Company focusing on rural markets as recovery in this segment is critical. Seasonality in portfolio likely to remain.
Packaged consumer goods maker Emami Limited, the manufacturer of products such as BoroPlus, Zandu balm, Navratna and Kesh King, announced a management rejig last week as founders of the company handed over the reins to the next generation. Mohan Goenka and Harsha V. Agarwal, scions of the 48-year-old business, will lead the company from April as its vice chairman-cum-whole time director and vice chairman-cum-managing director, respectively.
Volume-led recovery and lower raw material cost are aiding Emami's margins
NH Bhansali, Chief Executive Officer, Emami Group expects 16-17 percent revenue growth in the current fiscal. He is also confident that Emami will be able to sustain its operating margins at the current levels of 30 percent.
Amortisation of acquired trademarks/brands cost increased to Rs 60.92 crore (from Rs 13.65 crore year-on-year), including Rs 59.82 crore provided on intangible assets of Kesh King business acquired on June 12, 2015 at Rs 1,684 crore against Rs 12.57 crore in year-ago period, the FMCG company said in its filing.
In an interview CNBC-TV18, Sumit Malhotra, MD of Baja Corp said that the first quarter was disappointing in terms of volume growth as poor rural growth led to less consumption.
During the period, EBITDA margin is seen at 27.3 percent versus 25.5 percent while EBITDA may increase 26 percent at Rs 178 crore against Rs 141 crore year-on-year.
"We are expecting to commission the Guwahati plant this October. This will be a mega plant which will manufacture personal care products," Emami CEO Naresh Bhansali said.
FMCG firm Emami Ltd today reported 26.98 percent decline in consolidated net profit at Rs 134.12 crore for the third quarter ended December 31, on account of amortization of Kesh King intangibles.
Kesh King is also endorsed by celebrities like Juhi Chawla nationally except the southern markets for which Shruti Haasan has been roped in very recently.
The brokerage has also cut FY16/FY17F/FY18 revenue estimates by 3.9 percent/4.3 percent/4.4 percent due to lower Kesh King sales this year, a delayed winter season and a slower-than-expected pick-up in consumption.
The company had posted net profit of Rs 91.52 crore during the same period of previous fiscal, Emami said in a BSE filing.
Profit is likely to be hit by higher interest and amortisation cost owing to Kesh King, but that is likely to add Rs 50-75 crore to topline, driving year-on-year growth.
Sumit Malhotra, MD of Bajaj Corp, says, Q2 volume growth is largely driven by Bajaj Almond Drops and Brahmi Amla. He says the company has over 60 percent market share in light hair oil segment.
A slowdown in rural spending will have some impact but increased government spending will help, says Emami director Harsha Agarwal.
It will be quite interesting to know why HUL wants to re-enter hair oil market as it exited the business after selling Nihar Brand to Marico in 2006. The maker of Dove shampoos and Lux toilet soaps already has ayurvedic range of health care and personal care under its brand Ayush.
Shares of Emami bounced back on Wednesday, up 4.8 percent intraday as Credit Suisse has raised its target price on the stock to Rs 1,220 apiece (from 1,080/share) post Kesh King acquisition. In previous session, the stock had fallen 6 percent amid weak market condition.
NH Bhansali, chief executive officer, Emami says the company has new strategies to grow Kesh King‘s business and will look to expand the same in new regions.
Shares of Emami fell nearly 8 percent intraday Tuesday. The FMCG major entered into an agreement with Sanjeev Juneja to acquire his hair & scalp care business under the Kesh King and allied brands.