Motilal Oswal has initiated coverage on EPL Limited with a 'Buy' rating and a target of INR 290, forecasting 14% revenue growth through FY28. While Q1 FY27 results showed strong 25% revenue growth, investors are monitoring a slight dip in net profit and potential risks, including commodity cost volatility and a pending PE stake sell-down.
Motilal Oswal Securities has initiated coverage on packaging company EPL Limited with a 'Buy' rating, setting a target price of INR 290. The brokerage’s outlook is supported by its expectations of a 14% revenue compound annual growth rate (CAGR) for the company between fiscal years 2026 and 2028. This comes as the company balances strong top-line demand with specific financial and market-related pressures.
Q1 Performance and Geographic Growth
EPL Limited’s results for the first quarter of fiscal year 2027 highlighted a strong demand environment. The company reported revenue of INR 13.88 billion, representing a 25.3% increase compared to the same period last year. This growth was broad-based, with the East Asia Pacific (EAP) region leading performance with a 34.3% year-on-year surge. The company also saw significant traction in its personal care and beauty and cosmetics segments.
Despite this revenue growth, the company’s consolidated net profit saw a marginal decline of 1.4%, standing at INR 986 million. According to company financial disclosures, this dip was primarily due to tax-related base effects rather than a core operational slowdown. The brokerage anticipates that EPL's strategy of geographical expansion and focus on high-growth segments will continue to support revenue performance in the coming years.
Key Risks and Monitorables
While the growth outlook remains positive, investors should be aware of several factors that could influence the stock and the company's financial stability. A primary risk factor is the potential overhang from an ongoing private equity sell-down involving Epsilon Bidco (Blackstone). Large stake sales by private equity players can often create temporary supply pressure on the stock price.
Additionally, the company faces potential headwinds from commodity price inflation and volatile input costs, which could exert pressure on profit margins if not managed effectively. The business is also in the process of integrating its merger with Indovida, which is subject to pending regulatory approvals. Investors may want to track the progress of these approvals and whether the company can maintain margin stability amid fluctuating raw material prices.
Looking ahead, the market will focus on whether EPL can sustain its 'high teens' revenue growth guidance and successfully navigate the integration of new business acquisitions while managing the potential equity supply pressure.