Mold-Tek Packaging Limited (MOLDTKPAC) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Maltec Packaging Limited Q&F by 27 Earnings Conference called hosted by MKKnoble Financial Services Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation comes out. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Rajesh Kumar from MK Global Financial Services Limited. Thank you and over to you, sir.

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

Good afternoon, gentlemen. Thank you very much for your interest in our company's quarterly results, conference call. I'm glad to inform you that we have made a historical quarter. The turnover cost, 300 crores, partially helped by increased raw material cost. However, one of the most important points here is the per kg EBITDA has shot up to 46.7. This is a good turnaround because of the increased sales in pharma and food and FMCG, which are high-value-add products, and also mainly driven by the consolidation efforts we have taken up in bringing down the number of units in Idabod. Now, only two units from five units earlier. So this consolidation and improved sales of high-margin products has enhanced our EBITDA margins considerably in spite of the economic disturbance all around the globe due to the war situation. So that's fairly a good quarter where in spite of the price hike, we could successfully pass on the raw metal price hike to all the clients. And with internal efficiencies and consolidation, we could improve our profit margins considerably. This is briefly the introduction, and I hope we can discuss more on questions and answers. Over to operator.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment when the question queue assembles. We take the first question from the line of Vipyansh. From three Netfra asset managers, please proceed.

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

It is currently value-wise 46%, but volume-wise is around 50%, paint alone, and probably it will start stabilizing around there, or it might come down to 40% over the next 2-3 years, because of the increase in food and FMCZ and QPAC is much sharper than Unpharma, or much sharper than growth in paints. So I hope in three, four years, paints as a segment might contribute around 40 percent from current 50 percent.

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

Yeah, we are already growing in food now. Food is now contributing to almost 24, and if you consider QPAC also, it is around 28-29% of their products are sold in food. Pharma is only 2% in terms of weight, that is volume, but about 3.5% in the overall sales. So, these numbers will shoot up rapidly, like say 40-50% CAGR for next 3-4 years, and food and FMCG might grow at least around 18-20% CAGR, so whereas the paint might grow around 8-10%, currently it is 10%, so at that rate, Paint will slowly lose the share from 51% currently to probably 40% in the next four years.

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

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

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

Percentage terms, probably, if you can send a mail, we'll reply to you. There may be 3 to 5 percent, but overall food and thin wall growth is 24.2 percent, which is considerably much better than what it was in the last 2-3 years.

Okay. Thank you, sir.

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

Yeah, thanks for the opportunity. I'm all in. So, just a couple of questions. First, on the volume side, if you can help us understand the 6% growth, is it because did we apply new selective approach as far as the current market conditions are concerned? Is this the reason that the volume growth was relatively low? And second, on the EBITAPOC-AE side, how sustainable this number is? Because one part is obviously new has come down and makes a change. But if you can share some color and attribute the reasons behind this EBITAPOC-AE improvement. These are the first two questions.

Volume growth is tampered a bit because of drop in lube segment. Lube segment has dropped by 17%. It's mainly because of base oil unavailability with a couple of private companies who could not, due to the war in Iran, their base oil procurements have been affected, which impacted their sales and volumes and which in turn affected our sales in lube segment. So, Lube being almost 17 to 20% of our sales, a 17% drop has impacted almost directly 3% to the volume growth. So, the 6% volume growth, what we achieved would have been 9, had even Lube remained at the same level. So, Lube is a... This is a disappointing performance this quarter, which is beyond our hands because of the input problems of basile to some of the private players. So they could not get the oils in time, and in turn, we lost the volumes.

So that is about the volume growth.

But I also told you in the last quarter, as pharma growth is 38%, but it won't reflect too much on the volume, because they are lightweight containers, lightweight components. So on the volume side, it will now – anything around 10 percent is a great volume growth given the war scenario. But what I am very glad about is the EBITDA growth that has been achieved through consolidation of our units and improved efficiencies and a little bit better capacity utilization compared to the last financial year. So all these three are long-term in nature, and as you asked, we are bullish that we may able to cross our projected 42-43 rupees EBITDA for the year marginally. Maybe we are now aiming at 44-45.

Got it. So the way to look at it is that incremental YY EBIT up of kg growth would more normalize from 46 that we have seen in the current quarter in the Q2, Q3, Q4 would have a little bit of a normalized growth on the EBIT up of kg side compared to last year. Is that the right way to look?

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

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

No, no, no. This 31% growth rate in paint and 10% in volume is basically eaten away by the raw material price rise. So the sustainability of this will depend again on the raw material movement. If the raw material stabilizes or comes down, this gap will slowly come down. So, whatever, what you should appreciate is, company could immediately get the price rise due to the war. The raw material shot up from 110, 105 range to almost 155. So, the company could get that money with quick time frames from the clients and able to sustain or enhance our EBITDA. Otherwise, you would have seen EBITDA affected. So, this shows the relation what we have with our top clients in the paint or lube or even food industry and also the confidence they have on Maltec. So, we are able to pass on the price rise as and when the price rise happened and able to sustain our margins, rather improved our margins. Thank you.

Thank you. We take the next question from the line of Raj Shah from Fiddant AMC. Please proceed.

Hi. Thank you for the opportunity. My first question is on our QPAC volume. So, they have come down sharply, growing at close to 20% last quarter to 2%. So, what was the reason for the same? And secondly, in terms of… Yes, sir. And secondly, pharma also, I mean, on a quarter-on-quarter basis, our volumes are up like 2-3%. So how do you see this ramping up? And in terms of our target of close to 55% of revenue from pharma, so I mean, what kind of growth do you see in the next couple of quarters?

Yeah. In fact, the price... The growth is only 2% mainly because QPAC is a little price-sensitive segment. It is mainly used for edible oil and cashew, and edible oil industry has been under stress because of the increased freight costs and oil prices on one side, and with such a short-up of raw metal price from 100 level to 150, they were little hesitant to increase their sales and volumes. So that is one of the major reasons. Even companies which have moved into our square packs have gone back to tin or other forms of packaging tentatively. And that is one of the reasons why QPAC is a little, growth is disappointing. But now we set up our QPAC facility at North, which has started adding numbers, and also in South in Chayar. So we hope that coming quarters we'll see double-digit growth in QPAC again. That is your first question. Coming to the second question, Pharma, we have reached 41% growth, which is a sizable growth compared to last year's Q1. Even in the volume terms, it is a 38% growth, which I am sure you will appreciate is a big jump given the scenario. And at this stage, we already have about a quarterly projection of 11 to 12 crores. Which can go up to 14-15 crores towards the end of the year. So we are still looking at a 50-55 crores target for our pharma. So which will be like almost a 50% growth over the last year number 34 crores what we achieved. So, in Pharma, we are definitely on a strong wicket, and we also have plans to get into ophthalmic range of products for which trial molds are completed, and commercial molds may take another five to six months to... So, hopefully, from the beginning of next calendar year, we'll be entering into that. And we also are looking at other medical devices like dosing pens, for which we are looking at ways to shorten the development period. But no firm plans as of today. But certainly, that is another product we'll be landing in the next financial year.

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

See, increased finance cost is two reasons. One is the raw material cost goes up, our working capital needs to go up. So, on a higher volume of material cost, we will be paying the interest to the bankers. So, overall, working capital, the raw material cost is short of, if you compare it to last year, fourth quarter is 97 rupees average price, is 130 rupees. So, almost 35 percent, there is a jump in the raw material cost. So our raw material inventory costs and carrying costs also will go up accordingly. So that is one of the major reasons why the interest has gone up. It's not because of term loans. Term loans also, of course, are there, but not to the extent of this much difference. This 20% rise, what you see there, compared to the Q4, 20% rise is mainly due to the cost of raw materials and goods, which shot up in the war period. So that has to be, that is the reason for increasing finance costs.

Sir, lastly, just on VIBE, is there any update in terms of after JV?

I mean, when do we see all these content? Yes, I'm glad that with VIBE, we have developed the three products now, which they have got applied for patent, and another six products, three products, which constitute six components, are also getting onto the pilot stage, probably in the next two months, they will also be ready. And together they want to go for, they already applied for IP for these three products, and another two products also they want to go for IP, and they already... Taking the call on IP expenditure and marketing efforts. And even they have agreed to participate in the new mold cast to the tune of $50,000. So, all this agres well. But as I said, it is a long call. Probably towards the third quarter, we will be starting some commercial products for Vibro.

So, any target for this year?

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

Thank you so much.

Thank you. We take the next question from the line of C.A. Kaushal Sharma from Equinox Capital Venture Private Limited. Please proceed.

Hello. Yeah. Am I audible, sir?

Yeah, I am audible.

Yeah, very good evening, sir. I just want to understand that you selected that you have passed on the prices, but if I see your quarter-on-quarter market and your revenue growth, your revenue growth is around 26.50%, but your gross forfeit is down around 12% and EBITDA is around 16%. So there is some cost of the absorption. There is a drop in gross margin from 46.60% to 41.31%. So, what is the reason of this?

Now, if you notice, our EBITDA is short up by 12%, which is a very big jump from 40.7 rupees per kg to 46.7, compared to the last full year. So, that is a very considerable achievement. The revenue rise looks high because of the inflationary trend in the raw material, which we could successfully collect. Otherwise, it would have impacted our EBITDA per kg. So EBITDA per kg has gone up because of the efficiency and consolidation what we have taken up in the last financial year. So these are the reasons and we could effectively pass on the price rise of raw material from, if you notice the raw material cost, it was 97 rupees in the Q4 for the full year, 107 in Q4, it becomes 130 now. So, the revenue growth is partly due to the inflationary raw material price, but the proof of the pudding is EBITDA growth. So, EBITDA growing by almost 6 rupees over the last year number is a big relief or proof that our efficiencies and consolidation are adding to the bottom line.

Could you please explain what kind of products in pharma that we are going to launch, planning to launch?

Yeah, currently we have three set of products, you know, that for bottles and caps, variety of caps. We have EV tubes, fruits and tubes, and canisters. And now currently we are working on some other products, including dosing pens, wherein IP requirement is there. So, we are trying to work out with a suitable IP holder who will be able to give us the IP rights and able to bring the product here in India. So, that will cut our development time from three years to one year and enable us to get into this business within a year's time. Even some imports can be done during this period to do the market seeding. And what way we are going... Sorry?

See you at least.

So that is one product wherein we are putting efforts. We are also looking at semiconductor trays. That will be a little longer short because by the time semiconductors and chips are made in India, they will be needing a lot of packaging support, and this packaging is very high-end, I mean, accuracy and high-end raw material requirement, understanding of the technology is very much needed. So, that is one very high-end value-add product we want to look into in the coming year. What kind of... Oh, it could be very high, something like 150, 200 rupees, I guess. We are still having basic data, and that again depends upon the capacity utilization, but it will be at least double that of pharma is my guess, because the material used, the dimensional accuracy required, and temperature characters, all that are very demanding. It is a step ahead of pharma. So, there are very few players in the entire world who are doing this, but Taiwan and Korea are the main countries. Of course, China also, there are suppliers with good technology. We are trying to find some good technology partners to enter into this. That is a little longer shot, but PENS is one area where we are focusing now and hope to get into that business in a year's time.

And so what kind of capacity are we putting for these pens?

And what is the... So currently, the capacity requirements are shooting up in India, not only for diabetes, but also for semaglutide and other products that are expected to move into disposable pens. So once that volumes come up, the volumes in this country or even exports to the African and other countries can be of sizable numbers. So, we are still at the dining table stage now, depending upon the... Plants, it could be a million pins per month will be the minimum capacity we'll be starting with.

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

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

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

Thank you.

Thank you. Let me take the next question from the line of Shirish Pardeshi from Modinal 1, VQP.

Good morning, Mr. Rao, and thank you for the opportunity. As usual, you surprise us. Now, I just wanted to check a few things. This quarter, our loop's volumes were lower, and because of that, our EBITDA has shot up to 46.5. Now, what I'm trying to understand, If you can give me a number, what is the loop? Quarter 1 EBITDA per kg. And in future, once loop order comes back, will this EBITDA look like towards 45 or will be lower than that?

Lube, as it is, is not a bad contributor. It is average somewhere around 35 to 40 level. Yes, lube coming down is not the reason for improving the EBITDA. Improving the EBITDA is mainly due to consolidation of our units, which has reduced overheads, wastage, inter-unit transfers, and rejections, which were happening in printing especially, because our printing units were spread in three locations. Now, we brought them under one roof in Sultanpur. And also, a couple of units closure reduced our overheads considerably, right from power costs to the supervisory and managerial staff. They could be used elsewhere, or we let go some of the people. So, the overheads have come down considerably, inter-unit transfers have come down, and ratios and rejection rates have come down. So these are long-term in nature. So that is why we are confident about a consistent EBITDA growth in the current year in spite of moderate volume growth. And you must appreciate that in spite of the war situation all around. Other than loops, all our other segments have done well, especially pharma and food and FMCG, grown by 38% and 24% respectively, and paint by 10.8%, which is a fairly good number. So only loops are down due to the base oil disruption in a couple of our clients' locations. They could not get the base oil because of their dependency on Middle East. And, of course, QPAC, as I explained, is a price-sensitive market, AWA, L and QPAC, and so they were little hesitant when the government shot up by 50 rupees per kg. But they are coming back now. We are seeing the trend is returning for at least a modest 10% growth in Q2.

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

Yeah, for volume growth, as I said last time, We are aiming at 10 to 12 percent. Even today, I still feel 10 percent is possible because in spite of the war, the clients are sticky with us, and rather some more clients who left us are coming back because they know Maltec can afford to maintain the material, produce at good efficiency, and ensure supplies in time. So when any disturbance is there in the markets or in the general atmosphere around, they will fall back more on Moltec. And the trend of IML adoption in paint industry is growing because later they have started using more and more IML brands. And Aditya Birla also using more than 25-30% of their fields in IML. The trend is spreading into the lower players also. And they are coming back to us, and hopefully paint and paints especially will see a double-digit growth for the full year. If paint remains at that level, if loops even come back to a zero level of growth, food and pharma will pull up the numbers to make sure we are at 10% volume growth at least for the year. What you should appreciate is pharma, where numbers are in weight-wise, they are very less compared to pails. So, even if growth is 10%, it's equivalent to a growth of 15% volume if pharma is growing at 40%, which I think the trend is already in line with that. So, now, more than volume, I would look at one is definitely volume up to even 9-10% volume growth is equivalent to 14-15% of the past volume growth. And EBITDA growth of 5 rupees we achieved, 6 rupees, in fact, compared to the last year, fully at 40.7. We did 46.7. is mainly due to the consolidation and efficiencies and better capacity utilization, which will be long-term in nature. So that's why I'm confident this year we'll be crossing our target of RT243 we set for the full year.

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

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

Yeah, I understand. The reason why I'm asking is because you also eliminated the in-house printing labels. So, there is a cost lever also sitting there, and there is a margin lever also sitting there. So, I was just saying that 46, you are saying 43, 44, but I would expect the margin to remain stable, the same level at 18.5, 19%.

I hope so.

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

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

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

Gross profit per KG at 100 rupees, where are you seeing that?

So calculating, dividing gross profit by the volume. Because this is the entire pass-on cost, right? If the price increase in raw materials is about 30 rupees from 100 to 130, and we are selling it 150 rupees, so it increases by 30 rupees. It's 180 to, it increases from 150 to 180, due to which, by eyes, we look that the margins are down. However, on unit economics basis, the realization is still better.

Yes, yes. That's why I always encourage people to look at the EBITDA per kg, which is a correct sign of profitability in our line of business. Because raw material is a variable which is not in our control, and the price goes up or down, we pass it on to the client in the following month. So, that is still happening. So, tomorrow if the prices come down, it will come down and the percentage looks higher. But if you look at the absolute figure, EBITDA per kg, that is what matters. And that's where I'm very happy that we got an almost 12% jump compared to the last year's number, in spite of the war situation and in spite of the loops. and being impacted due to war. So, this is through consolidation and efficiencies which are, you know, long-term and permanent in nature.

Right, got it. So, second question that we are talking about the loops as a segment, if I am not wrong, in Q2 we lost a big client in last year Q2, which led to a normalized rate of 1800 to 2000 metric ton volume on a quarterly basis. So, one thing is that it is still a normalized level. Second, I wanted to know was, if the QPAC segment's volume normalizes, which wasn't any growth because of the competitive intensity it has, that is the reason why you're talking, that the EBITDA per kg, which is around 45 rupees, will come down to about 44-45 as a range.

Yeah, yeah, because not only that, when the capacity utilization remains at the same level or maybe a little less, your automatically a bit of per cage will come down. So I'm sure that loops will compensate this quarter. They're not, if not fully back, they're improved a lot. Maybe they made some alternative arrangements of the base oil. So, a couple of clients who are impacted during the war are now back into market in terms of quantities, and we hope loops will get back into shape in this quarter. So that will overall reduce the, I mean, improve the capacity utilization at the 75% level. If that happens, again, we may reflect on similar set of EBITDA per KG. Otherwise, probably marginal reduction here and there. But overall yearly projection of 42, which I gave at the end of last year, will certainly be surpassed in this year.

Right, right. So, next question is related to the new lines that we are getting into, the ophthalmic and looking to get into the dosage bench too. I wanted to understand what kind of size this industry has, and like even when we started to get into pharma, the quality requirement that the plastic product should not mix with the ingredient, maybe the capsule or something else, we faced that issue to bring up to that quality. Similarly, I guess that this is similar for the dosage pens too, because there is an API, liquid API included in that, right? So just wanted to understand the learning curve that would be required. And as you're saying that once the IP will, we will get the IP done, the timeframe can reduce from three years to one year. Just wanted to have a ballpark view of how you are looking at this.

No, what I'm saying is, in case we find a partner who is willing to share his IP and the validation data, which will, like a tech support or a tech... Then the time lines can come down from three years to one year itself because then the testing already some of the suppliers abroad we are in touch with, they already are in Indian market at the various levels of testing. So if we tie up with them, things can go faster, like a few months or max one year. But if that fails and we have to come out with our own design and IP, it will certainly take two to three years. So at this stage, it's too early to comment, but we are on a track to... See both options. And the assets are different. We will prepare a new plant and machine for this. You know that we already have the land, so we'll be needing at least 50-60,000 square feet of area to start with, and that will be around 10 crores investment, and the machinery to start with would be also in the region of around 10 to 15 crores. So minimum 25 to 30 crores, minimum plant size is required in the beginning, and which need to be ramped up depending upon the growth in the business. But the pricing and EBITDA margins are double, more than double that of regular form of products.

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

Yes, ophthalmic, we don't need any special level of safety or ambience. Our current facility where we are now already taken up a construction of 25,000 square feet area, which will be completed in six months' time. So that is where we'll be setting up the ophthalmic range. The new land which we acquired a year ago will be kept for devices. It is mainly pens and some other. There are some more devices under consideration, but we'll be too early to comment. We are working on feasibility and market demand. But let me assure you, Moltec is now focused on pharma and diagnostics in a big way and devices in a big way, and coming forward in the years or quarters, if not quarters, years, there will be certainly more focus and growth in that segment. It's a huge potential area, and we just touched the tip of it, so we have a long way to go.

Right, right. Just last question from my side, sir. Generally, after reaching a 75% capacity realization, we generally look for a new capacity addition. We are currently at about 77,000 mTPA. If you could just highlight what kind of… 67,000, I guess.

Our total capacity is 67,000.

Correct, 67,000. Right. So what are we looking at? By the end of the year, what are we looking at as capacity? And down the line, about two years, down the line, or three years, down the line, how are we looking at it?

Yeah, there will be certainly at least 10 to 12 percent capacity addition every year. That is to capture the growth. And better utilization at three units, which are Chayar, Panipat, and Mahad. This is where we are now trying to focus by enhancing the product range there. For example, in Panipat, we already started test marketing our thin wall products with four machines last year, and the response is pretty good. Already goods worth of around 70 lakhs to 1 crore are being sold every month, and now we are doubling that from this month, August onwards, to catch up for the festive season. So hopefully North Panipat unit will be utilized better in food and FMCZ, QPACs. Already QPACs, we are selling more than one, one and a half crore worth of QPACs from Panipat in this last six months. So whenever there is ups and downs in the pain demand, there will be fungibility with QPAC. So same thing we are doing at Chayar. Now a set of molds are going to CHR for QPACs and also paint industry molds, which will enable us to use the capacities in that unit also better. So our focus now is utilizing this capacity from 75 to probably 78 or even 80 in the coming years, and apart from that, create another 8 to 10 percent of capacity to catch up with the growth.

Perfect. Thank you. Thank you so much for the help, John.

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

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

Paint, actually, we have 10.8% in spite of the severe conditions what we are experiencing. The main culprit is loops. That is where I explained 17% dip compared to the Q1 last year. No, I am talking on volume growth. Yeah, yeah. Even volume growth in paint is 10.8%. The loops were minus 70%. So, that is where the volume growth has been stunted to some extent. Otherwise, it would have been close to 99.5%. So, the 70% dip in lube is the culprit for our volumes being moderately less compared to what it used to be. And once the war situation becomes normal... Even now, I think Loops, they have found some alternative arrangements of base oil so that their sales will come back to normal. And hopefully, in the coming quarters also, we'll be able to achieve double-digit growth. Given our growth patterns in food and QPAC and Pani Pat and JR capacities are being improving, utilization being improving, we are aiming double-digit growth in the coming quarters.

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

Yes, yes. It is increasing because the volumes are increased. Capacitulation is improving. The molds and machines are being kept on better use. I can't singleize, I mean, can't tell you the exact number, but we have a very good growth in Asian paints in this quarter.

And their IML share is rising. Is that fair understanding?

Yes, IML share is also rising, and their volume growth is very considerably high. It used to be down in the previous couple of years. It started positive from last quarter, that is Q4, and this quarter is one of the best growth numbers.

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

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

15 percent for the full year, you have been.

Sorry?

You are saying 15% in paints for the full year can be a possibility. Volume growth.

10 to 15.

Great, sir. Thank you very much and all the very best.

Thank you. We take the next question from the line of Shorya Yathav from GrowthSphere Ventures. Please proceed.

Hello. Am I audible? Thanks. Sir, I have just one question. Earlier, our team was signing certain visits

in China for tax I have visited

to Samva Glutide Pen. Any update on that?

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

Thank you, sir.

Thank you. We take the next question from the line of Adnav Sakhoja from Ambit Capital. Please proceed.

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

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

Okay. And what is the total capex that we can expect in FY27?

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

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

Yes, I think as far as the consolidation of units is concerned, Hyderabad is the only location where we had several units earlier, which we brought it down to two. The same thing is not possible elsewhere because everywhere we have only one unit. But there are a couple of other areas where we can still see improving the margins and efficiencies. One is automation, wherein we can reduce the manpower and improve the accuracy and reduce the rejection rates. We are working on that. A team is currently planning to visit our partner, our good friend in China, who have similar manufacturing facilities running with. Very lean manufacturing methods. So that study will enable us to implement the same here back in the next couple of quarters, and that also should improve our overall efficiencies.

Okay, thank you for answering the questions.

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

Yeah, thanks for the opportunity. Congratulations on the set of numbers. My first question is, we have seen 19% of our overall value growth, 6% volume growth, almost 19% growth in sales per kg. Would it be possible for you to bifurcate how much of that growth is because of the price inflation and how much is because of the product exchange?

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

Won't there be any change because of the product mix as well, given that food and net revenue per kg and...

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

Yes, sir, just to confirm, the 12-13% growth will be because of the mix sheet.

Uh, yeah. And what you are seeing 6 to 25 is mainly because of the inflation. At least 15% is inflation in the raw material price.

Second, let's move to your commentary, right, how our nature of business is changing. We are focusing more on pharma and medical devices and, you know, food and efficiency is also growing at a faster rate. Would it be fair to assume going forward, overall profitability growth or EBITDA per kg improvement should be the right metric rather than the volume growth number?

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

So, would it be fair to assume we should maintain this 1920% of Agita growth for the rest of the year as well?

Yes.

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

It's around 75.8% in tons and 77.8 in terms of value for this quarter.

Great, sir. Thank you so much. Thank you. Best time for coming.

Thank you. We take the next question from the line of Devang Mayur Bhatt from Spark PWM. Please proceed. I would request Mr. Devang to unmute and then speak. It seems like Devang's line has been disconnected. Till then, we'll proceed with the next question. We take the next question from the line of Chirag. Some keynote capitals. Please proceed.

Yeah, my questions are answered. Thank you.

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

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

How many means the number of pharma companies have visited are more than 50, and the current orders may be coming from around 20. Okay, okay. Another 10 companies are also slated to visitors in the next couple of weeks or months.

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

As I said, current growth will be contained within the current premises of our Sultanpur land, old land, and future growth will be for devices. So probably it will be, once we have a plan, as I said, we have two ways of going into devices. One is tying up with an existing patented owner, which will reduce our time frame. In that case, we have to start immediately and complete the buildings within a year's time. In case we are going for our own internal IP and development, which had a long time period, it could start later.

Sir, those are medical devices?

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

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

See, pharma number of molds are increasing every quarter. Like, say, I don't have a count now because number of products have crossed 100 now. Maybe every quarter we are adding at least 5 to 8 new sizes, bottles or caps every quarter. So, I think yearly we will be adding at least 15 to 20 products of different sizes or within the same size, different weights and neck sizes.

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

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

Okay, okay. And, sir, any CapEx for 2027?

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

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

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

Okay, okay. And sir, the phi to two units which we have consolidated... So, are there three units, what business is going on there right now?

Currently, the lands are available for us. Probably in a year or two, when a good price comes, we may sell off at least a couple of them and use the funds.

Okay, okay, okay. Thank you very much, sir. Yeah.

Thank you. We take the next question from the line of Devang Mayur Bhart from SPARC PWM. Please proceed.

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

For a higher realization of SMCZ and pharma together, it should be at least 3 to... Three rupees per kg would have come from those two lines, and another three rupees from the consolidation and efficiencies, improved efficiencies.

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

Yeah, that's what one of the questions, that's what the reason the interest has gone up. Consorably, with increased raw material costs, inventory costs, we end up paying more working capital, using more working capital, and hence pay more interest on it. So, current working capital is 125 crores, which was around 110-112 at the end of March, I think. So, it's gone up by around 16, 18 lakhs, gross.

So, you see this continuing for FA27?

It may stabilize there, because Ramitil is now not as much as it was in end of March. It is now currently trading around 10% less than what it was in the peak months. So, hopefully, it will stay there. It may not decrease much, but it won't increase. It may decrease to the level of... 5-10%, but it may not increase, given the raw metal price. If the VAR worsens and further crude prices shoot up, then may be a different point. But given this current scenario, it looks like it will come down a bit.

Okay. And what was your capex in Q1, FI27?

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

Okay. Okay. Thank you. Thank you. That's it from my...

Thank you. The next question is from the line of Dhruvind Doshi from NVAlpha. Please proceed.

Yeah. Hi, sir. Thanks for the opportunity. Sir, since you mentioned that raw material cost spiked from 7 rupees per kg blended in 4 q of 26 to around 130-ish in the first quarter of 27, if I heard it right. So, sir, I just wanted to understand if there is any inventory gains that we got in the gross margin of, say, 103 rupees per kg from 97 rupees last quarter.

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

Would you be able to quantify, say, 2 rupees, 1 rupees per kg?

Probably, yeah, 1 to 1 rupee 50 pesos, you can say.

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

Current raw material is 145. The peak was 160, I think, in the end of March or early April.

That's it from Mayan, sir. Thank you so much.

Thank you. We take the next question from the line of Amit Kumar, and from Determined Investment, please, Naseer.

Yeah, hi.

Can you hear me?

This is one question, you know, what your suppliers are saying in terms of, you know, availability of raw materials. Because, again, you know, throughout, you know, this month, which is July, so, you know, just about 15-20 days, you know, state of Hormuz was open. And now, you know, we understand that, you know, U.S. Congress, Senate, they have also sort of passed the bill which will restrict, you know, imports of, you know, Russian crude oil, you know, also into the global market. So have you had any sort of conversation or, you know, have your suppliers have had any sort of conversations with you in terms of, you know, supply availability?

Supply availability, they are not worried about, but the price they are not able to confirm. That's a volatility will still continue. But as of now, PP is co-polymer, which is our main raw material. Availability is still... I won't say it's plenty, but it is available as of today. And even the worst days of March and April, the material was available, and there was some shortage, and there was some rush to get it from Reliance or other manufacturers. But as such, I think the situation now is better than what it was in March, April, in terms of availability. In terms of pricing, yes, it depends on crude, at what price they get the crude, and they will change it up or down. So, that volatility is still there, but availability-wise, we are much better off now than what it was three months ago.

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

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

If you are talking about raw material or finished goods or total?

I'm talking about raw material. Including finished goods and SFG, probably one month. Okay, okay. Understood. One month, one month, a few days. Yeah.

Thank you.

Thank you.

That's it for mine.

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

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

Thank you. On behalf of MK Global Financial Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lamps.