"Essel Propack, net sales grew by 10.9 percent and 6.9 percent for Q2 and H1FY14 respectively registering a topline of Rs 162.5 crs. and Rs 314.4 crs. respectively. Growth was driven by both improved mix & volumes growth. The mix was favourably tilted to value added non oral care segment. Operating profit recorded a growth of 11.0 percent YOY to Rs 35 crs. in Q2 while margins remained flat at 21.3 percent. Operating performance for H1 has been better vs. corresponding period last fiscal. H1 Operational profit grew by 10.5 percent to Rs 66.0 crs. driven by cost rationalization & improvement in product mix. Margins in H1 were flat at 20.3 percent. Depreciation & interest cost were both lower enabling PBT margin to handsomely expand by 310 bps to 13.9 percent in Q2. PAT for Q2 stood at Rs 15.8crs. Tax rates moved up to 28.9 percent in H1FY14. PAT margin expanded by 40 bps at 8.9 percent with absolute PAT at Rs 29.0 crs. The company's commissioned the new line of plastic during this Q2. This is expected to add ~ Rs 4-5 crs. in FY14."
Valuations: "At CMP of Rs47.8, the stock is trading at a PE of 7.6x in FY14E it EPS of Rs 6.3. We expect the losses from Europe to come down; better performance by EAP and AMESA and stable performance by Americas will drive the consolidated earnings. We strongly believe that the restructuring in different geographies, plus robust demand from the FMCG sector and EPL holding as a dominant position with limited competitors will lead healthy growth. We are also of the opinion that the initiatives taken by the company will be more visible in FY14E. We recommend investors to ACCUMULATE with a long term view," says Way2Wealth research report.
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