Buy Essel Propack; target of Rs 314: Motilal Oswal

Motilal Oswal 's research report on Essel Propack

At the peak of COVID-19, ESEL launched a new product – ‘Hand Sanitizer’ tubes – in just 15 days to meet the sudden demand surge. ESEL plans to achieve sales volume of 150m tubes in FY21, and is already close to achieving two-thirds of its annual volume target (100m Hand Sanitizer tubes) by 2QFY21. This new product segment under Personal care is expected to provide steady volumes, as Sanitizers are increasingly becoming a part of daily consumption. Under Phase-I of project Phoenix, ESEL managed to increase EBITDA margin by 180bp YoY to 20.2% in FY20. The company has already initiated Phase-II of project Phoenix, which aims to expand margins further by virtue of cost management and rationalization. ESEL’s already best-in-class margins (v/s other domestic players) are expected to improve further.

Outlook

We expect revenue/EBITDA/PAT CAGR of 11%/15%/24% over FY20-23E and value the stock at 26x Sept’22 EPS. Our TP of INR314 implies 20% upside. Maintain Buy.