mold tek technologies ltd share price Management discussions

Mold-Tek Technologies Limited is a leading Engineering and Technology Solutions provider to many key players in various engineering services across the globe.

We specialize in providing Civil Engineering & Mechanical Engineering services and has a strong team of young energetic engineers lead by professionals with vast experience in Engineering and Project management. We specialize in Designing and Detailing of Structural Steel, Misc. Metals, BIM Services, In-house Connection Design and Pre-Engineered Metal Buildings- Design and Detailing Services to Steel Fabricators, Architects & General contractors.

We always believed in long term partnerships with our customers and invests substantial resources internally in software development, quality control, training and analytics to ensure the best possible customer experience. Our culture imbibes in each of the employees to constantly learn and improve project delivery & quality in line with customer requirements to bring out the best possible value to our customers. We constantly encourage our employees to dedicate part of their time in enhancing their skills in terms of domain knowledge and design concepts.

As an ISO 9001:2015 certified company, strict adherence to compliance and quality are monitored in every process. At Mold-Tek, stringent training, systems and continuous improvement are pursued all the time.

As an ISO 27001:2005 certified (Information Security Management System) company, strict adherence to data security is observed in all forms (Paper, Electronic, Physical, etc.) Mold-Tek Technologies Limited Risk Assessment is undertaken based on Confidentiality, Integrity and Availability. ISMS process includes Trainings, Objectives and applicable controls. All our structural steel detailing projects are executed using various high end technical software which allows checking for any clash or interference during the detailing stage and save considerable time and resources in modifications at site. Our employees are trained on the AISC/NISD approved training programs. Our In-house Engineering capabilities allows us to comprehensively understand and execute projects.

Our delivery centres are located in Hyderabad, Chennai, Vijayawada, Nasik and Pune. We have strong global presence with Sales offices in USA & Europe. We offer round the clock customer support across all time zones and deploy resources to clients location as per our clients and project requirements. Driven by its purpose and adoption of smart technologies to offer value proposition to its clients, Mold-Tek Technologies Limited is a well-established brand in the civil & mechanical engineering service industry. The Companys innovative services, has enabled it to maintain a strong competitive position in the market.

Engineering and Construction Sector Overview:

The United States (US) construction market size was valued at $2.1 billion in 2022 and is expected to achieve an AAGR of more than 4% during 2024-2027. The industrys growth in the US during the forecast period will be fuelled by investment in the energy, transportation, housing, and manufacturing sectors.

The World Steel Association in its Short Range Outlook (SRO) has forecasted steel demand for 2023 and 2024. World steel forecasts that in 2023, demand will see a 2.3% rebound to reach 1,822.3 Mt. Steel demand is forecast to grow by 1.7% in 2024 to reach 1,854.0 Mt. Manufacturing is expected to lead the recovery, but high interest rates will continue to weigh on steel demand. Next year, growth is expected to accelerate in most regions.

The Global Construction Market is projected to grow from USD 10.54 trillion in 2023 to USD 16.14 trillion by 2028, at a CAGR of 8.90%. This growth is expected despite the industrys forecasted sluggish expansion of just 0.8% in 2023.

The strong post-pandemic rebound of the US economy has run its course with the Feds steep interest rate hikes to tackle inflation. Growth in 2023-2024 is expected to be subdued by recessionary pressure. Rising interest rates as well as land and material costs are putting negative pressure on construction, particularly for the residential sector, while recovery in the non-residential sector is expected to continue.

Infrastructure is aided by recent legislation such as the 2021 infrastructure law and the Inflation Reduction Act (IRA). US manufacturing sector activity has slowed from the strong post- lockdown rebound. Rising car prices, high gasoline prices, and interest rates have put downward pressure on US auto sales, and US light vehicle sales went down by a further 8.0% in 2022. They are expected to recover by 8.0% in 2023 and an additional 7.0% in 2024 with a potential decline in interest rates.

After a fall of 2.6% in 2022, steel demand is expected to grow by 1.3% in 2023 and then by 2.5% in 2024 which is a positive sign for the Construction industry.

North America Construction Market Analysis:

The North America Construction Market size is estimated at USD 2.35 trillion in 2023, and is expected to reach USD 2.97 trillion by 2028, growing at a CAGR of 4.82% during the forecast period (2023-2028).

As reported in June 2021, the US will need to add 330 million sq. ft of warehouse space dedicated to online fulfilment by 2025 to keep pace with the expected uptick in e-commerce sales over the same period. In Canada, demand for warehouse space far outnumbers supply, resulting in a spike in industrial construction. Following a 32% rise in online sales in 2020, Canada is expected to require an extra 40 million sq. ft of warehouse space over the next five years to meet demand by 2025. That is more than three times the combined storage capacity available in Canadas three busiest industrial cities: Toronto, Vancouver, and Montreal.

Manufacturing, mining, and a range of services all include construction as one of their biggest customers. This encompasses all private and government real estate and commercial infrastructure developments in the United States, a primary workforce generator.

Canada has one of the worlds largest economies and is one of the worlds wealthiest countries. Construction is the backbone of its economy, responsible for building and maintaining the constructed infrastructure of cities, towns, and communities. Over the last decade, infrastructure and construction have seen remarkable growth, with around 50 skyscrapers completed in major cities like Toronto, Vancouver, and Calgary. Infrastructure Canada financed 6,500 projects to develop and maintain thousands of kilometres of expressways and motorways. In keeping with its election promises, the Canadian government is likely to increase spending on housing and renewable energy initiatives. The party claimed in its election program that it would spend CAD 2.7 billion (USD 2.1 billion) over the next four years to build or repair 1.4 million affordable housing units and that greenhouse gas emissions would be reduced by 40-45% below 2005 levels by the end of the decade.

Rising use of structural steel in different industries, including transportation, construction, shipbuilding, mining, packaging, and others, is stimulating market growth. All the above construction needs will help the company to grow in the USA and North American Construction market with structural and detailing engineering services to be on major focus.

Indias Engineering Export Performance:

Engineering exports from India, after reaching its all-time high at USD 112.16 billion during fiscal 2021-22, finished fiscal 2022-23 at USD 107.04 billion conceding a decline of 4.57 percent. In rupee terms however engineering exports recorded 2.77% growth year-on-year.

This disparity was due to substantial year-on-year depreciation of rupee vis-vis the US Dollar in 2022-23. Despite of lower exports in 2022-23, engineering exports surpassed the predicted value of USD 105.82 billion set by Government of India for 2022-23. Geo-political crisis in CIS region led by Russia-Ukraine war, economic slowdown in the North-East Asia especially China, crisis in the South-East Asia and slowdown in Europe are the major factors responsible for lower shipment of engineering goods from India. According to the Quick Estimates of Department of Commerce, Government of India, share of engineering exports in Indias total merchandise exports during fiscal 2022-23 was 23.92 percent as against a higher 26.58 percent in fiscal 2021-22. Panel-wise analysis showed that out of 34 engineering panels, 22 recorded growth in exports during 2022-23 while 12 conceded decline in shipment. Engineering exports finished fiscal 2022-23 with 4.57% decline over the previous fiscal Iron and Steel was the main spoilsport behind the decline in engineering exports with 41.52 percent decline in exports during 2022-23 over the previous fiscal. Region-wise, Indias engineering exports to North America, WANA, ASEAN, Latin America, and Oceania recorded positive growth in 2022-23 while shipments to North-East Asia, South Asia, CIS and EU declined over the previous fiscal.

India remained a bright spot in the global steel industry in 2022. Having managed inflation well, the Indian economy is on a healthy growth track, with a rising share of investment in GDP thanks to strong government spending on infrastructure. The residential sector is also expected to grow, backed by affordable housing projects and urban demand.

Indias capital goods sector is also expected to benefit from the momentum in infrastructure and investment in renewable energy. Automotive and consumer durables are expected to maintain healthy growth driven by sustained growth in private consumption.

After growth of 8.2% in 2022, demand is expected to show healthy growth of 7.3% in 2023 and 6.2% in 2024.

Opportunities & Threats: Opportunity

Key Takeaways from Market Study: Civil Engineering Services.

The global structural steel market is valued at US$ 103.8 billion in 2023.

Sales of structural steel are anticipated to reach US$ 166 billion by the end of 2033.

The global market is projected to expand at a CAGR of 4.8% from 2023 to 2033.

Demand for structural steel is forecasted to advance at a CAGR of 4% in Canada.

The residential segment is predicted to expand at a CAGR of 5% over the decade.

Sales of structural steel are expected to progress at a CAGR of 3.2% in Germany.

Increasing Demand for Luxury Homes.

Increasing Infrastructure Projects in Developing Countries.

Rising Investments in Renewable Energy Infrastructure.

Increasing Government Initiative for Infrastructure

Development.

Rising Opportunities in Developing and Under developing Countries.

The Construction Industry in 2023 is expected to offer a wide range of career opportunities. The construction industry will need to attract an estimated 546,000 additional workers on top of the normal pace of hiring in 2023 to meet the demand.

Key Takeaways from Market Study: Mechanical Engineering Services.

The BIW fixture sector is on track to hit a market size of $1.5 billion by 2030, with a CAGR of 5.2%.

The global poles and towers market is anticipated to grow at a 4.5% CAGR, reaching a valuation of $3 billion by 2030.

Specialized machinery is emerging as a niche market, with projections indicating a market size of $800 million by 2030.

The market for Plant and Process Simulation software is expected to reach $2 billion by 2025, becoming a staple in mechanical engineering.

Threats:

Following are some of the major risks any business faces and tries to address the same through corporate actions: Financial Risks - includes foreign currency rate fluctuations, liquidity and leverage.

Foreign Exchange Risk: Volatility in USD/INR value can affect the profitability either way.

Legal and Statutory Risks -includes contractual liabilities & statutory compliances.

Competition Risks - New competitors may enter the markets in which your company operates.

Business Outlook:

On a Consolidated level, Company achieved revenue of $18.212 million in FY 2022-23 compared to $13.253 million in FY 2021- 22, a growth of 37.42% in dollar terms and Rs 14,687.56 Lakhs in FY 2022-23 as against Rs 9,835.34 Lakhs during the previous year FY 2021-22, i.e., a growth of 49.33 % in rupee terms. On a Standalone level, the Company achieved revenue of Rs 13,325.86 Lakhs in FY 2022-23 as against Rs 9029.10 Lakhs during the previous year FY 2021-22, i.e., a growth of 47.59%. Consolidated Profit after Tax for FY 2022-23 increased from Rs 1,329.93 Lakhs in FY 2021-22 to Rs 2,926.75 Lakhs, a growth of 120.07%. Standalone Profit after Tax for FY 2022-23 increased from Rs 1,317.16 Lakhs in FY 2021-22 to Rs 2907.55 Lakhs, a growth of 120.74%. Companys Consolidated Operational Profit before Tax and before Forex Gain for 12 months FY 2022-23 is Rs 39.07 Cr as against Rs 16.49 Cr for FY 2021-22, a growth of 136.93%. The Company has shown phenomenal performance with EBIDTA margins around 30% and PAT margins around 20%, thanks to the better performance of both Civil and Mechanical divisions and strong turnaround in Mechanical Engineering Services Division performance.

This impressive performance is achieved through increase in revenues, improving Operational efficiency by implementing strong internal quality and cost controls.

Both our Civil and Mechanical divisions have given stellar performance in FY 2022-23 resulting in jump in revenues and impressive increase in profitability. Civil and Structural Division, our main line of business has performed well in this FY 2022-23 in terms of revenue. Increase in Fixed team revenues has also contributed to the growth in Civil Division.

Civil and Structural Division achieved revenue of $14.733 million in 12M 2022-23, compared to $11.70 million in 12M 2021-22, an impressive growth of 25.92%, in dollar terms. Mechanical Division achieved revenue of $3.479 million in 12M 2022-23, compared to $1.552 million in 12M 2021-22, an impressive growth of 124.16%, in dollar terms.

EBIDTA Margins & EPS:

Sharp rise in demand and better capacity utilization in Mechanical Engineering Division led to rapid growth in Consolidated EBIDTA in FY 2022-23, from Rs 22.73 Cr to Rs 44.18 Cr, a rise of 94.37%. The EBIDTA Margin grew sharply from 23% to 30% in FY 2022-23. With increased flow of projects in Civil and Mechanical Engineering Division right from Q1 of FY

2023-24, this EBIDTA margin may further improve during the FY 2023-24 subject to market conditions.

Consolidated EPS shot up from Rs 4.71 in FY 2021-22 to Rs 10.36 in FY 2022-23, a rise of 119.96%.

Future Outlook – Civil and Structural Division:

The Civil and Structural Division has embarked on a promising journey in the fiscal year 2023-24, setting a positive tone. A substantial workload is currently underway, and this momentum is anticipated to persist in the upcoming quarters. Notably, advancements in quality and the adherence to timely project execution have yielded fruitful outcomes. Tier 1 clients are now presenting larger projects at competitive hourly rates.

The company is actively anticipating the acquisition of fresh clientele, particularly in the realms of Fixed teams and Precast Concrete design/detailing services. These avenues hold significant promise for growth and development.

The companys involvement in NASCC 2023 in the USA yielded not only acclaim for the quality of our design and detailing services but also lays the foundation for an influx of new clients throughout the financial year 2023-24.

Of noteworthy mention, the establishment of capacities for connection design and member design marks a pivotal stride. This strategic move positions the company to explore high-value engineering services, fostering the augmentation of both revenue and profitability.

Furthermore, a commendable increase in billing for Fixed Teams has been realized, with a positive outlook for further amplification in the Civil divisions performance. The prevailing abundance of ongoing projects is set to persist, coupled with the projection of new entrants into the Fixed teams and Precast Concrete design/detailing services, both of which offer enticing growth prospects.

With the establishment of capacities for connection design and member design, the company aspires to fortify its financial standing and profitability by venturing into the realm of high-value engineering services.

Future Outlook - Mechanical Division:

After a year of unprecedented growth, Mold-Tek Technologies Limited Mechanical Division is set to scale new heights in the coming year. Mold-Tek Technologies Limited has become the experienced design house for Automobile Tier 1 and Tier 2 companies in Europe and North America. With the Electric Vehicle BIW Expertise, we are gearing up to make a splash in the U.S. market by showcasing our capabilities in the Electric Vehicle Body-in-White (EV-BIW) domain at industry-specific trade exhibitions. Utilizing analytics-based marketing and digital outreach, we are targeting untapped markets and customer segments to broaden our industry presence.

Company started booking larger projects in BIW space since FY 2022-23 and as on today the work on hand (WOH) stands at $1.10 million as against $0.20 million indicating improved demand for our Mechanical Division services.

With a strategic focus on personalized customer interactions and targeted promotional activities, Mold -Tek Technologies Limited Mechanical Division aims to establish itself as the go-to solution provider in the industry. Investments in operational streamlining through automation and process enhancements are set to boost productivity levels, cut down lead times, and elevate client satisfaction. These concerted efforts are geared to sustain our growth and profitability in the upcoming year. Our delivery centres are strategically located to serve a global clientele, with a strong presence in key markets across North America, Europe, and Asia.

By harmonizing our strengths with market dynamics and building on our recent achievements, Mold -Tek Technologies Limited Mechanical Division is perfectly poised to seize new opportunities and reach higher targets in the year ahead. Company is also in the lookout for acquisitions in the field of Connection Design, Architectural Services and Structural design engineering to expand its operations in USA.

To keep pace with our ambitious growth plans and to cater to future market demands, weve on boarded an additional 115 trainees. These fresh talents will undergo intensive training this quarter, adding value to both our Mechanical and Civil engineering divisions.

Team wise performance:

The company provides Structural engineering, detailing and mechanical engineering services as detailed below:

Sales

Type of Services	2022-23	2021-22
Structural Engineering	10,456.32	7,920.82
Services
Mechanical Engineering	2,869.54	1,108.19
Services
Total	13,325.86	9,029.01

Risks and Concerns:

The Company is always cautious in identification and monitoring strategic, operational and financial risks across various levels and takes appropriate actions for mitigation of the same. The Company has clearly defined processes for carrying out different responsibilities because as we firmly believe in doing so and are committed to providing our clients with quality services. We regularly inspect our operations, identify flaws, and provide solutions. This builds a strong system in and around the periphery of the organization.

Financial Performance Overview:

The financial statements of Mold-Tek Technologies Limited and its subsidiary are prepared in accordance with the Indian Accounting Standards (referred to as ‘Ind AS) prescribed under section 133 of the Companies Act, 2013, read with the Companies (Indian Accounting Standards) Rules, as amended from time to time. Significant accounting policies used in the preparation of the financial statements are disclosed in the notes to financial statements.

The following table gives an overview of the standalone and consolidated financial results of the company: Rs in Lakhs

	Standalone		Consolidated
Particulars	FY 2022-23	FY 2021-22	FY 2022-23	FY 2021-22
Revenue from operations	13,325.86	9,029.01	14,687.56	9,835.34
Earnings before interest, tax, depreciation and amortization (EBITDA) (before other income)	4,394.54	2,252.96	4,418.30	2,273.35
Profit Before Tax (PBT)	3,861.43	1,780.87	3,882.04	1,798.10
Profit After Tax (PAT)	2,907.55	1,317.16	2,926.75	1,329.93
Earnings per share (Rs 2 Face Value)	10.29	4.66	10.36	4.71

Operational Performance Overview:

On a Consolidated level, Company achieved revenue of

Rs 14,687.56 Lakhs in FY 2022-23 as against Rs 9,835.34 Lakhs during the previous year FY 2021-22, i.e., a growth of 49.33 %. On a Standalone level, the Company achieved revenue of

Rs 13,325.86 Lakhs in FY 2022-23 as against Rs 9,029.10 Lakhs during the previous year FY 2021-22, i.e., a growth of 47.59%. Consolidated Profit after Tax for FY 2022-23 increased from

Rs 1,329.93 Lakhs in FY 2021-22 to Rs 2,926.75 Lakhs, a growth of 120.07%. Companys Consolidated Earnings per share (EPS) for FY 2022-23 is Rs 10.36 as against Rs 4.71 of FY 2021-22, a growth of 119.96%.

Standalone Profit after Tax for FY 2022-23 increased from

Rs 1,317.16 Lakhs in FY 2021-22 to Rs 2,907.55 Lakhs, a growth of 120.74%. Companys Standalone Earnings per share (EPS) for FY 2022-23 is Rs 10.29 as against Rs 4.66 of FY 2021-22, a growth of 120.82%.

Civil Engineering Services (CES) generated a revenue of

Rs 10,456.32 Lakhs for the financial year 2022-23 compared to

Rs 7,920.82 Lakhs for the financial year 2021-22, i.e., growth of 32.01%, and the Mechanical Engineering Services (MES) generated a revenue of Rs 2,869.54 Lakhs for the financial year 2022-23 compared to Rs 1,108.19 Lakhs for the financial year 2021-22, i.e., growth of 158.94%.

Key Financial Ratios:

Particulars	FY 2022-23	FY 2021-22	% Change
Debtors Turnover	4.59	4.23	8.51%
Current Ratio	3.97	3.84	3.39%
Debt Equity Ratio	0.00	0.00	No Debt
Net Profit Margin	22.%	15%	46.67%
Return on Net worth (%)	43%	32%	34.38%

Return on net worth increased on account of Increased profitability for FY 2022-23.

Net profit margin increased on account of increase in sales and increase in profitability for FY 2022-23.

Market Outlook:

The civil and mechanical engineering services sector continues to present favourable growth prospects. As construction demands rise and industries embrace advanced technologies, MTTL is well-poised to capitalize on these opportunities. We anticipate continued growth in civil and mechanical engineering services due to considerable work on hand and improved quality. We plan to expand our client base through exploring opportunities for Mechanical engineering services in USA markets, and our alignment with sustainable engineering practices positions us to lead in environmental stewardship.

Internal Controls and Adequacy:

The Company has in place adequate systems of internal control commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use or losses, executing transactions with proper authorization and ensuring compliance of corporate policies.

The Company has a well-defined delegation of power with authority limits for approving revenues as well as expenditure. Processes for formulating and reviewing annual and long term business plans have been laid down for the management of risks and opportunities in the Companys activities. The internal audit process is designed to review the adequacy of internal control checks in the system and covers all significant areas of the Companys operations.

Human Resources:

At MTTL, people are central to driving the Companys competitiveness as they are integral to our sustainable business growth. MTTL has consistently focused on recruiting and on boarding the best talent from industry with the objective to generate superior performance.

The Company firmly believes that talented and engaged employees are critical differentiators as they provide competitive advantage for sustaining and growing the business. Our consistent focus has been to hire the best-in-class talent and nurture a supportive and a safe working environment. The Company has always believed that its people are an important asset and that training and development is necessary for the betterment of its people and the business. MTTLs headcount as on 31^st March, 2023 is 1,107.

Cautionary Statement:

It is noted that in accordance with relevant securities laws and regulations, certain of the comments in the Management

Discussion and Analysis section may be regarded to be "forward-looking statements" with respect to MTTLs objectives, plans, estimates and expectations. It is crucial to recognise that the actual results achieved may significantly deviate from the expressed or implied statements. MTTLs operations are subject to various influential factors, including economic developments within the country, industry-specific demand and supply conditions, fluctuations in currency, modifications in government regulations and tax laws, as well as additional considerations such as litigation and industrial relations.