Emami has reported a net profit of Rs 1.04 crore for the June quarter against Rs 56.6 crore posted during the same period last year.
The consolidated revenue was reported at Rs 541.1 crore, down over 16 percent than the previous year’s Rs 645.4 crore in the same period last year.
The global market research firm Nomura and Bank of America Merrill Lynch (BoAML) have maintained buy rating on the stock though the company's Q1 earnings were below estimates but the long term fundamentals of the company are still intact.
Broking House: Nomura | Rating: Buy | Target Rs 1289
The company's 1QFY18 results were significantly below the expectations and the key reason for the all-round miss can be GST related destocking.
The firm has cut its earnings estimates by 7.3 percent and 7.2 percent for FY18F and FY19F, respectively, to account for the miss.
On the other hand, Nomura believes that there are enough levers of growth for the company to mount a strong comeback in the coming quarters. The rural demand revival, strong monsoons, festive demand and a low base will lead earnings in 2HFY18.
The risk-reward remains favourable and hence maintain buy rating with a slightly higher target of Rs 1289 on a roll forward and an EPS estimate increase, implying 20 percent potential upside.
Broking House: BoAML | Rating: Buy | Target Rs 1420
According to BoAML the worst is likely behind, and the Emami’s business will revert to normalcy soon.
The firm has cut its estimates to bake in the 1Q results washout. The stock’s one-year forward estimated P/E at 35x is not cheap, but a healthy EPS CAGR should help sustain its premium valuation.
The rest of FY18 could see strong growth, led by re-stocking, favorable base and a pick-up in rural demand due to normal monsoons.
Innovation, increase in direct reach, premiumisation and industry consolidation due to GST will likely drive growth beyond FY18. Also, reduction in interest costs will also help profit growth.
At 11:15 hrs Emami was quoting at Rs 1,085, down Rs 21.10, or 1.91 percent on the BSE.
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