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Light at the end of the tunnel

EPLL has been facing challenges for the last few quarters amid lockdown-led demand slowdown across key geographies and high raw material prices. However, with the pandemic now behind us, demand is improving and raw material prices are easing. In this report, we highlight the current demand and raw material scenario in key geographies, new businesses opportunities and progress toward sustainability. Here are the key highlights:

* Demand in China (EAP) is expected to revive soon, while other geographies in EAP have a healthy demand outlook. Europe is facing cost-related challenges due to high energy prices and an increase in the minimum wage requirement, while the cost situation is improving in the Americas.

* The Brazil market offers a huge opportunity to EPLL with the current market size of ~3.5m tubes. The Brazil project is expected to be completed on time.

* Raw material prices are softening; however, they are still higher than the preCovid level. Freight costs have moved back to the pre-Covid level, leading to margin expansion across regions. EPLL has also increased prices across geographies to improve its margin profile.

* The company is adding new customers and increasing its wallet share with existing customers by offering more sustainable products. EPLL’s core focus is to promote sustainability within the organization to attract more customers.

Demand recovering across geographies

* The EAP region has been under pressure for the last few quarters (7%/- 6%/1%/-8% YoY revenue growth in 4QFY22/1QFY23/2QFY23/3QFY23), mainly due to Covid-related restrictions in China. The EAP region, except China, is delivering good growth.

* However, demand from China is expected to revive soon, as pandemicrelated restrictions are withdrawn.

* The EAP region has a higher proportion of Oral care (~65%) v/s Beauty, Cosmetics (B&C) and Pharmaceutical (~35%). Europe

* The oral care segment in Europe is witnessing good growth, while demand growth in the non-oral care segment is still a challenge. As Covidled restrictions have ended, the non-oral care segment is expected to recover.

* The cost is a major challenge for EPLL in Europe due to high energy prices and an increase in the minimum wage rate requirement, leading to margin pressure.

* Energy prices in Europe are currently stable but are at elevated levels.

* To mitigate inflationary pressures, EPLL is continuously in talks with customers for price hikes and has been successful in increasing prices in the last two quarters. However, a further increase is required to achieve previous margin levels.

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