Prabhudas Lilladher
Emami (Buy)
Target: ₹526
CMP: ₹434.85
We are upgrading target price of Emami to ₹526 (₹450 earlier) as we increase PE multiple from 26 to 28x (last 5-year average 38.6x, 25 per cent discount to coverage universe) and rollover valuations to FY23. We believe Emami has hit a sweet spot for growth led by: 1) strong rural demand; 2) strong demand for winter care products on early onset of winter; 3) low base for Q3; 4) Kesh king has gained traction and is gaining share in premium hair oil segment; strong demand for immunity boosters like Chawyanprash and Kesari jeevan; and benign input costs of LLP and Mentha oil.
We believe success of F&H re-launch and pick up in male grooming portfolio is key to sustaining growth beyond next 2/3 quarters. Emami has taken steps for broad based growth with new launches in immunity boosters, health and hygiene products (sanitisers, handwash, anti-septic soaps, floor cleaners, surface cleaners etc.), although we remain cautious on scalability.
We believe worst is over and accelerated amortisation, net cash balance sheet (₹250 crore in Q2-21), 40-50 per cent dividend payout, gradual reduction in promoter pledge (45 per cent, likely to decline in Q4) are positive.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.