Essel Propack’s (EPL) consolidated Q1FY18 revenue at `560 crore rose 6% with 12.3% y-o-y constant currency growth. AMESA growth was muted despite strong performance in Egypt. This was on account of flat India growth, up 1% y-o-y which saw 7.5% growth impact due to GST.
EAP is showing signs of upturn with constant currency revenue/EBIT growing 13%/49% y-o-y respectively. Though Europe’s performance, excluding Essel Deutschland Germany (EDG), was stable, the latter’s weak show due to lower customer offtake dented Europe’s margin. Americas reported another weak quarter due to tepid off take by key customers in US and Mexico.
Despite a tepid Q1FY18, given the one-off nature of GST and currency, we expect performance in India and Europe to bounce back in coming quarters. We value EPL at 9.0x FY19E EV/EBITDA, yielding target price of `300. Maintain ‘BUY’. EPL’s India operations (standalone) grew only 1% y-o-y to `200 crore impacted significantly by GST. Excluding the impact, management stated that growth would have been 8.7% y-o-y.
In Egypt, while constant currency growth was strong at 67% y-o-y the sharp depreciation of EGP led to revenue declining 16% y-o-y. Overall, AMESA reported flat y-o-y revenue growth at `240 crore. EAP growth seems to be returning with constant currency revenue jumping 12.6% y-o-y , reported 3% to `130 crore, with EBIT growth of 47% y-o-y.
Overall Europe revenue jumped 43% y-o-y to `120 crore; excluding the EDG consolidation impact, revenue/EBIT increased by a stable 10%/49% y-o-y. However, lower off take at EDG impacted overall Europe EBIT, which declined 9% y-o-y to `18 million. EPL estimates volume to ramp up at EDG in the coming quarters. Americas posted another disappointing quarter with revenue contracting 5% y-o-y to `106 crore.
Q1FY18 was yet again impacted by lower off take by key customers in US and Mexico. In addition to the GST impact, which led to lower off take, currency also dented Q1FY18 growth. Excluding Americas, where we have adjusted for the lower growth, we expect performance in India and Europe to bounce back in coming quarters. We maintain FY19E EV/EBITDA at 9.0x, yielding target price of `300. We maintain ‘BUY’.