Buy Essel Propack: Way2Wealth
Way2Wealth is bullish on Essel Propack (EPL) and has recommended buy rating on the stock in its February 07, 2013 research report.
February 07, 2013 / 17:48 IST
Way2Wealth is bullish on Essel Propack (EPL) and has recommended buy rating on the stock in its February 07, 2013 research report.
"EPL, net sales grew at 13% to Rs 145 crs. for Q3FY13. driven by both improved mix & volumes growth. The company continued to track the FMCG sector growth. Apart from seasonality due to festivities which lead to slower growth this quarter slowdown the company saw slower growth in of ~2% in the oral care segment on the back of higher base. The non oral care segment such as pharma & cosmetics grew at 5.5% while oral care at 4%. On the operating profit side the company saw 14% growth YOY to Rs 30.7 crs. Margins were stable YOY at 21.2%. Higher depreciation & lower interest cost net off; while tax rates moved up to 30%. This lead to a stable PAT margin YOY at 7.7% with absolute PAT growing by 12% to Rs 11.5 crs. The company plans to put a new line of plastic tubes from April 2013.Consolidated operations: Consolidated topline grew by 7.9% to Rs 444.3 crs. Growth was driven healthy growth across geographies. AMSEA grew by 7.6%, EAP by 6.2%, Americas by 4.6% and Europe by 22.8%. Consolidated mix of non oral care improved YOY from 34% to 39%.AMESA – This region clocked 7.6% growth as India the largest contributor to this areas revenue grew 13%. We believe growth in the flexible packaging subsidiary was lower as the FMCG industry saw a moderation in volumes growth. EBIT margins for this region improved by 100 bps YOY to 13.6%. 9M revenue contribution from this region came down to 45% as European operations gained traction. 9M growth registered was at 13.6% with revenues at Rs 643 crs. Margins improved by 60 bps to 13.1%. The trigger for growth in this region is the new line of plastic tubes which will be commissioned in FY14 as well as general revival in consumer sentiment to drive growth. Non oral care segment is expected to drive value growth.EAP – EAP region clocked a 6.2% growth in revenues to Rs 2106.27 crs. in Q3. EAP region has been impacted this fiscal on account of slowdown in orders from 2 major clients. The company recently was awarded a new contract in the cosmetic and pharma space. The company intends to grow in this region through value added proposition. On the path to this the company will grow its non oral care business through inter tube (laminates & plastic) offerings to capture the market as well as attempts to convert the large aluminum tube market. The investments in this region went up on account of the new line to cater to the non oral care segment as well as to cater to the new order they received. Margins were flat at 20.7% while absolute EBIT grew by 6.5% to Rs 22 crs.At CMP of Rs 37.4, the stock is trading at a PE of 8.5x in FY13E and 6.3x in FY14E it EPS of Rs 4.4 & Rs 5.9 respectively. We expect the losses from Europe to come down; better performance by EAP and AMESA and stable performance by Americas will drive the consolidated earnings. We strongly believe that the restructuring in different geographies, plus robust demand from the FMCG sector and EPL holding as a dominant position with limited competitors will lead healthy growth. We are also of the opinion that the initiatives taken by the company will be more visible in FY14E. We recommend investors to BUY with a long term view," says Way2Wealth research report.FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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