Hope you are doing well.
Recently, I came across Mitsu Chem Plast Ltd.
The company makes plastic industrial packaging products and hospital furniture parts.
What I found interesting about the company is the way it has grown over the years – From Rs 60 crore sales in FY 13 to Rs 309 crore in FY 23 and similarly Rs 2 crore PAT in FY 13 to Rs 12 crore in FY 23.
The last 4-5 quarters have been subdued for the company on account of fall in commodity prices and relatively low demand. The management is expecting improvement in sales and profitability in H2 FY 24.
Below, we have shared interesting insights from the Q2 FY 24 con-call of Mitsu Chem Plast to understand the current situation and the outlook for the company.
Before that, if you ever find a good stock in an ignored sector with promoter buying from market and increasing his stake, you should sit up and study the company in greater detail…something good might be brewing.
We recently released our new stock recommendation for Alpha/Alpha + members based on the same framework – for details click HERE
Mitsu Chem Plast – Insights from Q2 FY 24 con-call of the company
– Basic details
- We ended quarter Q2 FY 24 with a total income of Rs 76.01 Crores. Despite cost pressure we reported EBITDA of Rs 5.42 Crores. Net profit came at Rs 1.50 Crores
- The companies molded industrial plastic packaging products accounted for 87.5% of the sales as it continues to supply to various industries such as chemical, pharmaceutical, dye, agrochemical, disinfectant, etc.
- The hospital furniture parts vertical contributed 9% and other vertical contributed 3.5% to the total revenue
- Q2 volume – It is approximately 4460 metric tonnes…last year it was around 3,400 tonnes
- We are optimistic on demand growth while we continue to focus on cost optimization and profitability improvement
- On the demand side, the plastic packaging demand is robust and with the rising demand from petrochemical, pharmaceutical, chemicals and agrochemicals, the outlook is optimistic
- Last quarter we have added around four to five new customers and we are trying even in this quarter also
– Rights issue
- We are planning to raise funds up to the tune of approximately Rs 45 Crores
– Capacity utilization
- The company’s plant operated at an average capacity utilization of around 70% on installed capacity of 25,000 plus metric tonnes per annum
- Basically we can reach up to 85% or maybe till 87% to 88%
– International markets
- It is a little difficult to enter there and hence what we are trying to do from last two years is we are taking many exhibitions
- We are trying to build repo with customers and the sampling and everything else
– Raw material prices
- It looks like this must be a bottom or maybe some $50 to $60 may go down for the prices
- Further if the demand comes in chemical and pharmaceutical sector, the polymer prices also may increase at least $50 to $100
- I think the first half was very, very average and it was not really good. Even Q2 also was almost similar but here I can see a robust growth in Q3 and Q4
- I think if the demand comes yes we are ready with all the infrastructure so maybe we can go up to 85% utilization
- I think the second half should be more than 10% margin in EBITDA so that should be our target
- last year is exceptional but most of the year we have seen 20% to 30% to 35% growth and that is what we intend to achieve for coming two to three years
Disclaimer: This is not a recommendation to buy/sell Mitsu Chem Plast. The securities quoted are for illustration only and are not recommendatory.
SEBI Research Analyst Registration No. INH100001690
Research Analyst Details
Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
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