Buy Emami; target of Rs 950: Emkay

Emkay's research report on Emami

We remain positive on Emami, given the focus on execution to drive growth (with a professional team in place), the rebound in rural growth, increased thrust on urban (26% sales from Modern trade and Ecommerce), and hopes of a better season ahead. We maintain BUY with a Sep-25E TP of Rs950, on 44x P/E. Q2 operating performance (EBITDA grew 7% YoY) stood in line, managed by lower A&P spending (down by 150bps YoY to 16.4%), whereas the earnings beat (+16% YoY) was driven by better-than-expected other income (+94% YoY, aided by higher yield and liquidity) and lower tax rate. After a muted Q2, we expect growth recovery in 2H, helped by better seasonality. Management maintains its guidance of high-single digit revenue and double digit earnings for FY25. We see 10% topline and 12% earnings growth for 2HFY25.

Outlook

Relatively better financial show ahead should aid valuations; maintain BUY Emami remains a play on rural with additional focus on urban; the company is transforming itself for double-digit growth going forward. But seasonality remains a key risk ahead. Muted Q2 and weak sector outlook has a bearing on valuations, but we see
rerating on relatively better earnings show ahead. Maintain BUY with TP of Rs950.