In this article, we will discuss 2 such small-cap stocks which enjoy a monopolistic position in their respective industries as well. So, let’s get started!
1) Mold-Tek Packaging:
- Mold-Tek Packaging was established in the year 1986 and got listed on the stock exchange in the year 1993. The company is having a market capitalization of around Rs. 3,000 Cr. as of November 2022.
- The company deals in the plastics segment and is the leading rigid plastic packaging manufacturing company.
- Most of the plastic packaging of consumer products is done by Mold-Teck Packaging.
- Due to backward integration and cost-advantage, the company enjoys superior margins in the packaging industry.
- The monopolistic feature of the company is that the company manufactures Robots which further helps in the production of containers and other products. Due to these in-house manufacturing capabilities, the company enjoys around 25% market share in plastic packaging.
- The stock price of Mold-Tek Packaging has witnessed significant growth of 47.9% on a 3-year CAGR basis.
- The company deals in products like Plastic Pails, IML decorations, Twist Lock Pack, and many others.
- Key Clients of the companies are ITC, Vadilal, Asian Paints, Shell, Valvoline, Gulf, HP, Castrol, Amul, Vadilal, Cadbury, and many more.
- As of Q2FY23, the company derives the majority of its revenue from the Paints Segment i.e., around 53.8% which is then followed by Lubes (22.1%) and Foods & FMCG (24.1%).
- Key Risks:
- The company faces stiff competition, especially in the pricing case
- High Customer Concentration: The company derives 70% of its revenue from Top-10 Clients.
- High Supplier Concentration: The company sources its raw material from single suppliers which provides a higher supplier concentration risk.
- Plastic-Non-Economic Friendly Factor
2) NOCIL Limited:
- NOCIL Limited got incorporated in the year 1961 and is involved in the Rubber Chemical Business spans over 4 decades. The company is having a market capitalization of around Rs. 4,000 Cr. as of November 2022.
- The company is the largest rubber chemical manufacturing company in India. The company owns a 40% market share in this segment.
- NOCIL offers greater customization features where the company offers a wide range of rubber chemicals to suit customer needs.
- NOCIL has witnessed a sharp rise in exports due to China Plus One strategy.
- The company has 2 manufacturing plants in Navi Mumbai and Gujarat.
- The stock price of NOCIL has witnessed significant growth of 33% on a 3-year CAGR basis.
- Talking about the product portfolio, the company has a diverse 22 rubber chemicals product basket. The products of the company are divided into the following categories: Anti-Degradants, Accelerators, and Other Applications.
- Key Customers of the company are Apollo, MRF, JK, Fiat, Ceat, Michelin, Bridgestone, Yokohama Rubber, Sumitomo Rubber, Continental, etc. Since Tyre companies have many dependencies on Rubber, the tyre industry become the company’s major source of revenue.
- In FY22, the revenue from operations of the company stood at Rs. 1,571 Cr. while, the Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) stood at Rs. 283 Cr. The Profit Before Tax (PBT) of the company was Rs. 240 Cr. in FY22.
- The company has consistently paid a dividend to the shareholders. As of FY22, the company has given a dividend of 30% of its face value.
- Key Risks:
- High dependence on the tyre/automobile industry: 65% of the revenue comes from the tyre industry.
- Competition from cheap imports
- Profitability exposed to volatility in raw material prices: Crude Oil is the key raw material for the company where prices remain volatile.
What Should Investors Do:
Mold-Tek Packaging and NOCIL Limited are two small-cap stocks that own a monopolistic share and enjoys a leading position in their respective industry. Small Cap stocks are only suitable for those investors who have an aggressive approach and can face the volatile ride. Hence, investors who can take aggressive calls should keep these 2 stocks on their radar. Do follow due diligence before making investment decisions.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.