We hereby present you our investment idea for Equity Investment i.e “Pick of the Week”. A thorough analysis of company, industry and economy goes behind our stock ideas for you. With the “Pick of the Week”, you may earn superior returns in stock market over a time horizon of 6 – 9 months.

INVESTING RATIONALE

• Legacy paints division and F&F segment supports topline growth: Q1FY20 topline growth of 14% was driven by volume growth of 15% wherein IML & Non-IML volume share grew by 61%/39% respectively YoY. Overall volumes grew led by healthy offtake from Asian Paints for its Mysuru and Vizag plants and growing acceptance of IML square pails from Edible Oil segment. Overall F&F segment reported robust 56% YoY growth in revenues.

• For Q1FY20, MTEP posted volume growth of 14% YoY to 6,313 tn (434tn from Mysuru and Vizag plants and F&F +94% YoY volume growth) which offset the drag in volumes from Lubricant segment which witnessed pressure owing to Auto slowdown.

• IML contribution growing: IML volumes/value contribution stood at 61%/65% resp. in Q1FY20 higher than 57%/61% reported in Q1FY19. The growing IML volume/value contribution is owing to rising share of F&F segment which has been a key growth driver for the company. Within F&F growth has been driven by IML square packs for Edible Oil packaging.

• Management continues to hold on to its guidance of 15-20% volume growth in FY20/FY21 (~50%/80% utilization in Vizag & Mysuru plants over FY20/FY21). We maintain our volume growth forecast at 14/17% for FY20/21E given 1) utilization ramp up at its new plants (2) strong order book in edible oil packs and other F&F categories and 3) new client additions.

• Outlook: We expect F&F segment (generic pail, thin wall containers, small retail square ghee & edible oil packs) and Asian Paints oriented Mysuru and Vizag plants to be the key growth drivers of MTEP’s top-line/ bottom-line over FY20-21E. This coupled with continuously growing IML revenue share would enable MTEP to post robust revenue and profit growth of 14%/22% CAGR respectively over FY19-FY21E

• We maintain a BUY on Mold-tek Packaging with a target price of Rs. 294