ESEL delivered flat revenues (5% above our estimate) despite Covid-19-related disruptions in China and India in the quarter. ESEL indicated that it lost revenue of Rs536mn in Q4 due to Covid-19. Adjusted for this, comparable growth stood at 7% yoy. About 55% of ESEL’s annual revenue comes from the oral care segment which has shown resilience in demand despite Covid-19-related dislocations. Oral care/non-oral care revenue decreased marginally by 0.3%/1.2% in Q4 due to lower commodity prices yoy and loss of revenue on account of Covid-19. EBITDA margins improved 114bps yoy despite flat growth, indicating cost efficiencies. Adjusted for the Covid-19 impact, comparable EBITDA margins improved 273bps yoy to 21.7%. Management indicated that Phase-I of project Phoenix (cost efficiency project) resulted in 176bps improvement in EBITDA margin since its inception. ESEL has already launched Phase-II of the project to further optimize cost.
OutlookWe trim our FY21/22E revenue and EPS estimates marginally by 3% as we incorporate a slow Q1FY21 and gradual ramp-up. We roll forward our valuations to Jun-22 and maintain our TP of Rs200 (9x Jun-22E EV/EBITDA).
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