Investing in the stock market can be a rollercoaster ride, filled with ups and downs. Even the most promising stocks can experience periods of underperformance, causing investors to face substantial losses. However, amidst the unpredictability, there are instances where stocks manage to bounce back with renewed vigor.
This is exactly what happened with the shares of EPL (formerly known as Essel Propack Ltd.). After delivering a phenomenal return of 1884% between CY12 and CY20, the stock faced a period of underperformance over the next two years.
However, the current year has witnessed a remarkable turnaround, with the stock surging by an impressive 30% so far. During this period, the stock climbed from ₹170.65 to ₹220 apiece. Notably, the stock has ended five out of the last six months with gains, with June being the standout month, boasting a stellar gain of 18.40%.
This strong resurgence can be attributed to the company's decent performance for the March quarter, coupled with softening raw material costs and improving demand conditions across regions that were earlier impacted due to the pandemic.
EPL Ltd. 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.
Earlier in May, brokerage firm ICICI Securities in its research note, maintained ‘buy’ recommendation on the stock with a target price of ₹220 apiece. The brokerage highlighted the sequential improvement in the company's EBITDA margin in Q4FY23 but also noted that the margin was still far away from normal.
Looking ahead, the brokerage believes that FY24 could see an exponential recovery, with demand normalising across various regions, selective price increases, the ramp-up of operations in Brazil, and stable inflation.
"EPL has shown remarkable growth in sustainable tubes (2.5x in FY23), which is aiding it to grab a higher tube market share, and this phenomenon should only accelerate," said ICICI Securities.
The company is among the few to have been awarded the Gold Medal certificate by EcoVadis rating. It should also help in boosting EPL’s strong positioning in sustainable packaging, it noted.
ICICI Securities projected an EBITDA and net profit CAGR of 20% and 29%, respectively, over FY23–25E, which the brokerage anticipates will drive higher free cash flow and dividends.
Similarly, Motilal Oswal, in its April research note, also maintained a 'buy' recommendation on the stock with a target price of ₹215 per share. The brokerage highlighted the increasing demand for the company's products across geographies and the expansion of market share in the Americas region.
08 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.