Buy Emmbi Industries; target of Rs 176: KR Choksey

As against Management expectations of 15%, our stance stands conservative and we expect EIL to register a net sales growth of 10.35% at INR 2293 Mn for FY17. Post demonetization (month- November–December), our initial interactions with Management reinforced our cautious stance on the domestic business front (and we were proved right all again). Therefore, while our sales growth estimates continue to be conservative, we stand confident of the improvement in liquidity situation in rural areas as currency stabilization comes to effect and this in turn should revive demand for the domestic products sooner than later.

OutlookBanking on the aforesaid factors, EIL is favorably positioned to deliver superior performance, thereby achieving premium over its peers and hence poised to get re-rated. We recommend a “BUY” rating on the stock and assign a PE of “12” on FY19E of INR “14.6” to arrive at a target price “176”. At CMP of INR 144, EIL is trading at19.1x FY17 EPS of INR 7.6, 14.1x on FY18 EPS of INR 10.2 and 9.7x on FY19 EPS of INR 14.8.