Initiating Coverage: Essel Propack Ltd - BUY - TP Rs.140 - Kotak

- Essel Propack (ESEL) is a global leader in laminated, extruded plastic tubes and speciality packaging with a global market share of ~36% in oral care category. Diversification to non-oral care (relatively higher realisation) has augured well for the company. It has helped Essel Propack Ltd (ESEL) to increase its EBITDA margin to 19% at the end of FY18 from 16.7% in FY14, largely backed by increasing share of non-oral care business. Given its strong R&D efforts and expertise, ESEL has successfully converted many plastic/aluminum tubes into non-oral care laminated tubes. A pioneer in oral care tube manufacturing, ESEL has successfully captured the market share in India (65%) and globally (36% in oral care) by entering the appropriate geographies at the right time and backed by region-specific strategy.

- With a dominant market share in oral care, EPL is focusing on improving revenue from non-oral care segments such as beauty, cosmetics and pharma to maintain growth. We believe that, focus to increase the contribution of non-oral care segment to 50% should help the company to sustain its EBITDA margin at 19-19.5% in the coming years. Besides this, business development in Europe could be the key driver for future earnings. We model revenue and earnings CAGR of 10% and 25%, respectively during FY18-FY20E period, led by AMESA and EUROPE region. At CMP, the stock is trading at 15.8x/12.9x FY19E/FY20E. We initiate coverage with BUY rating, and a target price of Rs140, valuing it at 17x FY20E earnings.

Shares of ESSEL PROPACK LTD. was last trading in BSE at Rs.110.05 as compared to the previous close of Rs. 111.4. The total number of shares traded during the day was 14518 in over 276 trades.

The stock hit an intraday high of Rs. 114 and intraday low of 110. The net turnover during the day was Rs. 1626348.

Source : Equity Bulls

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