Target: ₹625

CMP: ₹534.75

Our positive stance on Emami is by virtue of Management actions being undertaken for boosting its business prospects. With induction of professionals in the management, Emami has created a good bandwidth for strengthening its core and launching new initiatives. It has been building its portfolio of small D2C and regional brands, wherein it gets the ball rolling with a financial investment, albeit with strategic focus.

Emami has announced acquisition of 26 per cent stake in general trade-heavy North-based Axiom Ayurveda Pvt, which generates bulk of its revenue from health juices; the investment is a strategic move, and Emami would look to gain further stake post scale-up.

Emami’s past organic foray did not bear fruit. It now has 5 investments that yield combined sales of ₹260 crore.

Prior to Axiom, Emami had acquired stake in four D2C brands — Helios Lifestyle (The Man Company), Brillare, Trunative and Fur Ball Story.

Interestingly, in all its investee companies, the remaining stake is with the respective promoter (no other external investors) and, subject to scale-up, Emami can increase its stake in them. Unlike peers, we see Emami’s strategy of financial investment as apt, given its limited capital muscle. We believe it will gradually raise stake, backed by future cash generation.