Result Update: Essel Propack Ltd - BUY - TP Rs.130 - Kotak

Essel Propack 3QFY19 operating performance was above estimates, with EBITDA margin of 70bps sequentially, supported by improvement in non-oral care revenue composition. Indian operations continue to get impacted by lower pharma category volume. However, Management expects volume in India to pick up, as Pharma regulation issues have been addressed by the industry.

Key Highlights

- Revenue during the quarter grew 16.7%/1.6% YoY/QoQ to Rs6.94bn, driven by both oral and non-oral care categories. AMESA, EAP, EUROPE and America registered 13.5%, 22.7%, 21.1% and 17% YoY growth respectively.

- Oral care accounted for 56.5% down from 57.6% in 2QFY19 of the revenue and non-oral contribution stood at 43.5%.

- The Indian Pharma regulation issues have been addressed by the industry and the management expect volumes to see an uptick going forward. Order pipeline in India continues to remain strong.

Valuation

With the regulatory framework in place in pharma, volume in India business likely to grow in the coming quarters, this coupled with commissioning of new laminator is expected to support margin. In addition to this, the company's focus on the increasing contribution from non-oral care segment across geographies, we expect EBITDA margin to remain in the range of 19-19.5%. Large non-oral care market and better utilisation of assets at Europe, make ESEL a good investment opportunity. At CMP, the stock is trading at 19x/14.7x FY19E/FY20E. We reiterate BUY rating, with an unchanged target price of Rs130.

Shares of ESSEL PROPACK LTD. was last trading in BSE at Rs.102.15 as compared to the previous close of Rs. 116.9. The total number of shares traded during the day was 37135 in over 596 trades.

The stock hit an intraday high of Rs. 116.3 and intraday low of 93.55. The net turnover during the day was Rs. 3779713.

Source : Equity Bulls

Keywords