Buy Emami; target of Rs 625: Emkay Global Financial

Emkay Global Financial's research report on Emami

Emami’s post-Covid 19 recovery has been contingent on portfolio relevance and Management execution, further accentuated by hiring of skilled professionals. With inflationary pressure ebbing and all eyes on Rural recovery, we see Emami well-fitted to uphold topline growth. Its healthy margin profile will further enable it to explore various growth avenues & initiatives. Emami has balanced its rural dependence (was 55%; 52% now) with higher thrust on urban markets (where modern retail contribution is now ~19%). However, seasonal effects across the core portfolio remain a key risk.

Outlook

We expect high single-digit topline CAGR and margin-driven 14% earnings CAGR over FY23-26E. The promoter is gradually addressing concerns on pledge, which it aims to reduce to low double digits. We initiate coverage on Emami with BUY and TP of Rs 625, on 31x PER.