Buy Emami; target of Rs 540 : Motilal Oswal

Motilal Oswal is bullish on Emami recommended buy rating on the stock with a target price of Rs 540 in its research report dated March 29, 2022.

Broker Research

March 30, 2022 / 14:42 IST

26 Aug, 2025 12:21

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Motilal Oswal's research report on Emami

HMN recently announced the acquisition of the Dermicool brand from Reckitt Benckiser India for INR4.32b. We estimate ~INR1.4b in FY23 sales for Dermicool, with an EBITDA of INR475m, translating in an acquisition cost of ~3x sales and ~9x EBITDA. COVID-led restrictions affected summer season sales in the last two years, impacting overall category growth. Hence, its CY21 sales of INR1.13b are not representative. We believe CY19 sales of INR1.33b are a better representation. The deal will be funded through internal accruals. Dermicool is part of the INR7.6b ‘Prickly Heat and Cool Talc’ category, which registered a 12% CAGR over CY16-19 v/s ~5% CAGR for the broader Talc market (valued at INR25b). The acquisition of Dermicool, the third largest player in the ‘Prickly Heat and Cool Talc’ category, gives HMN market leadership in this category and a combined market share of ~45%, surpassing Nycil (Zydus Wellness) which has ~34% market share. HMN’s Navratna Cool Talc is the second largest player in the market.

Outlook

The stock is currently trading at inexpensive valuations. We have a Buy rating. While sales growth over FY20-22E has been better (9.3% CAGR) than the extremely low 3.7% CAGR delivered in the preceding five years, HMN, with FY22E sales of INR32b, is much smaller than domestic peers like DABUR, MRCO, GCPL, and BRIT. The re-rating of its P/E multiple will depend on sales growth improving to 15-20%.

More Info

At 14:35 hrs Emami was quoting at Rs 445.85, up Rs 14.10, or 3.27 percent.

It has touched an intraday high of Rs 448.60 and an intraday low of Rs 434.45.

It was trading with volumes of 33,169 shares, compared to its thirty day average of 31,869 shares, an increase of 4.08 percent.