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Centrum Broking
Emami (Buy)
Target: ₹688
CMP: ₹534.45
Our interaction with Emami’s management reinforced our confidence in the company. H2-FY22 performance should improve, led by a cold winter ahead. Emami remains bullish on domestic business, given favourable macro factors, a strong harvest economy, and likelihood of a severe winter (already witnessed in the North).
Its investments in Project Khoj are driving direct coverage to nearly 10 lakh (30,000 villages), and could yield good results supported by strong NPD pipeline and D2C products. The management alluded that reduction in immunity products could be offset by resilient demand for Boroplus range and value-added hair oils. Distribution-led focus and investments in healthcare business may reflect in revenue momentum.
The management confirmed that it is committed to reducing promoter pledge to zero by divesting group assets at a reasonable price but not in distress.
We believe clear focus on improving rural markets has resulted in continued revenue momentum. With professional management (structure) and a result-oriented strategy in place, Emami could surpass growth projections and warrant a re-rating. We retain Buy, with a DCF-based TP of ₹688 (implying 31x FY24E EPS). Key risks: Prolonged Covid-19 second wave in rural India; erratic seasonality.
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