EPL Ltd. share price target

EPL’s Q3FY23 print suggests early signs of easing pressure on margins creating the vista of imminent margin expansion. Company will benefit from renegotiation of contracts to pass-on the rise in operating costs in the Americas and Europe, and easing inflation across the regions.

EPL’s Q2FY23 print was a mixed bag with revenue growth of 9% YoY (+14% QOQ) to Rs9.5bn led by growth across regions. However, gross profit margin fell 200bps QoQ
to 54% despite softening raw material prices due to high-cost inventory and volatility
in currencies (vs USD).

EPL, in its analyst meet, admitted near-term challenges significantly hampered its profitability, albeit it remains focused on achieving double digital profit growth. It is learning to re-adjust its business model for new challenges by pursuing price increases aggressively, market share wins and cost control measures.

We believe EPL with its new management under Blackstone is destined for longterm growth, driven by: a) growing revenue contribution from Personal Care products, b) a gradual shift to laminated tubes from plastic/aluminum tubes, c) a recovery in travel tube, with the lifting of travel restrictions across the globe, d) higher revenue sustainability owing to long-term contracts in the Oral Care segment, and e) customer additions across geographies as well as greater crossselling opportunities. However, EPL has been witnessing margin pressures since the last five quarters,...

Performance of America and European regions has remained volatile amid pandemic led challenges. This, coupled with improved revenue contribution from personal care segment, would help drive future margins...

EPLL reported a lower than expected operating performance in 3QFY22 due to a 500bp gross margin decline to 55% on higher raw material prices and freight cost. EBIT margin contracted across geographies, with a major...

Factoring in its 2QFY22 performance, we decrease our FY22E/FY23E earnings estimate by 20%/8% due to higher RM prices and expenses on account of increased freight cost and supply-chain disruption. We value the stock at 25x FY23E EPS to arrive at our TP of INR285. We maintain our Buy rating....

sonal care categorycategory which accounts for 43% of the total tube revenues- grew by 13.9% y-o-y, y, while oral care category grew by...