Mold-Tek Packaging: Recommendation review

We had recommended Mold-Tek Packaging to investors in DSIJ Vol. 26, Issue No. 25 (dated November 21-December 4, 2011), when the scrip was trading at Rs 69. Our recommendation of the scrip was backed by factors such as the strong financial performance of the company, a consistent dividend payment history, its foray into the FMCG and ice cream packaging sectors as well as its expansion plans.

However, after our recommendation, the scrip has only gone down. The basic reason behind its poor performance on the bourses has been the poor financial performance for the September and December 2011 quarters. Its topline and bottomline have declined consistently from the June 2011 quarter. From Rs 51 crore in June 2011, the topline came down to Rs 41.48 crore and then to Rs 39.58 crore in the September and December quarters of 2011 respectively. The bottomline has also declined from Rs 3.51 crore in June 2011 to Rs 2.56 crore in September 2011 and then to Rs 2.33 crore in December 2011.

Thus, it is clear that the financial performance has been deteriorating quarter after quarter. As a result, the scrip has witnessed a significant decline of 20 per cent. Overall, this has made the valuations of the scrip cheaper.

However we feel that in view of the current volatile situation, exiting from the counter at the current levels would make better sense. Instead, investors can divert the amount to our Choice Scrip or Low Priced Scrip recommendations.