Dolat Capital recommended accumulate rating on Emami with a target price of Rs 241 in its research report dated June 29, 2020.
Dolat Capital's research report on Emami
Emami’s Q4FY20 results were below our estimate. Domestic business declined 19%, while IB posted 4% revenue de-growth. Weak rural demand coupled with liquidity concerns prior to lockdown; and supply chain disruption from mid-March due to Covid-19 resulted in sales decline. Though GT was under pressure, MT grew by 26% and E-com jumped 167% during the quarter. MT/e-com contribution increased from 9/0.5% last year to 12/1%+ in FY20. The company plans to double E-com contribution in FY21E with distinct products and SKU’s. Management expects to sustain IB momentum with double digit growth in FY21E led by new launches. We believe that competition in Emami’s key product categories, such as skin, health care, and hair oil, will continue to remain high. Although, we remain optimistic about the favorable base, we believe that the business environment for Emami will remain challenging, given intense competition.
Although RM costs are expected to remain stable, liquidity crunch at the wholesale level may hamper performance. As most of the negatives are factored in the stock price, we upgrade the rating to Accumulate with TP of Rs 241 (17x FY22E CEPS).
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