Buy EPL Ltd for the Target Rs 290 by Motilal Oswal Financial Services Ltd
Growth across all regions In-line operating performance
* EPL reported revenue of INR13.8b (up 25% YoY) in 1QFY27, driven by revenue growth across all geographies. The EAP region posted the highest growth of 34% YoY, followed by America/Europe/AMESA, which grew 29%/ 20%/17% YoY, with strong growth of ~24% YoY in oral care and ~26% YoY in the personal care segment (B&C).
* We believe EPL is well-positioned to deliver healthy revenue growth on the back of continued scale-up of the B&C segment, ramp-up in oral care, expanding geographical presence in high-growth markets, and rising market share. Higher operating leverage, pricing discipline, and improved share of B&C mix (54% of tube revenue in 1QFY27 vs. 53% in FY26) should boost sustained margin improvement. Incrementally, the merger with INDOVIDA will further broaden the TAM and accelerate growth for the company.
* We maintain our estimates for FY27/FY28 despite the miss on our adj. PAT estimates. This is due to an upward revision in revenue guidance, which offset the adverse impact of higher tax rates and lower other income. We value the stock at 15x FY28E EPS to arrive at our TP of INR290. Reiterate BUY.
Strong revenue growth; Europe’s margins under pressure
* Consolidated revenue grew 25% YoY to INR13.8b (est. in line). Gross margin stood at 59% (down ~150bp YoY). EBITDA margins contracted ~200bp YoY to 18.8% (est. 19.6%). EBITDA stood at INR2.6b (est. in line), up 15% YoY.
* Adj. PAT declined 3% YoY to INR967m (est. below), led by lower other income than last year and a higher tax rate (22% vs. 13.6% in 1QFY26).
* Revenue from AMESA/EAP/Americas/Europe grew 17%/34%/29%/20% YoY to INR4.4b/INR3.6b/INR3.8b/INR3.2b.
* EBITDA margins for AMESA/EAP/AMERICA/EUROPE dipped from 19.1%/ 21.6%/18.8%/17.9% in 1QFY26 to 18.5%/20.2%/18.1%/13.1% in 1QFY27.
* EBITDA for AMESA/EAP/America grew 13%/26%/25% YoY, while EBITDA for Europe declined 12% YoY
Valuation and view
* EPL continues to deliver a healthy operating performance across geographies (except Europe), supported by healthy demand, product innovations, an improving sustainable tube mix (44% of total volume in 1QFY27 vs. 38% in FY26), and continued capacity expansion. Merger with INDOVIDA has further expanded EPL's TAM, and it is well positioned to capitalize on the same.
* We expect a CAGR of 14%/13%/24% in revenue/EBITDA/adjusted PAT over FY26-28. We value the stock at 15x FY28E EPS to arrive at our TP of INR290. Reiterate BUY.
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