Buy EPL; target of Rs 314: Motilal Oswal

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Motilal Oswal 's research report on EPL

In FY20, revenue/EBITDA/adj. PAT grew 2%/12%/14% YoY to INR27.6b/INR5.5b/INR2.1b, respectively. In FY20 gross margin improved by 110bp YoY to 58.1%, which can be attributed to an increase in revenue share of the Personal care segment. Except for employee cost, all other operating expenses' line items declined (as % of sales) due to introduction of project Phoenix-I, which focuses on cost rationalization. Other expenses dropped by 140bp to 18.6%, primarily due to reduction in other manufacturing expenses. EBITDA margin expanded by 180bp to 20.2%. However, adjusting for IndAS-116 impact, margin expanded by 60bp to 19.1%.

Outlook

The stock currently trades at 24x/20x FY22/FY23 P/E. Over the last three years, EPLL has traded at an average P/E of 19x. We expect revenue/EBITDA/PAT CAGR of 11%/15%/24% over FY20-23E and value the stock at 26x Sep’22E EPS. Our TP of INR314 implies 18% upside. Maintain Buy.

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