Buy Emami; target of Rs 1476: Chola Securities

Chola Securities' research report on Emami

Emami is a FMCG company with niche focus on relatively under penetrated segments such as antiseptic cream, fairness cream, talcum powder, cooling oil, pain balm and pain reliever. Emami’s power brands such as Navratna Oil, Boroplus Cream, Zandu & MenthoPlus Balm, Fair & Handsome, Boroplus Powder, Navratna Cool Talc, Fast Relief, SonaChandi & Zandu accounts for 75% of company’s sales. Emami sales and cash PAT have grown at a CAGR of 11.4% and 11.3% respectively (FY12- 17). Geographical breakup of sales: North (29%), West (27%), South (23%) and East (21%). Export contributes 10.4% of total revenue. Company has 3,000+ distributors, 740,000+ retail outlets and brand reach of 4mn outlets. Most of the domestic sales are on cash basis.

Outlook

We introduce FY20E estimates Revenue/EPS 15% / 21% YoY. At CMP, Emami is trading at a P/E multiple of 64XFY19E and 52.9XFY20E. In terms of EV/Sales, Emami is quoting at 8.7XFY19E and 7.6XFY20E. We have valued Emami at EV/Sales of 9.8X FY20E with a BUY rating and a target price of INR 1,476.