Hold Essel Propack; target of Rs 142: ICICIdirect

ICICIdirect.com has recommended to hold Essel Propack with a target price of Rs 142, in its research report dated April 30, 2015.

July 31, 2015 / 20:24 IST

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ICICIdirect.com's report on Essel Propack

Essel Propack’s Q4FY15 topline growth at ~5% was largely hit by lower volume offtake in the oral care segment (in India and China) coupled with translation loss due to ~19% YoY depreciation in the euro. Amesa region sales (up ~2% YoY) were impacted by muted demand of flexible packaging products by FMCG players while EAP region sales (up by ~6% YoY) were hurt by muted demand in the oral care segment. Sales from the America region increased 6% YoY on the back of stabilisation of Columbian unit and focus on conversion of plastic tube into new generation laminated tube.

There was a sharp increase in EBITDA margin by 215 bps YoY in Q4FY15, led by improved operational efficiencies in the European region (EBIT of ~Rs 6 crore vs. loss of ~Rs 4 crore) and America region (EBIT of ~Rs 15 crore vs. Rs 10 crore). With the Poland facility breaking even, this led the European region to register a profit

A sharp growth in PAT by 66% YoY is attributable to lower interest & tax outgo (set off against historic losses) and gain from sale of assets

"EPL is trading at an enterprise value of 5.9x and 5.1x its FY16E and FY17E EBITDA, respectively. We expect consolidated sales and earning CAGR of ~11% and ~24% in FY14-17E, supported by improving earnings from the European business. We believe increasing focus on higher margin non oral care products with plans to reduce debt would translate to higher return ratios (~17-18%). We have valued the stock at 5.6x its FY17E EBITDA and upgraded our rating from HOLD to BUY with a revised target price of Rs 142 per share", says ICICIdirect.com research report.