features such as the “pull-up spout”, locking system and tamper-proof seals. All these innovations have kept the cash register ringing for the company as its top line almost tripled from Rs 149 crores in FY11 to Rs 437 crores in FY20 whereas its bottom line more than quadrupled from Rs 8 crore rupees to Rs 38 crore rupees during the same period.

Packed for growth

Management expects the Paints and FMCG & Foods divisions to grow at ~20% and >30% YoY, respectively in the next 2-3 years on the back of strong demand visibility for Paints, continued momentum in Q-Packs, recovery in Ice-cream’s portfolio and new business opportunities. Citing this ICICI Direct has assigned a ‘BUY’ rating to the stock with a target price of Rs 600 implying an upside of 30%.

“Despite being in the B2B business, gross margin of the company has increased in the last five years depicting its pricing power. Increased contribution from high margin segments would aid revenue and EBITDA margin expansion. Expect ~15%, ~28% revenue, PAT CAGR, respectively, in FY20-23E,” said the brokerage firm in the report.

Similarly, Nirmal Bang Institutional Equities is also bullish on the stock and has set price target of Rs 500. “Current EBITDA/kg is sustainable in the near term as it is more a function of effective cost management rather than mix improvement. As the mix improves, we see further upside in the EBITDA/kg (from Rs34 in FY21E to Rs39 in FY23E),” noted the report.

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