Buy Emami; target of Rs 539: Ventura

Ventura's research report on Emami

"We expect the company's power brands (Navratna, Boroplus, Zandu & Mentho Plus and Fair & Handsome) to drive the top line growth on the back of its eminent presence in niche under-penetrated product categories, expansion of its distribution reach and strong focus on rural markets. Despite the revenue concentration among the top four brands, no single brand accounts for more than 20-22 percent of revenues and hence provides stability to revenues. Moreover, regular flow of 2-3 new product launches / extensions every year should help keep the company's brand and product portfolio reinvigorated besides building on the brand equity further."

"We initiate coverage on Emami Ltd (Emami) as a BUY with a Price Objective of Rs 539 representing an upside potential of ~14 percent over the next 15 months. At the CMP of Rs 475, the stock is trading at 29.1x and 24.7x its FY14E and FY15E earnings respectively. During past three years, Emami has broadly traded in 25-29x one-year forward PE band. We believe that the stock has the potential to trade in the upper range of this band on account of strong positioning in under-penetrated categories, thrust on rural market penetration, aggressive ad spends and rapid expansion in distribution network. Moreover, strong growth in International business should give push overall profitability and revenue growth. Accordingly, we have assigned a target multiple of 28x to its FY15E earnings translating into a target price of Rs 539," says Ventura Securities research.

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