E
EPL
101234567898012345678960123456789.7012345678900123456789
-1.15 (-0.61%)
NSE Volume
4.7L+
Broker Reports
BUY
BUY
HOLD
HOLD
BUY
BUY
ADD
BUY
BUY
ADD
Essel’s continued focus on improvement in operating performance across the region has helped the company to maintain its EBITDA margin ~20%. The company reported improvement in operational performance due to better traction in Europe and EAP. The company captialised the opportunities by launching timely product, which supported the revenue growth and will continue to aid the performance in the coming quarters as well. We expect traction in the personal care segment to continue, driven by increasing penetration of laminated tubes in the end user industry will help the company to maintain EBITDA margin in the range of 20-21%. Prudent capex policy and improvement in operating efficiency, we expect net debt to decline further. We continue to remain positive on the stock given the strong business model. Factoring 1QFY21 performance, we have marginally revised our estimates higher to Rs7.2 (Earlier Rs6.9) and Rs9.3 (earlier Rs8.9) for FY21E and FY22E, respectively. At current valuation the stock is trading at 28.3x/22.1x FY21E/FY22E earnings. Despite the macro challenges and the impact of COVID-19, strong performance indicates management’s focus to increase its market share with the current customer and the addition of a new customer augur well for the company. We expect the stock to trade at a premium to its historical average, as higher share of personal care will drive the earnings coupled with improving RoCE. However, given the limited upside, we recommend ADD (earlier REDUCE), with a revised target price of Rs216 (earlier Rs189).
ADD
Essel’s continued focus on improvement in operating performance across the region has helped the company to maintain its EBITDA margin ~20%. The company reported improvement in operational performance in the last couple of quarters due to better traction in Europe. However, due to COVID-19 personal care demand across the region is expected to remain tepid and would weigh on overall performance. But, the launch of new product and recovery in China, would largely offset the impact. Though in the near term, we might see some pressure on personal care segment volume, however the long term story remains intact, driven by increasing penetration of laminated tubes in the end user industry. Prudent capex policy and improvement in operating efficiency, we expect net debt to decline further. We continue to remain positive on the stock given the strong business model. At current valuation of 24.9x/19.2x FY21E/FY22E earnings, the stock offers limited upside. Hence we recommend ADD, with an unchanged target price of Rs180.
BUY
WeestimateaCAGRof8%inrevenueand20%inPAToverFY19-22,drivenby 11% revenue CAGR in the Americas, 5% in EAP, 3% in AMESA and 15% in Europe. We value the stock at 20x FY22E EPS of INR10.5, arriving at a target price of INR210. We initiate coverage with a Buy rating.
BUY
Key things to watch out for would be the sustainability of the numbers in the coming quarters. Factoring 2QFY20 performance, we have revised our earnings and at CMP, the stock is 16.8x/13.7x FY20E/FY21E, revised earnings, which is discount to its last 5 years median. We now recommend BUY (earlier ADD), with a revised target price of Rs154 (earlier Rs128), valuing at 18x (earlier 17x) as we believe, with a large capex behind and strong FCF generation in the coming years, it will return excess cash to shareholders and this should improve its return ratios.
ADD
We believe re-rating of earnings multiple seems to be limited. Given the fall in the stock price since our last update in the month of July (rating Reduce), we now upgrade the stock to ADD, with a revised target price of Rs117 (earlier Rs127), valuing at 17x FY21E earnings, considering the slowdown in India and China. At CMP, the stock is trading at 17.3x/15.2x FY20E/FY21E earnings.
REDUCE
Increasing presence in emerging markets and further penetration into non-oral category is expected to support the earnings CAGR of 8% during the FY19-FY21E period. We believe potential for re-rating of earnings multiple seems to be limited, hence, we continue to maintain Reduce on the stock, with a revised target price of Rs127 (earlier Rs130), valuing at 17x FY21E earnings. At CMP, the stock is trading at 20x/17.3x FY20E/FY21E earnings.
ACCUMULATE
The stock currently trades at 19.1x FY19e EPS of Rs 6.80 and 16.8x FY20e EPS of Rs 7.76. Growth will be invigorated by burgeoning demand in the packaging industry, better capacity utilization at the company’s Europe plants- relocation of Russian unit to a new location for future growth opportunities & setting up of a custom built factory near Guwahati, Assam. However, the disruption caused by the prospering e-commerce business indirectly exposes EPL to vagaries of demand. Weighing odds, we advise buying the stock with the revised target price of Rs 155 (previous target Rs 140 (adjusted for bonus)) based on 20x FY21e EPS of Rs 7.76 over a period of 9-12 months.
REDUCE
HOLD
EPL is a global leader in laminated tubes selling ~7 billion tubes across 10 countries. EPL's clientele includes marquee global brands (Colgate, HUL, etc) in the oral care, beauty, cosmetics and pharmaceutical industries. Increasing presence in emerging markets and further penetration in the fast growing beauty, cosmetics and pharmaceutical segments is expected to accelerate growth, going forward. We believe revenue, earnings CAGR of ~12%, ~13% in FY18- 21E would largely led by strong performance in emerging markets. We believe a demand recovery in the Amesa and Europe region will be a key trigger for future growth. With a target market cap, the deal is valued at 20xFY20E, 17xFY21E earnings and 8xFY20E, 7xFY21E EBITDA, respectively. We believe the stock would hover around the deal price.
HOLD
We model revenue and adj.PAT CAGR of 12% and 15%, respectively over FY18-21E to factor in recovery in India business, improved utilization in European region and increased contribution of non-oral care segment. Hence, we maintain ‘HOLD’ rating on the stock with a revised rolled over target price of Rs121 based on 14x FY21E EPS.
HOLD
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NEUTRAL
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REDUCE
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