EPL Q4CY09 Result Update ; Directionally Correct, Maintain 'BUY' ; Target: Rs 76
Essel Propack
Directionally Correct, Maintain 'BUY'
BUY
CMP: Rs 46 Target Price: Rs 76
Though, Q4CY09 performance was marginally ahead of estimates, but operationally the performance is heading for stated direction. Essel Propack (EPL) reported strong performance in Q4CY09 with - (1) revenues decline by 2.8% yoy to Rs3.5 bn – below our estimates (2) operating profit grew by 2.2% yoy to Rs580 mn – ahead of estimates and (3) net profit of Rs109 mn versus net loss of Rs192 mn – ahead of estimates. EPL reported 80 bps expansion in operating margins - vindicates our argument for steady improvement in operational efficiency.
We expect the earnings to retrace to CY06 levels – fill-up the gap created during the turmoil of CY06-08 period. We maintain our earning estimates of Rs4.3/Share and Rs6.7/Share for CY10E and CY11E. We maintain our valuation methodology - value EPL on average of PER, P/BV and EV/EBITDA methodology. At the current price of Rs46.2/Share, EPL is trading at a PER of 10.7X CY10E and 6.9X CY11E, P/BV of 1.0X CY10E and 0.9X CY11E and EV/EBITDA of 5.0X CY10E and 3.9X CY11E – significantly below CY06 levels. Alongside, strong earnings performance – we expect the valuations to retrace to CY06 levels- fill up the gap created during the turmoil of CY06-08 period. We maintain positive bias with BUY rating and price target of Rs76/Share.
Regards,
Pritesh Chheda, CFA
Emkay Global Financial Services Ltd.
Member: Bombay Stock Exchange. Member: National Stock Exchange of India.
Paragon Center, H – 13 - 16, 1st Floor,
Opp. Century Mills, Pandurang Budhkar Marg,
Worli, Mumbai - 400 013.
Tel: 6612 1273
Fax: 6624 2410
E-mail : pritesh.chheda@emkayglobal.com
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