Shares of Essel Propack jumped 5.5 percent intraday on March 4 despite shutting down a plant in China amid coronavirus fears.
The rally was in addition to 3.55 percent upside seen in the previous session. It was quoting at Rs 169.00, up Rs 8.40, or 5.23 percent on the BSE at 1139 hours IST.
Essel Propack (ESEL) derives 25 percent of its revenue (FY19) from East Asia Pacific (for 9MFY20 its revenue share was 22.8 percent). China accounts for the majority of revenue in this geography. ESEL's facility in China has been shut since February 2020 due to Covid-19.
ESEL exports laminates from China and supplies laminated tubes to its Chinese Oral and non-oral customers.
ESEL has diverted laminate exports from China to its India facility; however, the inability to cater to local demand could lead to a loss of revenue, said Emkay Global while maintaining buy call with a target price of Rs 200, implying 24.5 percent potential upside from current levels.
"As we are yet to see any visibility on the re-opening of the China facility and normalcy returning to operations, we trim FY20/21/22E revenue by 2/1/1 percent. After strong cost optimization in Q3FY20, we raise FY20/21/22E EBITDA margin by 33/20/20bps," it added.
Emkay believes that Covid-19-related disruptions are temporary and will pass.
"As of now, we have not factored in any material impact in FY21. If Covid-19 disruptions prolong, there could be further downside to our revenue estimates. Our EBITDA margin assumptions at 20.4/21.6/22.2 percent for FY20/21/22E are conservative as ESEL has already delivered 22.2 percent in Q3FY20," the brokerage said.
Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
