Buy Emmbi Industries; target of Rs 281: KR Choksey

KR Choksey's research report on Emmbi Industries

The revenues of Emmbi Industries Ltd grew by 19.88% y-o-y in Q3FY18, majorly on the back of healthy demand scenario in the domestic markets coupled with growth of 7% y-o-y in exports business (exports contribute 45.42% of the total revenues). Further, increase in B2C contribution to 7.6% via strong brand building activities like village meetings and agro-exhibitions has aided higher top-line growth of the company. The company aims to achieve 22% of its total revenues from B2C business by FY20-22 by increasing their distribution networks.

Outlook

Further, we expect ROE/ROCE to increase from 14.6%/15.2% in FY16 to 21.4% /22.0% by FY20E respectively. At CMP of INR 194, EMI is currently trading at 20.6x on FY18 EPS of INR 9.4, 14.1x on FY19 EPS of INR 13.8 and 10.3x on FY20 EPS of INR 18.8. We assign a PE of 15X on FY20 EPS of INR 18.8 to arrive at a target price INR 281 indicating an upside of 45% from current CMP. We maintain our BUY rating on the stock.