FMCG player, Emami’s share price responded positively to the company’s Q4 numbers despite the lackluster performance. Key positives for the quarter included Emami’s growth in modern trade, e-commerce segment, and male grooming range, while OPM expanded. However, excluding acquisitions, domestic business volume growth was negative in Q4. Also, healthcare pain management and Navratna range registered a decline in revenue in the quarter.
On Friday, Emami’s stock price closed at ₹401.45 apiece up 4.3% on BSE.
In Q4FY23, Emami posted a 60% YoY drop in consolidated net profit to ₹142 crore due to reduced demand. However, income from operations increased by 9% to ₹836 crore in the quarter.
Additionally, in Q4 of FY23, the company saw domestic sales grow by 5%, while international sales rose by 19% despite high inflation, currency depreciation and geopolitical challenges in several key markets.
Emami said the FMCG industry witnessed a mixed demand environment in Q4FY23, as discretionary categories such as personal care remained unchanged due to the reduction in non-essential spending by rural consumers.
Overall, Emami posted a soft performance in the March 2023 quarter.
What should investors do with Emami shares post-Q4 results?
Sharekhan said in his report: “Emami delivered a muted performance in FY2023 with revenue growth in high single digits and contraction in OPM. For FY2024, the domestic business is expected to grow by 8-10%, mainly driven by strong growth on the new sector. businesses acquired, and OPM is expected to be higher than 27%.”
The brokerage note added, Emami has a strong brand portfolio and its continued focus on product launches, distribution expansion, expansion of emerging channels, strong pipeline of D2C brands, growth of international business, and enhanced penetration will help to enhance its growth. prospects in the medium term. OPM is expected to improve in the coming years as raw material prices stabilize.
On the stock price, Sharekhan notes, “The stock has corrected 11% over the past six months and is currently trading at 20.4x and 17.2x FY2024E and FY2025E earnings, respectively. We maintain our Buy recommendation with a revised price target ( PT) of Rs. 460.”
On the other hand, Amnish Aggarwal – Head of Research, Prabhudas Lilladher has given ‘Accumulate’ rating on Emami shares.
Aggarwal said, “We will increase our FY24/FY25 EPS estimates by 3.4%/6.5% factoring in easing raw material inflation, picking up rural demand across categories (except summer portfolio) and increased ad spend on the back of the core brands. 4Q saw a volume growth of 2% on the fruit and the summer portfolio was impacted by unseasonal rains across India.”
He also highlighted key categories like Pain Management and Healthcare which are expected to grow (after 2 years of underlying COVID numbers) in FY24. Input cost pressures have eased, promising demand in the coming quarters.
Further, Aggarwal added, “Emami is investing for the future with 1) new launch in existing categories like Boroplus, Zandu and new product launches in D2C 2) investment in D2C and Modern Trade businesses 3) expansion on direct domestic coverage to 60k ( from 52k) by FY24 and 4) increasing spending to gain market share We estimate 19.4% PAT CAGR over FY23-25. We value the stock at 25x Mar25 EPS and assign a value of Rs517/share (earlier Rs485). Accumulate.”
But ICICI Securities said in a note, “We believe Emami has some initiatives in place to drive growth, but results are yet to be seen. Weak macros have added to the pain. We like the plans – (1) focus on expansion of distribution. including rural markets, chemist outlets and (2) push for new addresses and new channels (including D2C offers) – to drive premium. Gains in MT and e-commerce are good. ADD .TP: Rs420.”
Disclaimer: The above opinions and recommendations are the opinions and recommendations of individual analysts or brokerage firms, and not the views of Mint. We encourage investors to check with certified experts before making any investment decision.
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Updated: 27 May 2023, 10:47 PM IST
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