Ladies and gentlemen, good day and welcome to the Mold-Tek Packaging Limited Q1 FY2027 earnings conference call hosted by Emkay Global Financial Services Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rajesh Kumar from Emkay Global Financial Services Limited. Thank you and over to you, sir.
Good evening, everyone. I would like to welcome Mr. J. Lakshmana 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 am glad to inform you that we have made a historical quarter. The turnover crossed 300 crore, partially helped by increased raw material costs. However, one of the most important points here is the per kg EBITDA has shot up to INR 46.7 per kg, which is historically around INR 40, INR 42 was the best in the last several years. This is a good turnaround because of the increased sales in pharma and food and FMCG, which are the high value-added products, and also mainly driven by the consolidation efforts we have taken up in bringing down the number of units in Hyderabad to now only two units from five units earlier.
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, wherein in spite of the price hike, we could successfully pass on the raw material price hike to all the clients. And with the internal efficiencies and consolidation, we could improve our profit margins considerably. This is briefly the introduction, and I hope we can discuss more on question answers. Over to operator.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment for the questions to assemble. We take the first question from the line of Dnyansh from 3L Tech Analysis. Please proceed.
Hello, sir. Thank you for the opportunity. My first question is, over the last few years, the company has diversified beyond decorative paints and looking ahead, what would be the ideal revenue mix across, like what portion will they accept over decorative paints over the next few years?
It is currently value-wise 46%, but volume-wise it is around 50% paint alone, and probably it will start stabilizing around there or it might come down to 40% over the next two, three years because of the increase in food and FMCG and Qpack is much sharper than on pharma, are much sharper than growth in paint. So, I hope in three, four years, paints as a segment might contribute around 40% from current 50%.
Okay. Is there 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 Qpack also, it is around 28%, 29% of their products are sold in food. Pharma is only 2% in terms of weight, that is volume, but about 3.5% in the overall sales. So, these numbers will shoot up rapidly, like say 40%, 50% CAGR for next three, four years. Food and FMCG might grow at least around 18% to 20% CAGR. Whereas the paint might grow around 8% to 10%. Currently it is 10%. So at that rate, paint will slowly lose its share from 51% currently to probably 40% in the next three, four years.
Are you sure?
In overall.
Okay. Could you help us understand 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. In the paint and roofs, there's not much of new additions. But in the food and FMCG and in pharma, there are several clients I can't list. There'll be more than 10, 20 clients added in this quarter.
Okay. In percentage terms, can you give, like in food and pharma, how much has been came from new customers?
Percentage terms, probably if you can send a mail, we'll reply to you. There may be 3% to 5%, but overall food and thin wall growth is 24.2%, which is considerably much better than what it was in the last two, three years.
Okay. Thank you, sir.
Thank you. We take the next question from the line of Deepak Saha from Ashika Institutional Equities. Please proceed.
Yeah, thanks for the opportunity. Am I audible?
Yeah, go ahead.
Sir, just a couple of questions. First, on the volume side, if you can help us understand this 6% growth, is it because we reapplied any selective approach as far as the current market conditions are concerned? Is this the reason that the volume growth was relatively low? Second, on the EBITDA side, how sustainable this number is, because one part is obviously lube has come down and mix has changed. If you can share some color and also the reasons behind this EBITDA improvement. These are the first two questions.
Yeah. Volume growth is tempered a bit because of drop in lube segment. Lube segment has dropped by 17%. It is mainly because of base oil unavailability with couple of private companies who could not, due to the war in Iran, their base oil procurements have been affected, which impacted their sales and volumes, and which in turn affected our sales in lube segment. Lube being almost 17% to 20% of our sales, a 17% drop has impacted almost directly 3% to the volume growth. The 6% volume growth, what we achieved would have been 9% had even lube remained at the same level. Lube is a disappointing performance this quarter, which is beyond our hands because of the input problems of base oil to some of the private players. They could not get the oils in time, and in turn, we lost the volumes.
That is about the volume growth. I also told you in the last quarter, our pharma growth is 38%, but it won't reflect too much on the volume because they are lightweight containers, lightweight components. On the volume side, anything around 10% is a great volume growth given the war scenario. 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. All these three are long-term in nature, and as you asked, we are bullish that we may be able to cross our projected INR 42, INR 43 EBITDA for the year marginally. Maybe we are now aiming at INR 44, INR 45 for the full year.
Got it, sir. The way to look at it is that incremental year-over-year EBITDA growth would more normalize from 46 that we are seeing in the current quarter. In the Q2, Q3, Q4, we would have little bit of a normalized growth on the EBITDA 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. We have other areas of automation which we have started recently, which will also start contributing in a couple of quarters. 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.
Got it.
Increase food and FMCG and pharma, we are confident to sustain momentum in the EBITDA.
Got it, sir. One 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 on the paint side?
No, this 31% growth rate in paint and 10% in volume is basically eaten away by the raw material price rise. 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. 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. The company could get that money with quick time frames from the clients and able to sustain or enhance our EBITDA. Otherwise, we would have seen EBITDA affected. 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 Mold-Tek.
We are able to pass on the price rise as and when the price rise happens, and able to sustain our margins, rather improve our margins.
Got it, sir. That is really helpful. Thank you and all the best for upcoming quarters.
Thank you.
Thank you. We take the next question from the line of Raj Shah from Fident AMC. Please proceed.
Hi, thank you for the opportunity. My first question is on our Qpack volumes. They have come down sharply, growing at close to 20% last quarter to 2%. What was the reason for the same? Secondly, in terms of- Sorry. Yeah, sir. Secondly, on the pharma also, I mean, on a quarter-on-quarter basis, our volumes are up, like, 2, 3%. How do you see this ramping up? In terms of our target of close to INR 55 crores of revenue from pharma. What kind of growth do you see in the next couple of quarters?
Yeah. The growth is only 2%, mainly because Qpack is a little price-sensitive segment. It is mainly used for edible oil and cashew, and the edible oil industry has been under stress because of the increased freight costs and oil prices on one side. With such a shot up of raw material price from INR 111 to INR 150, they were little hesitant to increase their sales and volumes. 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. That is one of the reasons why Qpack growth is disappointing. Now, we set up our Qpack facility at north. It has started adding numbers and also in south in Cheyyar. We hope that coming quarters will see double-digit growth in Qpack again.
That is your first question. Coming to the second question, pharma, we reached 41% growth, which is a sizable growth compared to last year's Q1. Even in the volume terms, it is a 35% growth, which I am sure you will appreciate is a big jump given the scenario. At this stage, we already have about a quarterly projection of INR 11 crores to INR 12 crores, which can go up to INR 14 crores, INR 15 crores towards the end of the year. We are still looking at INR 50 crores , INR 55 crores target for our pharma. Which will be almost a 50% growth over the last year number, INR 34 crores, what we achieved.
In pharma, we are definitely on a strong wicket, and we also have plans to get into ophthalmic range of products for which our trial molds are completed, and commercial molds may take another five to six months to arrive. Hopefully from beginning of next calendar year, we will be entering into that. We also are looking at other medical devices like dosing pens, for which we are looking at ways to shorten the development period. No firm plans as of today. Certainly, that is another product we will be landing in the next financial year.
Understood. Secondly, on your finance cost, we have seen a sharp increase on a quarter-on-quarter basis close to 20%. What is the reason? Last quarter, I think we have said that we will not be increasing debt from here on. What was the reason for the increase in finance cost?
See, increase finance cost is two reasons. One is raw material cost goes up, our working capital needs to go up. On a higher volume of material cost, we will be paying the interest to the bankers. Overall working capital, the raw material cost shot up. If you compare it to last year, fourth quarter is INR 97 average price, is INR 130. Almost 35% there is a jump in the raw material cost. Our raw material inventory cost and carrying cost also will go up accordingly. That is one of the major reasons why the interest has gone up. It is not because of term loans. Term loans also, of course, are there, but not to the extent of this much difference.
The 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. That is the reason for increase in finance cost.
Sir, lastly, just on Vibe, is there any update in terms of after JV? When do we see
We have developed the three products now, which they have got applied for patent. Another three products which consists six components are also getting onto the pilot stage, probably in the next two months, they will also be ready. Together they already applied for IP for these three products. Another two products, also they want to go for IP. They are already taking the call on IP expenditure and marketing efforts. Even they've agreed to participate in the new mold cost to the tune of $50,000. All this progress well, but as I said, it's a long call. Probably towards the third quarter, we'll be starting some commercial products for Vibe.
Understood. Any target for this year in terms of-
This year, probably couple of crores we may do in the last quarter because these products are very high value add. They're even better than, or at least equal to pharma products in terms of EBITDA. Once they are launched, the volumes also can shoot up. Probably next financial year we'll certainly see decent numbers coming from Vibe.
Mm-hmm. Cool. Thank you so much.
Thank you. We take the next question from the line of Kaushal Sharma from Equinox Capital Venture Private Limited. Please proceed.
Hello. Am I audible, sir?
Yeah, audible.
Yeah. Very good evening, sir. I just want to understand that you suggested that you have passed on the prices, but despite your quarter-on-quarter market share and your revenue growth, your revenue growth is around 46.6%, but your gross profit is down around 12% and EBITDA is down 16%. The cost of the absorption. So, there is a drop in gross margin from 46.61% to 41.31%. So, what is the reason of this?
No, if you notice, our EBITDA shot up by 12%, which is a very big jump from INR 40.7 per kg to INR 46.7 compared to the last full year. 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. EBITDA per kg has gone up because of the efficiencies and consolidation, what we have taken up in the last financial year. 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 INR 97 for the full year, INR 107 in Q4, it become INR 130 now. The revenue growth is partly due to the inflationary raw material price. But the proof of the pudding is EBITDA growth.
EBITDA growing by almost INR 6 over the last year number is a big relief or proof that our efficiencies and consolidation are adding to the bottom line.
Okay. Could you please explain what kind of value-added products in pharma that we are going to launch or planning to launch as a backup in the market?
Yeah. Currently, we have three set of products, that is bottles and caps, variety of caps. We have EV tubes, flips and tubes, and canisters. Now currently we are working on some other products, including dosing pens, wherein IP requirement is there. 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. 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. In that way we are going. Sorry.
Yeah, please sir.
That is one product wherein we are putting efforts. We are also looking at semiconductor trays. That will be a little longer shot 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, accuracy, and high-end raw material requirement. Understanding of the technology is very much needed. That is one very high-end value-add product we want to look into in the coming year.
What kind of development new product?
It could be very high, something like INR 150, INR 200, I guess. We are still having basic data. 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. 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, they have suppliers with good technology. We are trying to find some good technology partner, to enter into this. That is a little longer shot. But pens is one area where we are focusing now and hope to get into that business in a year's time.
What kind of capacity are we putting up for these pens and what is the
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. Once that volumes come up, the volumes in this country or even exports to the African and other countries can be of sizable numbers. We are still at the drawing table stage now. Depending upon the plans, it could be 1 million pens per month will be the minimum capacity we will be starting with.
This revenue will come from the next financial year, right? Like 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. We take the next question from the line of Shirish Pardeshi from Motilal Oswal. Please proceed.
Good evening, Mr. Rao, and thank you for the opportunity. As usual, you have surprised us. I just wanted to check few things. This quarter, our lube volumes were lower, and because of that, our EBITDA has shot up to 46.5. What I am trying to understand, if you can give me a number of what is the lube quarter one EBITDA per kg, and in future, once lube's order comes back, will this EBITDA looks like towards 45 or will be lower than that?
Lube as it 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. 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 wastages and rejection rates have come down. So, these are long-term in nature.
That is why we are confident about a consistent EBITDA growth in the current year, in spite of moderate volume growth. You must appreciate that in spite of the war situation all around. Other than lubes, 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 lubes are down due to the base oil disruption in a couple of our client locations. They could not get the base oil because of their dependency on Middle East. Of course, Qpack, as I explained, is a price-sensitive market, edible oil and grain users. So, they were a little hesitant when the raw material shot up by INR 50 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 food and FMCG has grown 26%. However, there could be aggregation because quarter on 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 if this price is now settled and growth looks better in second half forward.
Yeah, for volume growth, as I said last time, we are aiming at 10% to 12%. Even today, I still feel 10% is possible because in spite of the war, the clients are sticking with us and rather some of the clients who left us are coming back, because they know Mold-Tek can afford to maintain the material, produce at good efficiency, and ensure supplies in time. When any disturbance is there in the markets or general atmosphere around, they will fall back more on Mold-Tek. The trend of IML adoption in paint industry is growing, because the leaders have started using more and more IML brands and Aditya Birla also using more than 25% to 30% of their paints in IML.
The trend is spreading into the lower players also, and they are coming back to us and hopefully paint, and paints especially, we will see a double-digit growth for the full year. If paint remains at that level, if lubes 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, the numbers are, weight-wise, they are very less compared to paints. Even if growth is 10%, it is equivalent to a growth of 15% volume if pharma is growing at 40%, which I think the trend is already in line with that. 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.
EBITDA growth of INR 5 we achieved, INR 6, in fact, compared to the last year, full year 40.7, we did 46.7, is mainly due to the consolidation and efficiencies and better capacity utilization, which will be long-term in nature. That is why I am confident this year we will be crossing our target of 32, 43 we set for the full year.
Okay, that is 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. If July, the prices have come down in the beginning, and again, last two weeks they have gone up. Now today they are back to 145, 146 compared to the peak of 155 they reached in the end of March. Again, the price is rising, but we don't know if the war comes to an end, I'm sure it will come down to 120, 125 at least.
Yeah, I understand. The reason why I'm asking because you also eliminated the in-house printing levels. There is a cost lever also sitting there and there is a margin lever also sitting there. 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. 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 INR 100?
Profit per kg at INR 100. Where have you seen that?
So calculating the
Minus-
Yeah, dividing gross profit by the volume. This is the entire pass on cost, right? If there is a price increase in raw material about INR 30 from 100 to 130, and we are selling at INR 150, so it increases by INR 30. 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. That is why I always encourage people to look at the EBITDA per kg, which is a correct sign of profitability in our line of business. 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. That is still happening. 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. That is where I am very happy that we got almost a 12% jump compared to the last year's number, in spite of the war situation and in spite of the lubes being impacted due to war. This is through consolidation and efficiencies, which are long-term and permanent in nature.
Right. Got it. My second question is that we are talking about the lube 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 1,800 to 2,000 metric ton volume on a quarterly basis. One thing is that it is still a normalized level. Second, I wanted to know was, if our Qpack segment's volume normalizes, which was not any growth because of the competitive intensity it has. That is the reason why you are talking, that the EBITDA per kg, which is around INR 46, will come down to about 44, 45 as a range.
Yeah. Because not only that, when the capacity utilization remains at the same level or maybe a little less, your automatically EBITDA per kg will come down. I am sure that lubes will compensate this quarter. If not fully back, they have improved a lot. Maybe they made some alternate arrangements of the base oil. A couple of clients who are impacted during the war are now back into market in terms of quantities. We hope lubes will get back into shape in this quarter. That will overall 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. Next question is related to the new line that we are getting into, the ophthalmic and looking to get into the dosing pens, too. I wanted to understand what kind of size this industry has. Even when you 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 feel that it should to bring up to that quality. Similarly, I guess that this is similar for the dosing pens, too, because there is a liquid API included in that, right? Just wanted to understand the learning curve that would be required. As you are saying that once 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 am saying is, in case we find a partner who is willing to share his IP and the validation data, which is like a tech support or a tech understanding, then the timelines can come down from three years to one year itself. Because, then the testing, already some of the suppliers abroad we are in touch with, they already are in Indian market at various levels of testing. If we tie up with them, things can go faster, like 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. At this stage, it is too early to comment. But we are on a track to see both options.
And the assets required for this? How would you plan new plant and machinery for this?
We already have the land, so we'll be needing at least 50,000, 60,000 sq ft of area to start with. That will be around INR 10 crores investment. The machinery to start with would be also in the region of around INR 10-INR 15 crores. So, minimum INR 25-INR 30 crores minimum plant size is required in the beginning, which need to be ramped up depending upon the growth in the business. But the pricing and EBITDA margins are more than double that of regular pharma products.
Right. For this ophthalmic product that we are talking about, for that, we can make it on the same assets that we have today with us?
Yes. Ophthalmic, we don't need any special level of safety or the ambience. Our current facility where we are now already taken up a construction of 25,000 sq ft 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. That is mainly pens and some other. There are some more devices under consideration, but it will be too early to comment. We are working on feasibility and market demand. But let me assure you, Mold-Tek 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'll 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. Just last question from my side, sir. Generally, after reaching a 75% capacity utilization, 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. By the end of the year, what are we looking at as capacity? Down the line, about two years down the line or three years down the line, how are you looking at it?
Yeah. There will be certainly at least 10% to 12% capacity addition every year. That is to capture the growth and better utilization at three units, which are Cheyyar, 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 around INR 70 lakhs to INR 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. Hopefully, Panipat unit will be utilized better in food and FMCG, Qpacks. Already Qpacks, we are selling more than INR 1 crore, INR 1.5 crore worth of Qpacks from Panipat in this last six months.
Whenever there is ups and downs in the paint demand, there will be fungibility with the Qpack. The same thing we are doing at Cheyyar. Now a set of molds are going to Cheyyar for Qpacks and also paint industry molds, which will enable us to use the capacities in that unit also better. Our focus now is utilizing this capacity from 75% to probably 78% or even 80% in the coming years. Apart from that, create another 8% to 10% of capacity to catch up with the growth.
Perfect. Thank you so much, sir. Well done.
Thank you. We take the next question from the line of Bhargav Buddhadev from Ambit Asset Management. Please proceed.
Yeah. Good evening, team, and congratulations on a good set of numbers. Sir, my first question is that, is it fair to say that two things that we would have seen some volume decline, obviously because of elevated RM prices, they might be destocking. But now with the crude coming off, is it fair to say that we can, in the ensuing quarters, see volume growth coming back in paints?
Paint, actually, we are up 10.8% in spite of the severe conditions what we are experiencing. The main culprit is lubes. That is where I explained 17% dip compared to the Q1 last year.
No, I am talking volume. Volume growth.
Yeah. Even volume growth in paint is 10.8%. The lubes grew-
Okay
minus 17%. That is where our volume growth has been stunted to some extent. Otherwise, we would have been close to 9.5%. The 17% 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 lubes, 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 will be able to achieve double-digit growth.
Okay.
Given our growth patterns in food and Qpack and Panipat and Cheyyar capacities are 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, Mold-Tek 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 EBIT per kg should sort of increase from here on?
Yes. It is increasing because the volumes are increased, the capacity utilization is improving. The molds and machines are being kept on better use. I can't tell you the exact number, but we have a very good growth in Asian Paints in this quarter.
Their IML share is rising. Is that fair understanding?
Yes. IML share is also rising, and their volume growth is very considerably high, which used to be down in the previous couple of years. Started positive from last quarter, that is Q4, and this quarter is one of the best growth numbers.
Under 10% volume growth in paints, which we have seen in the first quarter, maybe in the next 9 months, it should only accelerate. Is that a good understanding?
It should at least remain at 10%-15% range. We are confident this time paint will go in double digit, and the signs so far are good. But for at least the wall stops in couple of months time, hopefully we will be seeing even 15% growth is possible because of very handsome growth in Asian Paints sale for us.
15% for the full year, you are saying?
Sorry?
You are saying 15% in paints for the full year can be a possibility, volume growth?
10% to 15%.
Okay. Understood. Great, sir. Thank you very much and all the very best.
Thank you.
Thank you. We take the next question from the line of Shaurya Yadav from GrowthSphere Ventures . Please proceed.
Hello. Am I audible?
Yeah.
Thanks. Sir, I have just one question. Earlier, our team was planning certain visits in China for tech tie-up related to similar blue type paint. Any update on that?
Yes, we are in talks with a couple of them, actually, not even one. 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.
Project partner soon.
Thank you. We take the next question from the line of Arnav Sakhuja from Ambit Capital. Please proceed.
Hi. Thank you for taking my question. My first question is that we had a strong growth of 11% in volumes for the paints sector. 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 you might have onboarded in quarter 1?
We do not onboard any new client in paint. This growth is all through our existing clients only.
Okay.
In paints.
What is the total CapEx that we can expect in FY2027?
Yeah. This year, we hope to bring it down from INR 130 crore, INR 135 crore to around INR 90 crore.
Right. 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 kg.
Yeah
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 my questions.
Thank you. We take the next question from the line of Apurva Parekh from 360 ONE Capital . Please proceed.
Yeah, thanks for the opportunity. Sir, congratulations on the good set of numbers. My first question is, we are seeing 19% of our overall value growth, right? 6% volume growth and almost 19% growth in sales per kg. Would it be possible for you to bifurcate how much of that growth is because of the price inflation, and how much is because of the product mix change?
See, if you can see directly that the sale in tons is only 6.25% increase. The rest of the all 18% is mainly due to raw material price increase. The increase price.
Okay. But won't there be any change because of the product mix as well, given that food and FMCG and-
You are correct. There will be definitely change in the product mix, which will improve the net revenue per kg. Due to pharma increase by 40%, their per kg rates are much higher. Yes, you are correct to the extent that if the raw material would have been the same level, the difference of 25% would have been somewhere around 12%-13%, because from 6% volume growth, the value add in revenue would have been 10%-12% at least because of the product mix of food and FMCG and pharma increasing compared to previous quarters.
Sorry, just to confirm, is it 12%-13% growth will be because of mix change?
Yeah. Volume growth have resulted in at least 10% growth with the revenue. That is product mix. Now the change what you're seeing, 6% to 25%, is mainly because of the inflation. At least 15% is inflation in the raw material price.
Okay. Got it. Sir, listening to your commentary, our nature of business is changing. We are focusing more on pharma and medical devices, and now food and beverage will be 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 numbers?
Yes, I would always encourage people to look at the EBITDA per kg and volume growth also as secondary. Because going forward, volume growth might be close to 10%, but EBITDA can grow around 18%-20% also, given our product mix changes and efficiencies that we are bringing in in our operations.
Sure. Would it be fair to assume you should maintain this 19%-21% EBITDA growth for rest of the year as such?
Yes.
Great. Sir, 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, and back to you.
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, so then we'll proceed with the next question. We take the next question from the line of Chirag from Keynote Capitals. Please proceed.
Yeah, my questions are answered. Thank you.
Thank you. We take the next question from the line of Sandeep Modi, an individual investor. Please proceed.
Yeah, thanks for the opportunity. Hi, sir, I wanted to ask few questions. Total, how many pharma companies you have visited and how many are actively giving orders?
How many means the number of pharma companies that we listed are more than 50. And the current orders may be coming from around 20, 25.
Okay
companies.
Okay.
Another 10 companies are also slated to visit us in the next couple of weeks or months.
Okay. Yeah, 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, the current growth will be contained within the current premises of our Sultanpur land, old land.
Yeah.
Future growth will be for devices.
Okay
It will be once we have a plan. As I said, we have two ways of going into devices. One is tying up with existing patent owner, which will reduce our timeframe. In that case, we have to start immediately and complete the buildings within a year's time, or 8-10 months' time. In case we are going for our own internal IP and development, which has a long time period, it could start later.
Sir, those are medical devices?
Yes, medical devices like dosing pens and other items, similar nature.
Okay. Very good. Thank you. One more thing. How many new molds are being made for pharma and why?
In pharma, number of molds are increasing every quarter. I do not 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. 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. 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. Sir, any CapEx for 2027?
Yes, there will be a CapEx of about 90 crores for this current year, assuming 25-30 crores for pharma and the remaining for balancing and replacement.
Okay. Is only the medical device the new business we are entering or are we planning any other business also?
We are open to consider white goods. We are even looking at electronics and semiconductor packing. These are all long shots. They are at the drawing board stage now. Based on how we tie up or how we get the partners in the field, the timeframes can be decided.
Okay. Sir, the five to two units which we have consolidated. Now, other 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. Thank you very much, sir.
Thank you. We take the next question from the line of Devang Mayur Bhatt from Spark PWM. Please proceed.
Yeah. Thank you. Thank you for taking my question. My question was, what was the benefit to EBITDA per kg from higher realization?
For a higher realization of FMCG and pharma together, it should be at least INR 3 per kg, would have come from those two lines. Another INR 3 from the consolidation and improved efficiencies.
Okay. Since our RM will be higher in the near term, what is your outlook for working capital?
Yes, that was one of the questions. That was the reason the interest has gone up considerably. With increased raw material costs, inventory costs, we end up using more working capital and hence pay more interest on it. Our current working capital is INR 125 crore, which was around INR 110 crore, INR 112 crore at end of March, I think. So, it has gone up by around INR 16 lakh, INR 18 lakh. Close.
Do you see this continuing for FY2027?
It may stabilize there because raw material is now not as much as it was in end of March. It is now currently trading around 10% less than what it was in the peak months. Hopefully it will stay there. It may not decrease much, but it will not increase. It may decrease to the level of 5%, 10%, but it may not increase given the raw material price. If the war reverses and further crude prices shoot up, then maybe a different point. But given this current scenario, it looks like it will come down a bit.
Okay. What was your CapEx in Q1 FY2027?
Q1, already INR 20 crores we invested, I guess. INR 20, 22 crores.
Okay. Thank you. That is it from my end.
Thank you. The next question is from the line of Dhruvin Doshi from NV Alpha. Please proceed.
Yeah. Hi, sir. Thanks for the opportunity. Sir, since you mentioned that raw material cost spike from INR 77 per kg blended in H2 of FY2026 to around INR 130 in first quarter of FY2027, if I heard it right. Sir, just wanted to understand if there is any inventory gains that we got in the gross margin of say, INR 103 per kg from INR 97 last quarter.
Inventory gains will be there to some extent, but not huge.
Would you be able to quantify, say, INR 2, INR 1 per kg?
Probably, yeah. INR 1 to INR 1.50 is there.
Understood. Got it. Sir, and currently, what is the raw material cost you said?
Current raw material is INR 145. The peak was INR 160, I think in end of March or early April.
Got it. Understood. That's it from my end, sir. Thank you so much.
Thank you. We take the next question from the line of Amit Kumar from Determinant Investments . Please proceed.
Yeah. Hi. Can you hear me?
Yeah.
Just one question. What your suppliers are saying in terms of availability of raw materials. Because again, throughout this month, which is July. Just about 15, 20 days, Strait of Hormuz was open. Now, we understand that U.S. Congress Senate, they have also sort of passed the bill, which will restrict imports of Russian crude oil, also into the global market. So have your suppliers had any sort of conversations with you in terms of supply availability?
Supply availability, they are not worried about, but the price they are not able to confirm. That volatility will still continue. But as of now, PP is copolymer, which is our main raw material. Availability is still I won't say it's plenty, but it is available as of today. Even the worst days of March and April, the material was available and there were 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 depend 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.
Okay. In terms of inventory, your own inventory holding as well as your customers. I mean, it's sort of lower than normal, higher than normal. Where do we sort of stand there, roughly? If you have any idea.
We don't have the details of our customers or competitors, but our standards are around one-month inventory. Three weeks to one month.
This, you are talking about raw material or finished goods or total?
I am talking about raw material, including finished goods and WIP, probably one month.
Okay. Understood.
One month, one month, few days. Yeah.
Thank you. That is it from my end.
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 Emkay for arranging this meeting with all the investors who have shown a lot of interest in our company and its operations. I thank you everybody, one and all, and wish you a great evening. Bye. Thank you, Rajesh.
Thank you. On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.