Buy Essel Propack; target of Rs 270: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on Essel Propack

Essel Propack (EPL) reported a strong performance amid a challenging scenario of pandemic related lockdowns globally. Consolidated topline grew ~18% YoY, led by strong performance in the overseas business with improved market share and addition of new clients in the China, Americas & Europe. The personal care category recorded strong growth of ~21% YoY in Q1FY21, the oral care category reported growth of ~10% YoY in Q1FY21. Contribution of personal care category in the topline increased to 49% in Q1FY21 vs. 45% in FY20. According to the management, the growth momentum is likely to continue in the overseas business (~70% of topline) supported by addition of new clients, market share gains and launch of new product categories. On the margin front, saving in other expenditure under the company’s ongoing cost optimisation schemes helped move EBITDA margins up 254 bps YoY to 19.8%. Finally, PAT moved up 14%, mainly tracking sales and operating profits during the period. We revise our FY21E-22E earnings estimates by 17%, 20%, factoring in the company’s strong growth outlook in Europe and China. This, along with efficient capital allocation (with rationalisation of capital expenditure) and reduction in net debt gives strong comfort on the balance sheet front.

Outlook

We believe improved profitability along with balance sheet condition in the challenging scenario is encouraging. During the period, gaining market share and improving wallets share from existing clients shows the increased competitiveness of EPL. Further, the company’s focus on ‘capital efficient consistent earnings growth would help improve return ratios, going forward. We upgrade our rating from HOLD to BUY with a revised price target price of Rs 270/share, valuing at 12x FY22E EV/EBITDA.

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