Brokerage firm Nomura has hiked the price target for EPL Limited to Rs 325, following a strong Q1 FY27 performance with revenue growing 25.3% year-on-year. While expansion in the Beauty and Cosmetics segment is boosting sales, investors should monitor risks like commodity price volatility and potential stake sales by major shareholders.
EPL Limited has received a target price upgrade from Nomura, which lifted its view to Rs 325 from Rs 300, citing the company's robust Q1 FY27 performance. The brokerage noted that the packaging company successfully delivered a 25.3% year-on-year revenue growth in the first quarter, reaching Rs 13,879 million, which beat market expectations. This growth was driven by consistent demand across key global markets and the scaling of the Beauty & Cosmetics (B&C) segment.
Operational Growth and Segment Strength
The company’s strategic push into the B&C category appears to be paying off, with the segment now accounting for 54% of its sales. This is a significant shift from previous years and has helped reduce reliance on traditional categories. Nomura highlighted the company's ability to maintain an underlying EBITDA margin of 19.6% during the quarter, despite facing pressure from raw material costs. While the reported profit after tax (PAT) saw a slight decline of 1.4% to Rs 986 million, this was largely attributed to a normalized tax rate compared to the same period last year, rather than a decline in core business performance.
EPL has been investing in new capacity, including a greenfield project in Thailand, to support its growth targets. Management has also raised its revenue growth guidance for the fiscal year to the 'high-teens,' suggesting confidence in sustained demand. The company is actively passing on increased costs for raw materials, freight, and currency fluctuations to customers, a strategy that the brokerage believes makes the business model more resilient to global market volatility.
Risks and Market Monitorables
While the growth narrative remains strong, investors should consider certain risks. Input cost inflation, fueled by geopolitical tensions, remains a potential headwind that could impact margins if the company is unable to pass on all cost increases. Additionally, there is a potential overhang in the market related to a possible stake sell-down by Epsilon Bidco, a major shareholder. Investors should also watch for shifts in working capital requirements, as these can affect short-term liquidity.
The company's focus on high-value products and recyclable packaging remains a core pillar of its long-term strategy. Moving forward, the key factor for investors to track will be the actual execution of its capital expenditure plans and how successfully the management team can maintain profit margins against ongoing global supply chain constraints and commodity price fluctuations.