EPL Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Broad-based 13.3% revenue growth, led by Beauty & Cosmetics: Three of four regions delivered double-digit growth, with B&C surging 26% YoY and materially outpacing the market.
• Europe margin drag masks otherwise solid profitability: EBITDA margin at 20.1% was within the target range, but Europe’s short-term operational issues and adverse mix held back what would have been a stronger print.
• Beauty & Cosmetics is the structural growth engine: The B&C market is twice the size of Oral and growing twice as fast, with EPL’s market share still low enough to support a doubling over the next few years.
• Management has built a margin shield for the next commodity cycle: Internal processes now enable proactive, customer-level margin reviews, giving confidence that margins can be protected if raw material prices rise.
• What to watch next quarter: Whether Europe’s operational initiatives start delivering the promised margin recovery, the pace of Thailand’s scale-up, and any concrete M&A progress.

Beauty & Cosmetics: The Growth Engine

• Segment delivered 26% YoY growth, with every region close to or above 20%, materially outperforming the market and signaling accelerating share gains.
• Market structure favors a long runway: B&C market size is twice that of Oral, growing at twice the rate, and EPL’s market share is relatively low. Management sees doubling share within reach over the next few years, implying growth higher than what has been seen so far.
• Innovation is driving adoption: Tube-in-Tube formats in China are scaling and command an 8x premium over standard tubes, while other applicator innovations are getting positive customer response.
• B&C economics are favorable: ASP is significantly higher than Oral care, so while percentage margins are roughly similar, better fixed-cost absorption makes B&C margin “a bit advantageous as an overall” on a full P&L basis.

Bakshi: "If you look at B&C and compare it with Oral, B&C market size is twice that of Oral. It's growing at twice the rate of Oral. And in addition to that, our market shares in B&C are relatively lower. So, if we were to double our market share, which is very well within our reach in the next few years, we have a runway for growth which is higher than what we've seen so far."

Regional Performance

• China factory closure was customer-initiated: A customer moved its filling facility closer to another existing EPL plant. Equipment was relocated, and the only cost impact was employee severance.
• Thailand entry model is different: An organic entry model that management calls “very interesting” and believes will open up many more markets. The plant was operational for less than four weeks in the quarter.

Bakshi: "Our model in Thailand of entry is different. This is a much more organic entry model... it is a very interesting new model which will open up many more markets for us."

Europe: Challenges & Recovery Plan

• What went wrong: Adverse customer mix, higher write-offs, higher outsourcing, and production issues combined with a seasonally slow Christmas quarter. Last year’s base also included one-time gains that flattered the comparison.
• What is being done: Key initiatives include consolidating some operations and taking significant actions to reduce costs emerging from operational issues. Benefits are expected in coming quarters.
• Early recovery signals exist: Growth has improved between the two quarters, and the large customer that was destocking is beginning to show a turnaround, though management cautioned “there is some way to go still.”
• Confidence in margin recovery: Management is confident of returning Europe to targeted mid-teen margins in the coming quarters.

Margins & Raw Material Strategy

• EBITDA margin at 20.1% was 20 bps lower YoY but within the target operating range. Margins improved across all regions except Europe.
• PAT was flat YoY due to a one-off benefit in the base quarter; excluding this, PAT grew 11%, in line with EBITDA growth.
• Margin protection capability has been rebuilt: After the last raw material increase cycle where margins dipped, the organization reviewed its processes and found pricing discussions with customers were not timely. It has since strengthened capabilities to review margins at the customer level and conduct proactive discussions. This has been demonstrated in certain pockets, products, and regions.
• Raw material exposure is managed: 50% of business is on a pass-through basis; the balance 50% is negotiated when prices move. Management’s expectation is that margins should not get impacted as prices go up.
• Depreciation will grow slower than revenue: Investment is in line with depreciation, and depreciation growth will always remain lower than revenue growth, as seen in YTD numbers.

Goyal: "We have learned from the last episode that happened. And we have built in capabilities to review our margins and have proactive discussions with our customers to make sure that our margins don't get impacted in case the commodity cycle turns."

Balance Sheet & Capital Allocation

• Cash flow remains strong: Net debt to EBITDA at 0.65x, with ROCE expanding 184 bps YoY to 18.7%.
• Net debt increased in the quarter due to phasing: dividend payout and some accelerated CAPEX spending. This is a timing impact expected to correct on a full-year basis.
• Growth is the top priority: Management will continue gradual debt reduction, but growth takes precedence over all other metrics. Multiple levers exist to improve ROCE, and all will be deployed, but no year-level guidance was provided.
• M&A criteria are defined: Targets must either open a new geography or build new capabilities EPL does not have, and must be margin- and growth-accretive. Nothing concrete is at a discussable stage.

Bakshi: "When we look at M&A, we use two criteria to look at targets. One is anything which takes us to a new geography or indeed helps us build new capabilities, capabilities we don't have."

Guidance & Commitments

Key Metrics