Essel Propack

EPL is into speciality packaging. It has come with mixed results for Q1 CY 2007.
(It may be noted that since EPL acquired Medical Devices (MD) & Speciality Flexible Packaging (SP) business in April’06 and Sept.’06 respectively, results are not comparable).
Consolidated net sales grew by a handsome 33.2% to Rs. 282.5 crore (Rs. 212.5 crore) led by 43% growth in revenues from overseas operations to 75% (70%) of revenues. However, higher overall costs combined with changing business profile resulted in lower OPM% of 21.1% (24.1%). Gains from higher other income of Rs. 3.6 crore (Rs. 0.2 crore) were negated by almost doubling of interest expense to Rs. 8.8 crore (Rs. 4.6 crore) and consequently PBT (before extraordinary items) grew by only 20.1% to Rs. 31.1 crore (Rs. 25.9 crore). Accounting for extraordinary expense of Rs. 5.2 crore (Nil) (closure expenses of Venezuela unit – Rs. 1.1 crore and for product development initiative – Rs. 4.1 crore) further stunted PAT growth at a meagre 4.3% to Rs. 19.5 crore (Rs. 18.7 crore).
Future growth drivers are
© Fast growing packaging industry, riding on booming retail market and India’s strengthening position as world manufacturing hub for prescription drugs, provides ample growth opportunities to EPL.
© Innovative product introduction like Inviseam tubes and Minitubes technologies directed towards high end segments like hair & skin care and pharma industry. This would also enable company to further enhance its world market share in laminated tubes to 40% (32%) by 2009. EPL is jointly developing a new product in pharma packaging with a MNC major, which has huge conversion potential and will be a growth driver.
© Plastic tubes will be one of the major growth drivers, thereby de-risking tubes business. Towards this end, EPL is aggressively developing capacities in US (presently in ramp up mode) and Europe (to be commissioned in August 2007).
© Diversification into :
1) MD - Company has ventured into fast growing niche of cardiac catheters having huge potential due to increasing incidence of life style diseases and preference for non / minimum invasive surgery procedures.
2) SP - company has entered into food packaging for FMCG sector and is well placed to exploit vast export prospects and benefit from government’s increasing thrust on food processing. It is also eyeing high margin pharma packaging - product launch expected in June’07 & is expected to start contributing from CY 2008; this product represents a business opportunity of Rs. 800 crore by 2009. It is setting up new facility at Uttaranchal (costing Rs. 40 crore) for both food packaging and pharma - expected to start contributing from CY 2007 end.

While higher proportion of revenues from SP & MD will drive topline growth (aiming to cross Rs. 2250 crore by 2009 @ CAGR > 30%), focus on high value added product segments viz. cosmetics, pharma packaging in tubes business would enable bottonlime to grow at faster pace.

CY 2007 expected consolidated EPS of Rs 7.7 and CY 2008 expected consolidated EPS of Rs 11.7.

Source : Geojit Research Desk