Buy Essel Propack; target of Rs 153: Emkay

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26 Aug, 2025 12:21

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Emkay's research report on Essel Propack

Conversion to laminated tubes and increasing focus on non-oral care to be key revenue drivers. EPL expects non-oral care account for 50% of revenue in FY16E (42% 9MFY15). We expect 13.4% revenue CAGR over FY14-17E

Better mix (increase in non-oral care), improving capacity utilization and cost control to drive margin expansion. We expect a 110bps EBITDA margin expansion to 18% by FY17E

Higher earnings growth (30%) coupled with improving asset productivity led by capex to extent of depreciation and improved working capital cycle to aid in healthy free cash flow generation and return ratios above +20%

Management is confident of achieving 13-15% revenue growth and +20% PAT growth in FY16. We expect healthy cash flow generation, improving return ratios and higher dividend payout.

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"Company guides to deliver 13-15% revenue CAGR & +20% PAT growth in FY16, led by higher conversion from plastic & aluminum tubes to laminated tubes, higher non-oral care mix, operating leverage from ramp up in capacities and tight leash on cost management. Company is focused on improving capital allocation, higher free cash flow generation and expanding return ratios. EPL trades at a significant discount to global packaging peers at 8x P/E & 4x EV/EBITDA FY17E. We assign 10x P/E to EPL arriving at target price of Rs 153/share and maintain BUY rating", says Emkay Global Financial Services research report.

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