Emami Ltd. share price target

Despite lower base in 3QFY17 owing to demonetisation, Emami has reported a disappointed set of numbers for 3QFY18. While its consolidated net sales grew by 6% YoY to Rs7.6bn (vs. our estimate of Rs8.1bn), net profit came in at Rs1.5bn, lower than our estimate of Rs1.6bn....

It is a great play on rural demand growth and wholesale recovery. Before the slowdown caused by extraordinary factors like demonetization, Emami had the best track record among peers on consistency of earnings growth, which we expect will make a comeback. Emami has a formidable portfolio of dominant brands, with best-in-class R&D and advertisement to support existing brands and new launches. Despite likely resumption of better-than-peers' earnings growth of 20% CAGR over FY18-21, the stock trades in line with peer multiples. Our target price of INR1655 implies a one-year upside of 23% and a two-year upside of 39%. Our bull case upside is 33% for one year and 53% for two years.

Emami Ltd is one of the leading and fastest growing personal and healthcare businesses in India, with an enviable portfolio of household brand names such as Boroplus, Navratna, Fair and Handsome, Zandu balm, Mentho Plus balm and Fast Relief. Emami has received countless accolades for its innovative and clutter-breaking products, which have carved out whole new segments from scratch in the Indian FMCG space .

We expect EPS CAGR of 18% over FY17-20E. We value Emami based on P/E of 35x on Sep-19 EPS. Our TP is Rs 1,327. We maintain our BUY rating. Emamis net revenues were up 10% at Rs 6.3bn. Like-to-like revenues were up 14% vs. expectation of 13%. Domestic volume growth was healthy at 10% (in-line). International business registered strong 22% growth. EBITDA and APAT were up 15% and 27% respectively. Channel restocking and improving consumer sentiments have helped growth recover (1QFY18 revenue declined 16%). Management is confident of achieving ~17% domestic growth in 2HFY18. We remain optimistic about Emamis domestic business, and expect 13% revenue CAGR over FY17-20E.

Following a disappointing performance in 1QFY18 due to GST overhang, Emami has posted an encouraging set of numbers in 2QFY18. While its consolidated reported sales grew by 9.7% YoY to Rs6.3bn, the underlying revenue grew by 14% YoY excluding the accounting changes post GST. While EBITDA increased by 15% YoY to Rs2bn, net profit surged by 49.7% YoY to Rs986mn. We estimate Emami to post 12.3% revenue and 17.2% earnings CAGR through FY17-19E. We believe that Emami would sustain the growth momentum in coming quarters on the back of good monsoons, increased focus on direct distribution, strong new product pipeline and lower base effect. We maintain our BUY recommendation on the stock with a revised Target Price...

2QFY18 sales grew 9.7% YoY to INR6.3b. Domestic revenue rose 14% YoY, with 10% volume growth. The quarter continued to see CSD and wholesale channel destocking, but there has been significant recovery compared to 1QFY18. HMN...

Boroplus Cream and 7-in-one oils continue to perform well; Navratna saw recovery in sales: Boroplus range grew by 38%, driven by strong double-digit growth in Boroplus antiseptic cream. Navratna range grew by 16%, led by double-digit volume growth in cooling oil and cool talc. 7-in-one oil continued to gain good traction and registered double-digit volume...

Q1FY18 below expectations: Consolidated net sales declined 16%, while EBITDA and adj PAT plummeted 46% and 56% YoY. India sales declined 16% with volume decline at ~20% YoY. International sales fell 19% due to sustained pressure in MENAP business (-42% YoY).

We expect EPS CAGR of 19% over FY17-20. We value Emami based on P/E of 35x on Jun-19 EPS. Our TP is Rs 1,301. We maintain our BUY rating. Emamis net revenues contracted by a sharp 16% to Rs 5.4bn (vs. expectations of -8%). Domestic business (85% of total) declined by 16%, with an 18% volume decline. International was under pressure, and contracted by 19%. EBITDA/APAT up by -46/-55%. Domestic biz was impacted by channel destocking. Management is confident of a strong growth recovery in 9MFY18 (July recovery was inspiring). We remain optimistic for Emamis domestic business, and expect 14% revenue CAGR over FY17-20.

Revenue decreased by 20.35% to Rs. 577.58 Cr in Q4FY17 when compared to the previous quarter.