Promoters’ pledging has reduced to 47% from 95% in Q1FY2021; Group aims to reduce pledging by selling non-core assets (hospitals and real-estate property) in another 8-10 months. Sustained demand for health and immunity products and recovery in rural demand will help Q2 performance be sequentially better with a rise in margins due to benign raw material prices. Revenues likely to grow by 0-2%: OPM to expand by 268 bps in Q2FY2021. Strong traction in new products, focus on enhancing distribution reach and recovery in rural demand are key growth drivers in the near to medium term.
OutlookWe re-iterate our Buy rating on Emami with a PT of Rs. 440; receding risk of promoter pledging and better growth prospects make Emami a better pick in mid-cap FMCG space with discounted valuations of 21x FY22E earnings.
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