ESSEL PRO PAC
cmp 73 tgt 110 in 12 months
In a little over two decades, Essel Propack has emerged as the largest laminated tubes manufacturer in the world with a 33% market share. With its lamitubes business reaching maturity, the company is diversifying into other sectors like plastic tubes, specialty packaging and medical devices where it can leverage its core competence in polymer processing to de-risk its business and spur growth. We initiate coverage on the company with an OUTPERFORMER rating.
At the current price of Rs 73.5, the stock is trading at 10.7x its CY07E EPS of Rs 6.9 and 8.1x its CY08E EPS of Rs 9, which is lower than BSE Mid-cap Index that is currently trading at 13.7x FY07 earnings. On an EV/EBIDTA basis, the stock is available at 5.5x CY07E earnings and 4.6x CY08E earnings. Given the company's global leadership status and foray into fast-growing businesses, we believe current valuations are extremely attractive.
We rate the stock an OUTPERFORMER with a 12 month price target of Rs 110 at 11x CY08E earnings.
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