Buy Emami; target of Rs 640: Motilal Oswal

Motilal Oswal's research report on Emami

HMN reported 6.3% sales growth in 2QFY24 (broadly in line with our estimates), attributed to factors like poor monsoons, food inflation, and subdued demand in rural markets. Domestic business growth at 4% YoY led by 2% volume growth, which was mainly driven by channels catering to urban markets such as Modern Trade (MT) and E-commerce. The Navratna and Dermi Cool reported robust double-digit growth, while single-digit fall see in BoroPlus/Kesh King/ Male grooming due to low demand from price-sensitive consumers. The management has guided for a 200-250bp expansion in EBITDA margin and high- single digit sales growth in FY24.  We retain our BUY rating on HMN, considering a gradual rural revival (over 50% of sales), inexpensive valuations at 28xFY25E EPS, improving revenue performance, rural distribution expansion, and increased ad spending

Outlook

Valuations are inexpensive at 19.5x FY25 EPS; hence we reiterate our BUY rating with a TP of INR640 (based on 28x FY25 P/E multiple).