Sustainable Packaging And Emerging Markets Will Expand Global Reach

Key Takeaways

• Focus on sustainable packaging, emerging market expansion, and innovation is shifting EPL's sales toward higher margin categories and strengthening long-term growth potential.
  
• Strategic acquisitions and strong financial health enable EPL to accelerate global market share gains and enhance overall profit metrics.
  
• Reliance on core segments and major customers, along with exposure to regulatory pressures and sustainability trends, heightens risks to revenue stability and profit margins.

Catalysts

Manufactures and sells plastic packaging materials in the form of multilayer collapsible tubes, corrugated boxes, and laminates.

• EPL's increasing revenue share from sustainable tube formats (now 38% of sales) positions it to benefit from accelerating regulatory and customer mandates for recyclable/biodegradable packaging, supporting long-term revenue growth and higher net margins as sustainability premiums expand.
  
• Strategic expansion in high-growth emerging markets (e.g., Brazil capacity doubling, new Thailand greenfield facility) exposes EPL to surging demand from rising middle-class populations and local CPG growth, driving both top-line and operating margin expansion.
  
• Sustained double-digit growth in the Beauty & Cosmetics segment (35% YoY) and aggressive new customer acquisition, particularly among fast-growing D2C and digital-first brands, are shifting EPL's sales mix toward higher-margin, value-added categories, likely enhancing overall gross margins and EPS.
  
• Ongoing investments in product innovation (e.g., Neo-seam technology, extruded tube capability, digital printing) cater to the evolving requirements of e-commerce and premium brands, strengthening EPL's pricing power and supporting durable revenue and earnings growth.
  
• Robust M&A appetite, coupled with a strong balance sheet (net debt/EBITDA at 0.45), allows EPL to accelerate global market share gains through acquisitions in underpenetrated regions and premium segments, underpinning both revenue growth and capital returns (ROCE improvements).

EPL Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming EPL's revenue will grow by 9.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.2% today to 9.9% in 3 years time.
• Analysts expect earnings to reach ₹5.7 billion (and earnings per share of ₹16.72) by about August 2028, up from ₹3.9 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.2x on those 2028 earnings, up from 18.6x today. This future PE is greater than the current PE for the IN Packaging industry at 21.1x.
• Analysts expect the number of shares outstanding to grow by 0.52% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.73%, as per the Simply Wall St company report.

EPL Future Earnings Per Share Growth

Risks

• Persistent softness in Oral Care volumes, particularly in the AMESA region, exposes EPL to prolonged demand stagnation in its historically core segment; if recovery in this segment is delayed or macroeconomic headwinds in FMCG persist, it may continue to suppress revenue growth and margin expansion.
  
• EPL's continued strategic focus and planned M&A activity is centered on plastic and laminate tube packaging, potentially increasing its vulnerability if long-term secular trends and regulatory tightening accelerate the shift towards biodegradable or alternative materials, thereby eroding revenue, market share, and future earnings.
  
• The business remains heavily reliant on major beauty and cosmetics (BNC) brands and a relatively concentrated set of large FMCG customers, creating risk if there are shifts in customer procurement strategies, loss of key contracts, or increased bargaining power-this could result in meaningful revenue concentration risk and earnings instability.
  
• Sustained aggressive growth plans, including geographic expansion (Thailand, Brazil) and ongoing innovation in sustainable packaging, require significant and ongoing capital expenditure; if new capacity is underutilized or if sustainability-led growth does not keep pace with investments, company free cash flow and net margins could come under pressure.
  
• Industry-wide shifts, such as increased adoption of alternative packaging by multinational brands, rising costs of regulatory compliance (e.g., plastic taxes, Extended Producer Responsibility), and increasing consolidation among packaging and consumer companies, could drive greater pricing pressure and higher operating costs, thereby squeezing margins and impacting overall profitability.

Valuation

• The analysts have a consensus price target of ₹306.875 for EPL based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹350.0, and the most bearish reporting a price target of just ₹280.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹57.1 billion, earnings will come to ₹5.7 billion, and it would be trading on a PE ratio of 25.2x, assuming you use a discount rate of 12.7%.
• Given the current share price of ₹229.15, the analyst price target of ₹306.88 is 25.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.