Broker's call: Essel Propack (Buy)

| Updated on January 15, 2018 Published on April 21, 2017

CD Equisearch

Essel Propack (Buy)

CMP: ₹237.90

Target: ₹283

Essel Propack is targeting its non-oral care revenue share to reach 50 per cent by end of FY18. Its growth strategy is to identify and tap new geographies and increase market share. The company’s dedicated facility for non-oral care in China will help tap huge opportunities in pharma and FMCG space. The development will not only drive its volume growth but also help to increase its revenue share of non-oral care segment and expand margins.

The stock currently trades at 20.5x FY17e EPS of ₹11.39 and 16.5x FY18e EPS of ₹14.17. Beset by higher raw material prices and partially by demonetisation of high value currency notes, earnings declined by nearly 2 per cent in 9MFY17. Rebound in European economy and robust off take in AMESA region would aid earnings (24.4 per cent) in FY18. Essel Propack’s peppy introduction of value added products would support margins. Given increasing consumer preferences towards personal care, FMCG sector presents Essel an opportunity to grow its non-oral market share. Weighing all odds, we maintain our ‘buy’ rating on the stock with a target of ₹283 (previous ₹298) based on 20x FY18e earnings (forward peg ratio: 0.8) over a period of 9-12 months.

Published on April 21, 2017

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