Prabhudas Lilladher recommended Hold rating on Emami with a target price of Rs 287 in its research report dated June 29, 2020.
Prabhudas Lilladher's research report on Emami
Emami’s has given cautiously optimistic outlook given 1) more reliance on rural India (55% of sales) which is showing resilience 2) benign input costs of Mentha and packaging 3) uptick in pain management and 4) new launches in hygiene and immunity boosters (3.5% -4% of sales). Although April sales severely impacted summers portfolio, there has been pickup in select categories post that. Emami’s renewed thrust on new launches is positive as it can go a long way in reducing the seasonality in business, however recent track record in new launches has not been that encouraging. Benign input costs are likely to support margins in medium term and will enable 11% Adj. PAT CAGR over FY20-22. We value the stock at 20xFY22 EPS to arrive at a price target of Rs 287 (Rs285 earlier).
Outlook
HMN has done Buyback of Rs1.5bn (Allocated Rs2bn) so far and seems committed to reduce promoter pledge to Nil by March 21. Reduction in promoter pledge and revival in growth can re-rate the stock. Retain Hold.
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