Buy Emami; target of Rs 671: Cholamandalam Securities

Cholamandalam Securities' research report on Emami

Reported consolidated revenue grew by 16.2% YoY to INR 6.14bn (CSEC Est: INR 6.34bn); on like to like basis (including GST/VAT & excise duty), revenue grew 19% YoY (volume growth: +16% YoY). Domestic business grew 21% YoY aided by low base (-16% YoY in 1QFY18) and recovery in the wholesale channel (~40% of domestic sales). Modern trade grew 43% YoY (~8% of domestic revenue) and CSD grew 28% YoY (-20% YoY in 1QFY18). Despite low base, International business posted a modest growth of 7% YoY (-19% YoY in 1QFY18) due to weakness in CIS region, International business excluding CIS grew 21% YoY.

Outlook

At CMP, Emami is trading at a P/E multiple of 60.9XFY19E and 48.4XFY20E. In terms of EV/Sales, Emami is quoting at 8.9XFY19E and 7.8XFY20E. We have valued Emami at EV/Sales of 9X FY20E with a BUY rating and a target price of INR 671.