Hold Essel Propack Ltd For Target Rs.245 - ICICI Direct
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
One-off events drag profitability…
About the stock: EPL is the world’s largest manufacturer of laminated plastic tubes (~8 billion tubes annually) catering to the FMCG and pharma space.
* Oral care segment contributes ~54% of total topline while the rest comes from the personal care category
* Focus on debt reduction, improving RoE, RoCE (~15%, 16%, respectively)
Q2FY22 Results: Lower profitability in Europe and one off losses dragged overall profitability.
* Consolidated revenue growth of 13% YoY to | 870 crore led by America and Amesa regions (up ~22%, ~19% YoY, respectively). However, revenue decline of ~3% YoY in Europe region restricted overall topline growth
* Higher raw material prices and other expenses (up 26% YoY) dragged EBITDA margin down 326 bps YoY to 18.3%
* PAT fell 23% YoY to | 53 crore due to losses from associates of ~| 7 crore
What should investors do? EPL’s share price has grown by ~2x over the past five years (from ~| 116 in November 2016 to ~| 222 level in November 2021).
* We maintain our HOLD rating on the stock
Target Price & valuation: We roll over our valuation on FY24E and value EPL at | 245 i.e. 10x EV/EBITDA on FY24E EBITDA
Key triggers for future price performance:
* Performance of Amesa region has been a laggard (FY18-21) mainly due to lower volume offtakes. However, consolidation of Creative Stylo and improved product mix would help drive revenues of the region
* Performance of America and European regions has remained volatile amid pandemic led challenges. This, coupled with improved revenue contribution from personal care segment would help drive future margins
* Focus on maintaining a quality balance sheet, going forward
Alternate Stock Idea: We like Mold-Tek Packaging in the packaging space.
* Strong volume growth of ~19% in FY21-24E led by capacity expansion and client additions in the high margin product categories
* BUY with a target price of | 850
To Read Complete Report & Disclaimer Click Here
https://secure.icicidirect.com/Content/StaticData/Disclaimer.html
Above views are of the author and not of the website kindly read disclaimer
