Prabhudas Lilladher recommended accumulate rating on Emami with a target price of Rs 373 in its research report dated November 06, 2019.
Prabhudas Lilladher's research report on Emami
We cut our EPS estimates of FY21 by 1.8% led by 1) muted demand scenario in India business and 2) Structural issues in Pancharishta and male grooming segment. 2Q performance was affected due to 1) only 1% domestic volume growth and 2) decline of 11% in Kesh King on low demand in hair oil segment. We remain cautious on Emami on 1) low growth in key categories like premium hair oil, male skin creams and Pancharishtha 2) slowdown in rural demand given high dependence (54-55%) and 3) limited success in categories beyond traditional strongholds. Mentha prices have corrected by 28% since Mar'19 which will support margins.
We estimate 13.9% Adj. PAT CAGR over FY19-22 and value the stock at 25x Sept21 EPS to arrive at a price target of Rs 373. Retain Accumulate. Overhang of promoter pledge remains a key issue, any resolution of same can re-rate the stock.
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