Shares of EPL, a leading global specialty packaging company, rose 12% in morning trade, hitting a 35-month high of ₹243 per share. This increase came after the company reported strong numbers for the quarter ended June that were in line with analysts’ estimates.

The company recorded an increase in consolidated sales of 11% compared to the previous year and reached ₹1,007 crore. EBITDA (earnings before interest, tax, depreciation and amortization) margin improved by 90 basis points year-on-year to 18.4%, driven by higher margins in the Americas and Europe. EBITDA increased by 17% year-on-year to ₹190 crore, while adjusted PAT (profit after tax) increased by 18% year-on-year to ₹64.2 Crores.

Revenues increased in all regions. In AMESA, EAP, Americas and Europe, revenues increased 9%, 14%, 19% and 9% year-on-year, respectively. EBITDA margins increased 610 basis points to 15.8% in the Americas and 230 basis points to 13.6% in Europe. In contrast, margins decreased 280 basis points to 19% in AMESA and 90 basis points to 21.9% in EAP.

EBITDA increased 94% in the Americas, 31% in Europe and 10% in EAP, while it decreased 4% in AMESA for the quarter. Revenue in the Oral Care and Personal Care segments increased 15% and 6% year-over-year, respectively, with the Personal Care segment representing approximately 47% of total revenue, compared to 49% last year.

outlook

The company has seen encouraging margin development and expects to reach a 20% margin mark soon. It expects gross margin for the first quarter to be sustainable and is focused on improving margins in the EU and India.

In Brazil, EPL is experiencing strong momentum due to new customer acquisitions. The company has started supplying two new multinational customers and one local customer, in addition to an anchor customer. The Brazilian plant is operating at 65-70% capacity.

The company stated that margins in the AMESA region have declined due to increased investments to improve performance and drive future growth. However, EPL expects margins to improve as sales increase and Egypt is not expected to be a drag on AMESA performance in the future.

Should you buy the stock after the first quarter?

Following the announcement of the company’s quarterly results in June, domestic brokerage Motilal Oswal reiterated its buy rating for the stock and set a price target of ₹275 per share.

The brokerage expects robust revenue growth and margin expansion for EPL, driven by cost rationalization measures, margin improvements in Brazil and operating leverage. It forecasts a compound annual growth rate (CAGR) of 8%, 16% and 30% in revenue, EBITDA and adjusted PAT, respectively, for FY24-26.

Motilal Oswal has largely maintained its earnings estimates for fiscal 2025 and 2026. According to the broker, the stock is valued at 20 times fiscal 2026 earnings per share, a 20% discount to the past five-year average P/E of 24.7.

EPL is considered the world’s largest specialty packaging company and specializes in manufacturing laminated plastic tubes for various industries including beauty, pharmaceutical, food, oral and home care products. From week 12 to week 20, the company’s shares have seen a remarkable uptrend, returning nearly 1900%.

Disclaimer: The views and recommendations expressed in this article are those of individual analysts. They do not reflect the views of Mint. We advise investors to seek advice from certified professionals before making any investment decisions.