Essel Propack (EPL) is the largest laminated tubes packaging firm globally and a force to reckon with in the global packaging industry. Adhering to the growth cornerstones of innovation and customer-driven R&D, the company has captured one-third market share in laminated tubes. We expect RoE to exceed 21% in FY17 from 13.5% in FY14 as: (1) penetration in non-oral care segment is on the rise; and (2) subsidiaries in Europe and America are turning profitable. While EPL has historically traded at 5-7x EV/EBITDA band, we have valued it at 7x considering that EPL’s RoE will transcend its historical range of 8-10%. Our target EV/EBITDA is at 21% discount to global peers despite EPL’s margins being much higher. Initiate coverage with ‘BUY’ and target price of INR184 (57% upside).
We recently met Dhanuka Agritech’s (DAL) management to get a sense of the domestic agrochemical industry and the company’s future business prospects. Management highlighted that deficient monsoon, correction in agro commodity prices and higher agrochemical channel inventory have impacted both industry and company growth during FY15. The recent unseasonal rains have further worsened the situation. However, DAL continues to be upbeat on its long‐term growth prospects, riding its innovative products’ pipeline. The company is confident of growing revenues at 20‐25% CAGR over next 2‐3 years on 2‐3 innovative product launches per annum considering normal weather condition. It also expects to scale up EBITDA margin to 20% from current 17% over the period. We believe a vibrant distribution network, tie ups with innovators, launch of new products and Rajasthan capex will propel DAL’s growth going ahead. We maintain ‘BUY’.
Wonderla Holidays (Wonderla), India’s largest amusement park chain, is set for an adrenaline rush propelled by the likely recovery in discretionary spending. Reasonable prices, credible brand equity, in-house manufacturing, improving resort occupancy and experienced management team give it a distinctive competitive edge. Riding 2 successful operational parks and 1 on the horizon, we expect commendable revenue, EBITDA and PAT CAGR of 31.9%, 28.3% and 18.6%, respectively, over FY15-17. We initiate coverage with ‘BUY’.
We met the Natco Pharma Ltd. (NPL) management to gain meaningful insights into the Sofosbuvir (Sovaldi)/Sofosbuvir + Ledipasvir (Harvoni) opportunity for the company. Although the Hepatitis C market is shaping up to be a crowded space, we believe the company will be at par with the domestic behemoths to tap the lucrative opportunity anchored by (1) well entrenched experience in the specialised distribution system required for Hepatitis C drugs and (2) cost competitiveness. Moreover, the company estimates the product’s penetration levels to be as high as 10% of infected population, considering that Sofosbuvir/Ledipasvir are more effective, cheaper than existing therapies in India and entail lower side-effects. Additionally, management is upbeat on the potential of its US product pipeline. The above substantially bolster our confidence that NPL is well poised to monetise the incremental opportunities and generate substantial cash flows for future growth. We continue to maintain ‘BUY’ with a target price of INR 1873/share.