Emami Ltd. share price target

Emami Ltd power brands continued to maintain leadership in key categories. Cooling Oils, Balms, Boroplus Antiseptic cream and Fair and Handsome maintained their leadership positions with 9M FY16 volume market shares at 60.5%, 56.2%, 77.7% and 62.6% respectively. New brand extensions - Fair and Handsome Complete Winter Solution and BoroPlus Cocoa Soft Moisturising Lotion launched recently are expected to add filip to its existing brand portfolio.

Delayed winter led to weak organic business growth of 4% and flattish volumes Price growth of 4% in the organic business despite deflation Gross margin saw strong expansion due to subdued commodity prices...

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 and PAT have grown at a CAGR of 18.4% and 23.2% respectively (FY08-13). Geographical breakup of sales: North (29%), West (27%), South (23%) and East (21%). Export contributes ~10.4% of total revenue. Company...

Emami's numbers for 3QFY16 were marginally below our estimates. While net sales grew 13.9% to Rs7.9bn (our estimate of Rs8bn), EBITDA came in at Rs2.5bn, a growth of 18% yoy vs. our estimate of Rs2.7bn. Net profits for the quarter stood at Rs1.3bn, which was impacted by amortisation of goodwill arising from Kesh King acquisition. We estimate a 17.3% and 14.3% CAGR in revenues and earnings for...

Seasonal irregularities, the near term challenge: The onset of winter has been delayed across most parts of India and it will impact Q3FY16 sales for Emami as winter products form a bulk of its sales in Q3. Even during PC's ground view tour across various regions of India, it...

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 and PAT have grown at a CAGR of 18.4% and 23.2% respectively (FY08-13). Geographical breakup of sales: North (29%), West (27%), South (23%) and East (21%). Export contributes ~10.4% of total revenue. Company...

Emami reported 17.4% growth in consolidated topline to Rs5.7bn. This was lower than our estimate of Rs6.3bn. EBITDA grew by 34.2% to Rs1.5bn in line with our estimate while reported net profit fell by 33.5% to Rs611mn on account of amortisation of Kesh King intangible assets for Rs620mn. Cash net profit increased by a healthy 30.3% in the quarter. Adjusting for the amortisation impact, EPS works out to Rs28.3 in FY17E. At the current price, the stock is trading at price earnings...

Emami's Q1FY16 revenues were ahead of our/consensus estimates because of very high volume growth of 15%. New launches contributed 7% to topline. This is the fifth successive quarter of superior volume growth for Emami versus its peers Colgate, Dabur, and HUL, and...

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 and PAT have grown at a CAGR of 18.4% and 23.2% respectively (FY08-13). Geographical breakup of sales: North (29%), West (27%), South (23%) and East (21%). Export contributes ~10.4% of total revenue....

Given the company's core competencies and the leadership position in most categories it is present in, we remain optimistic in terms of the company's financials. While we believe, Kesh King's acquisition enriches Emami's Hair Care portfolio in terms of another brand addition, we believe that given the high debt resulting in increased interest expense and decrease in other income, the acquisition will be EPS dilutive by 4%/0.5% in FY16E/17E (refer exhibit below for...