Essel Propack’s (EP) new expanded capacity in Goa goes on stream ::Emkay

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Essel Propack’s (EP) new expanded capacity in Goa goes on stream

Essel Propack has expanded its facility in Goa for an investment of Rs 400mn. Post the expansion, the production capacity of Essel Propck’s Goa facility stands increased by 150%. This new installed capacity is fast ramping up and is expected to achieve full utilization by August 2011. With the expansion, the plant becomes EP’s biggest manufacturing facility in India and second in the world after its facility in China. The expansion of this facility is an outcome of an exclusive long term contract with one of the leading MNC FMCG company. The management stated that this exercise of consolidating few of its plants into a single location than having number of plants as a cluster is to save resources and increase efficiency.

Focus on Non-oral care segment - Apart from focus on the oral care segment, the management indicated that it is looking at increasing its revenues from non-oral care segment from current 30% to 50% over the next 5 years. The non-oral care segment has been growing at a faster rate than oral care and due to higher profitability in this segment, EP is targeting at a higher share from the non oral care segment.

Our Take – We believe that this expansion in Goa facility would enhance consolidated revenue and PAT growth for EP over the next few years. We maintain our revenue and PAT estimates for FY12E and FY13E. EP is currently trading at 3.5x FY13E EV/EBIDTA. We have a “BUY” rating with a target price of Rs 72, which discounts FY13E EBIDTA at 4.9x.