Emami Ltd. share price target

Emami reported a slightly patchy revenue performance with (consol.) revenue growth of 3% - both adjusted revenue growth YoY (explained below) and 3-year CAGR were 8%. RM pressure, inferior product mix and higher ad-spends (much appreciated) led to lower margins (EBITDA print of 24%).

HMN recently announced the acquisition of the Dermicool brand from Reckitt Benckiser India for INR4.32b. We estimate ~INR1.4b in FY23 sales for Dermicool, with an EBITDA of INR475m, translating in an acquisition cost of ~3x sales and ~9x EBITDA. COVID-led restrictions affected summer season sales in the last two years, impacting overall category growth. Hence, its CY21 sales of INR1.13b are not representative. We believe CY19 sales of INR1.33b are a better representation. The deal will be funded through internal accruals....

Near term growth remains a concern given slowdown in rural demand and sharp jump in input costs in past month. While we expect 2/3% price increase in April, poor demand and high inflation will impact profit growth in 1H23 on a high base. We cut EPS estimates of FY23/24 by 5.9/1.3% amidst near term uncertainty. We estimate 11.7% PAT CAGR over FY22-24 and value the stock at 30xDec23 EPS and assign a value of Rs607/share. We believe Rs1.6bn...

Navratna therapy, Kesh King onion range, Crme 21 products, however it will have any significant impact in a few years only. Although inflation in LLP and Rice bran oil remains high, 3-4% price increase and cost control will enable Emami prevent any significant margin erosion. We estimate 12% PAT CAGR over FY22-24 and value the stock at 30xDec23 EPS and assign a value of Rs624/share. We believe Rs1.6bn buyback (Max...

Background: Emami is a FMCG company with niche focus on relatively under penetrated segments such as antiseptic cream, fairness cream, talcum powder, cooling oil, pain balm and pain reliever. Emami's power brands such as Navratna Oil, Boroplus Cream, Zandu & MenthoPlus Balm, Fair & Handsome, Boroplus Powder, Navratna Cool Talc, Fast Relief, SonaChandi & Zandu accounts for 75% of company's sales. Emami sales have grown at a CAGR of 38.5% (FY2010-20)....