Motilal Oswal's research report on EPL
EPLL has been facing challenges for the last few quarters amid lockdown-led demand slowdown across key geographies and high raw material prices. However, with the pandemic now behind us, demand is improving and raw material prices are easing. In this report, we highlight the current demand and raw material scenario in key geographies, new businesses opportunities and progress toward sustainability. Here are the key highlights: -Demand in China (EAP) is expected to revive soon, while other geographies in EAP have a healthy demand outlook. Europe is facing cost-related challenges due to high energy prices and an increase in the minimum wage requirement, while the cost situation is improving in the Americas. The Brazil market offers a huge opportunity to EPLL with the current market size of ~3.5m tubes. The Brazil project is expected to be completed on time. Raw material prices are softening; however, they are still higher than the pre-Covid level. Freight costs have moved back to the pre-Covid level, leading to margin expansion across regions. EPLL has also increased prices across geographies to improve its margin profile. The company is adding new customers and increasing its wallet share with existing customers by offering more sustainable products. EPLL’s core focus is to promote sustainability within the organization to attract more customers.
Outlook
We expect a revenue/EBITDA/PAT CAGR of 12%/20%/34% over FY23-25. We value the stock at 19x Dec’24E EPS to arrive at a TP of INR215. We retain our BUY rating on the stock.
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