Motilal Oswal is bullish on Emami recommended buy rating on the stock with a target price of Rs 310 in its research report dated August 07, 2020.
Motilal Oswal 's research report on Emami
Emami's (HMN) sales and gross profits were marginally (~5%) higher than our expectations. However, EBITDA beat was led by 53% YoY decline in ad-spends, the highest amongst FMCG peers so far. While sales decline of 25% in 1QFY21 was admittedly sharp, the outlook seems to be improving with sales growth in Jun'20, followed by reportedly double-digit YoY growth in Jul'20. While it is too early to call out recovery given the several years of underperformance, we maintain Buy as (a) valuations are inexpensive at 19.6x FY22E EPS, (b) sale of the cement business is leading to reduction in pledge, and (c) HMN has a tailwind in FY21 with half of its domestic sales coming from rural (same as other rural peers), where the prospects appear to be brighter than urban growth.
Outlook
While it is too early to call out recovery given several years of underperformance, we maintain Buy as (a) valuations are inexpensive at 19.6x FY22E EPS, (b) sale of the cement business has led to reduction in pledge, and (c) just like other rural peers, HMN has a tailwind in FY21 with half of its domestic sales coming from rural where prospects appear to be brighter than urban growth.
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