Essel Propack target price hiked to Rs 270: Motilal Oswal

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New Delhi | Published: November 3, 2016 6:12:28 AM

Revenues at `554cr were 4% ahead of our estimate of `538cr and increased 9% y-o-y driven entirely by volume growth. AMESA and Americas regions grew by 13% each while EAP (East Asia Pacific) and Europe declined by 2% and 1%, respectively.

Gross margins declined by 220bp YoY on the back of lower contribution from non-oral care segment (40% vs 42% y-o-y) as well as lower contribution from high margin geography of EAP.

EBITDA Margin at 20.0% declined by 140bp y-o-y (our estimate: 18.9%) and EBITDA at `111cr was higher by 2% y-o-y. PAT at `70.8cr was higher by 27% on y-o-y basis however it includes a one time gain of `23.9 cr pertaining to divestment of an asset. Adjusted PAT stood at `53 cr witnessed a growth of 6% y-o-y against our estimate of `41.2 cr. During the quarter, the Company completed the buyout of its associate company, Essel Deutschland Germany (EDG) to make it a 100% subsidiary.
This will add ~`300 cr revenues on an annnualised basis and would thus lead to a higher jump in consolidated revenues in FY18E.

We expect revenue and PAT to post a CAGR of 15% and 23% respectively over FY16-19E. We raise our target price to `270 (earlier `230 based on FY18E) by valuing the business at 13.3x PE based on Sep 2018E EPS (in line with Essel’s post-tax ROCE).

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