Hold Emami; target of Rs 270: Emkay Global Financial

Emkay Global Financial's report on Emami

Emami’s Q1FY21 performance came in above expectations, with revenue and EBITDA at Rs4.8bn and Rs1.2bn, respectively. Decline in domestic business stood at 26%, international portfolio at 18% and CSD at 38%. The domestic business was impacted by a 41%/33%/70% fall in Navratna/KeshKing/Male Grooming. Healthcare/Pain management/BoroPlus grew 23%/15%/28%. Secondary sales fell 15%. June/July saw a strong recovery at over 8%, pointing to a better Q2. Input prices remained soft, which should continue to drive the gross margin expansion. Management hopes to maintain profitability as high GM and cost savings (~Rs500mn in FY21) may offset the decline in sales.

Outlook

Valuations at 21x FY22E are cheaper than peers and have de-rated on account of growth challenges over the last five years. Recovery in June/July is positive but we await better visibility on growth initiatives. We maintain Hold with a revised TP of Rs270 (from Rs240).

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