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Last Updated : Jun 30, 2020 11:21 AM IST | Source: Moneycontrol.com

Emami shares surge 11%; Motilal Oswal maintains buy despite weak Q4 show

Even though the company reported a weak set of quarterly numbers, brokerage firm Motilal Oswal Financial Services has maintained a 'buy' call on the stock with a target price of Rs 245.

 
 
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After two consecutive days of losses, shares of Emami surged over 11 percent in the morning trade on BSE on June 30.

The FMCG company on June 26 reported a 58 percent year-on-year decline in consolidated profit at Rs 23 crore for the quarter ended March 2020, largely impacted by the lockdown.

Revenue from operations declined 16.8 percent to Rs 532.68 crore compared to the same period last year.

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Even though the company reported a weak set of quarterly numbers, brokerage firm Motilal Oswal Financial Services has maintained a 'buy' call on the stock with a target price of Rs 245.

"Q4FY20 results were disappointing and concluded another underwhelming year for the company. Changes to our model have resulted in an 11.6 percent/8.9 percent cut in FY21/FY22 EPS. Sales/EBITDA/Adjusted PAT has witnessed a nearly 5 percent CAGR or lower for five years now, which is particularly disappointing given Emami’s smaller size against peers," said Motilal Oswal.

The brokerage said it has maintained 'buy' on the stock on account of an improving rural outlook, the announcement on the call that the group cement business sale would be concluded within the next fortnight, thereby sharply removing the pledge and inexpensive valuations of 16 times FY22 EPS.

Highlighting the management's commentary, Motilal Oswal said the company's sales are now nearly back at pre-COVID-19 levels.

As per the brokerage, the management said Emami has taken cognizance of the new requirements related to fairness products and would come up with a fresh strategy likely involving a name change as well. It has worked on nearly 40 new products in the past 120 days, which would be launched over the next few quarters.

Motilal said the group’s cement transaction is likely to be completed over the next fortnight, bringing down the pledge to 45 percent from 90 percent, with zero pledge targeted by the end of March 2021.

Around 11:05 hours, the scrip was 8.68 percent up at Rs 223.40 on BSE.

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First Published on Jun 30, 2020 11:21 am
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