Multibagger EPL stock gains over 8% to reach 11-month high, up 22% since April. Good time to buy?

Shares of EPL, a leading global specialty packaging company, continued their upward trend for the second consecutive trading session on Tuesday, gaining 8.5% intraday to reach a 11-month high of ₹219 per share.

Since April, the stock has maintained strong growth, achieving a 22% increase to date. Despite this, it remains approximately 32% below its peak of ₹318.60 per share, set in August 2020. The shares were impacted by the drop in the company's financial performance.

Also Read: Allied Blenders shares dip after positive debut. Buy, sell or hold?

However, the recent rally in share price is expected to persist as the company is seeing a strong demand for its products, driven by robust interest from a diverse range of customers, including both large multinational corporations and local clients.

According to Systematix Institutional Equities' latest report, EPLL's operations in Brazil are reporting strong EBITDA margins, capitalising on its unique position as the sole strategic global tube supplier in a significant consumer market. This market presence includes global customers, enhancing its strategic advantage.

Also Read: Gold beats Nifty 50 in H1CY24; will the shine last? What should investors do?

With increasing customer demand for proximity to manufacturing locations, EPLL's Brazil facility is poised for substantial growth. The company remains optimistic about maintaining strong margins, foreseeing Brazil as a key contributor to overall EBITDA margin enhancement. It anticipates ongoing opportunities in Brazil, highlighting significant potential for growth month by month, said the brokerage.

Systematix emphasises the company's long-term strategy focused on achieving profitable growth through four key initiatives: accelerating expansion in beauty & cosmetics, and pharmaceuticals, expanding market share across key regions, leading in sustainability to inspire customer adoption and driving multi-year projects to fuel sustained growth.

The global tubes market, valued at $42 billion in 2023, sees EPLL as the largest manufacturer with a 20% market share, producing over 8 billion tubes annually. Specifically, EPLL holds a 10% share in the $22 billion beauty, cosmetics, and pharmaceuticals segment, a 35% share in the $17 billion oral care market, and an 8% share in the $3 billion food, home, and industrial segment. Major customers include Colgate, P&G, L’Oreal, and Unilever.

Also Read: Promoters sold stake worth ₹87,000 crore in H1 2024, highest in 5 years

The brokerage notes EPLL's successful initiatives such as restructuring in Europe, improving product mix, strategic pricing management, and cost optimisation, all contributing to margin enhancement and bolstering confidence in achieving its targeted 20% EBITDA margin for FY25.

It projects revenue, EBITDA, and PAT CAGR of 12%, 18%, and 42% over FY24–26E, respectively. The brokerage maintains its 'buy' rating with a target price of ₹264 apiece based on an unchanged 20x FY26E P/E ratio.

Also Read: What SEBI’s notice and Hindenburg’s response means for Adani?

EPL is the world's largest specialty packaging company, specialising in the manufacture of laminated plastic tubes for a wide range of industries such as beauty, pharma, food, oral care, and home care.

Between CY12 and CY20, the company's shares experienced a sustained upward rally, delivering an impressive return of nearly 1900%.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.