Target: ₹2,000
CMP: ₹1,559.20
Epigral (formerly Meghmani Finechem) is poised to consistently grow its earnings at over 25 per cent CAGR over the next few years, led by: higher utilisation/expansion of existing capacities, consumption of chlorine into derivatives/value-added products with large import substitution opportunity, and scale up of existing/newer chemistries.
Backed by the idea of captive chlorine consumption in more downstream products, Epigral is now the largest player in ECH and CPVC, and the first mover in the chlorotoluene value chain. Revenue share of the legacy caustic soda business will reduce in coming years, towards more chlorine derivatives/value-added products, driving multiple re-rating.
The current annual capex guidance for FY25 stands at ₹300 crore. Though the company has not given details of the capex, we believe there is enough room for capacity expansions in ECH, CPVC, and chlorotoluene derivatives. Based on this run rate, Epigral is likely to generate healthy OCF of ₹,1600 crore over FY25-27E, helping the return ratios to consistently log above 20 per cent till FY27.
We expect Epigral to report revenue/EBITDA/PAT CAGR of 21/23/33 per cent over FY24-27. We initiate coverage with a Buy and Jun-25E target price of ₹2,000 (20x Jun-26E EPS).