Prabhudas Lilladher's research report on Emami
We are increasing FY21/22/23 EPS estimates by 2.3/4.1/4.3% following strong growth momentum in healthcare, hair care and gains from strong winter and higher rural salience for its products. Emami will build on its momentum led by 1) 3-4% increase in penetration 2) Increased investment to strengthen rural distribution 3) 25-30% growth expected in health care 4) positive momentum post re-launch of Fair and Handsome and 5) Hair oils led by kesh king posting strong growth on a high base. Emami is facing input cost headwinds in LLP, Mentha and Packaging, although it aims to maintain ~30% margins backed by cost efficiencies and strong growth momentum.
Outlook
We believe success of new brands hold key to future growth and Emami expects to invest in 5-6 new launches which have surpassed initial targets. Highest rural salience at 55% of sales puts Emami in a sweetspot in the current scenario. Timely onset of summer season sales and gradual reduction in Promoter pledge (36%) can further re-rate the stock. We value the stock at 29x FY23 EPS and arrive at a target price of Rs568 (Rs526 based on 28xFY23 EPS earlier). Retain Buy.
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