EPL Limited
Indorama Group takes strategic stake; Retain BUY
EPL Limited’s (EPLL IN) promoters, Blackstone, has entered into a definitive agreement to sell a minority stake of 24.9% (79.5mn shares) in the company to Indorama Netherlands, B.V. (INBV), a group entity of Indorama Ventures Public Company Limited (IVL), at Rs 240 per share. IVL brings global expertise in packaging and has a complementary geographic presence. IVL’s business spans packaging, recycling, and specialty chemicals, serving marquee customers across diverse global markets, in pharmaceuticals, cosmetics, and personal care. Its strong presence in Southeast Asia and Africa complements EPLL’s leadership in India, China, Europe and the Americas. We view this transaction as positive for EPLL, considering the entry of IVL as a strategic investor would strengthen EPLL’s growth prospects and aid market expansion. Management reiterated its commitment towards long-term sustainable growth and healthy margins. We estimate revenue/EBITDA/PAT CAGR of 11%/14%/31% over FY24-FY27E, respectively, and maintain BUY with a target price of Rs 324 (unchanged), based on 22x FY27E P/E (unchanged). Key risks: Global recession could keep demand subdued, spike in commodity and freight prices and logistics issues.
Strategic partnership with IVL to help improve geographical expansion and raw material sourcing: The collaboration would speed up EPLL’s entry into the Thailand market and improve customer engagement. IVL’s expertise in specialty chemicals and packaging would enhance raw material access and make procurement efficient. IVL’s packaging business would also create opportunities for customer crosspollination. Additionally, their scale in the polymer and packaging industries would enhance sourcing efficiency, cost competitiveness and drive margin expansion for EPLL. Management says that EPLL’s laminated tube expertise and IVL’s PET-based packaging leadership could create opportunities for collaborative innovation. Indorama’s local expertise is expected to support EPLL’s rapid expansion in Thailand.
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