Emkay Global initiates buy rating on Epigral; sets 1 yr target price of Rs 2000

Emkay Global has initiated coverage on Epigral Ltd with a buy rating and sets a twelve-month target price of Rs 2000 per share, significantly above its current market price. They anticipate Epigral Ltd to consistently achieve over 25 percent CAGR in earnings over the next few years.

Epigral anticipates increased earnings from higher capacity utilization, expanding into chlorine derivatives and value-added products with significant import substitution potential, and scaling up existing and new chemistries. With a strategy focusing on captive chlorine use in downstream products, Epigral leads in ECH, CPVC, and chlorotoluene. As its revenue mix shifts away from legacy caustic soda towards chlorine derivatives and value-added products, the company expects a re-rating in its valuation multiples, Emkay report added.

"We expect Epigral to report revenue/EBITDA/PAT CAGR of 21%/23%/33% over FY24-27E. We initiate coverage with a BUY", Emkay report said.

Emkay report said following a multi-year upcycle in FY22/23, caustic soda prices have now stabilized around their 10-year historical average with a positive bias. Epigral aims to utilize 85 percent of its chlorine output internally by FY26, focusing on manufacturing derivatives with substantial import substitution potential. These products promise higher margins and reduce business risks associated with caustic soda cycles, providing greater stability. Emkay expects Epigral's shift from legacy caustic soda towards derivatives and specialty chemicals by FY27 (aiming for a 35:65 mix versus 50:50 in FY24) to trigger a revaluation of its multiples.