Buy EPL, target price Rs 225: ICICI Securities
EPL Ltd., incorporated in the year 1982, is a Mid Cap company (having a market cap of Rs 5458.25 Crore) operating in Packaging sector.
By ETMarkets.com | Updated:
Agencies
ICICI Securities has buy call on EPL with a target price of Rs 225. The current market price of EPL is Rs 168.95 Time period given by analyst is one year when EPL Ltd. price can reach defined target. EPL Ltd., incorporated in the year 1982, is a Mid Cap company (having a market cap of Rs 5458.25 Crore) operating in Packaging sector.
EPL Ltd. key Products/Revenue Segments include Laminated Tubes, Service Charges, Royalty Income, Scrap and Export Incentives for the year ending 31-Mar-2022.
Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 836.00 Crore, down -5.26 % from last quarter Total Income of Rs 882.40 Crore and up 3.93 % from last year same quarter Total Income of Rs 804.40 Crore. Company reported net profit after tax of Rs 37.20 Crore in latest quarter.
Investment Rationale
EPL’s Q1FY23 print was a mixed bag with revenue growth of just 4.1% YoY (down 5.5% QOQ) to Rs8.3bn (impacted by softer sales in EAP, down 6.4% YoY) and AMESA (up 13.4%, but flattish after adjusting for higher laminate sales to other geographies). However, gross profit margin improved by 210bps QoQ to 56.1% (a pleasant surprise). With raw material prices in correction mode, the company could see more margin expansion through the next few quarters. EBITDA margin though was flattish QoQ at 15.1% on lower revenue base. Company expects revenue ramp-up in EAP in the next few quarters as China situation normalises. Americas and Europe remain a drag on EBITDA margin, which was impacted from production challenges resulting in the company losing certain business (we expect this to ease from the next quarter). Brazil facility, for which EPL is investing Rs1.3bn, is expected to start operations by end-FY23. Despite the weak print, the brokerage cuts EPS estimates by only 3-6% over FY23E-FY24E on better margin outlook. It maintains target price at Rs225 and rollover DCF-based valuation to FY24E.
Promoter/FII Holdings
Promoters held 51.91 per cent stake in the company as of 30-Jun-2022, while FIIs owned 14.7 per cent, DIIs 13.9 per cent.
EPL Ltd. key Products/Revenue Segments include Laminated Tubes, Service Charges, Royalty Income, Scrap and Export Incentives for the year ending 31-Mar-2022.
Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 836.00 Crore, down -5.26 % from last quarter Total Income of Rs 882.40 Crore and up 3.93 % from last year same quarter Total Income of Rs 804.40 Crore. Company reported net profit after tax of Rs 37.20 Crore in latest quarter.
Investment Rationale
EPL’s Q1FY23 print was a mixed bag with revenue growth of just 4.1% YoY (down 5.5% QOQ) to Rs8.3bn (impacted by softer sales in EAP, down 6.4% YoY) and AMESA (up 13.4%, but flattish after adjusting for higher laminate sales to other geographies). However, gross profit margin improved by 210bps QoQ to 56.1% (a pleasant surprise). With raw material prices in correction mode, the company could see more margin expansion through the next few quarters. EBITDA margin though was flattish QoQ at 15.1% on lower revenue base. Company expects revenue ramp-up in EAP in the next few quarters as China situation normalises. Americas and Europe remain a drag on EBITDA margin, which was impacted from production challenges resulting in the company losing certain business (we expect this to ease from the next quarter). Brazil facility, for which EPL is investing Rs1.3bn, is expected to start operations by end-FY23. Despite the weak print, the brokerage cuts EPS estimates by only 3-6% over FY23E-FY24E on better margin outlook. It maintains target price at Rs225 and rollover DCF-based valuation to FY24E.
Promoter/FII Holdings
Promoters held 51.91 per cent stake in the company as of 30-Jun-2022, while FIIs owned 14.7 per cent, DIIs 13.9 per cent.
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