Emkay Global Financial's report on Essel Propack
ESEL beat our street high revenue/EBITDA/adj. PAT estimates by 13%/12%/40% on the back of 21.2% growth in Personal Care. Personal care growth was boosted by a surge in demand for hand sanitizers, which ESEL capitalized by signing up with 50 brands globally. Constant currency growth stood at 13.6%, reflecting a 4% gain on forex. EBITDA margins improved 253bps yoy to 19.8%, aided by cost efficiencies and operating leverage. ESEL has already achieved 176bps margin improvement in Phase-I of its cost-saving initiative Project Phoenix and has already launched Phase-II in Q1FY21. Hence, we expect the margin improvement to sustain and see upside risks to our FY21 EBITDA margin estimate of 21.6%. Management indicated that they have passed on the benefit of low raw material prices to customers. We expect ESEL’s accelerated growth in Personal Care to continue amid high demand for sanitizers, forex tailwind, and recovery in the beauty and cosmetics segment. We increase our FY21 revenue/EBITDA estimates by 3% but leave our FY22/23 estimates unchanged. Our annual FY21E EPS estimates remain unchanged due to Rs161m impairment provided on assets in Russia as ESEL realigned its manufacturing to increase efficiencies.
Outlook
We increase our target multiple to 10x EV/EBITDA (vs. 9x earlier), considering a high FCF yield of 8.2%/6.3%/6.7% for FY21E/22E/23E. We maintain strong Buy and increase our TP to Rs230 as we roll forward to Sep-22E EV/EBITDA.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Read More
