4 EMAMILTD share price target reports by brokerages below. See what is analyst's view on EMAMILTD share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
After coming in at an admirable ~20%/ 34%/35% in the first five years of the decade, sales/EBITDA/PAT CAGR has slowed down significantly to ~5%/ 7%/3% for the five years ending FY20. Sales growth in many of HMN’s key categories has been impacted in recent years due to rural slowdown (52% rural dependency), liquidity crunch (~40% wholesale contribution) and category growth issue (majorly problem-solving portfolio and not everyday use products with the former getting affected more in a weak demand situation). However, none of these are structural issues and thus HMN will be a key beneficiary when the tide turns. Valuations of 20x trailing EPS and 16.4x FY22 EPS (~20x after taking into account amortization) also offer some comfort. Moreover, valuations are at ~60% discount to peer average and ~50%/40% discount to its own 5/10-year average. Maintain Buy with a TP of INR310 (targeting 20x FY22E adj. EPS).
There is marginal upward revision to our FY21/FY22E EPS. Our concerns relating to the domestic business remains, with rural growth outlook and traditional channel liquidity concerns still uncertain in the near term. We will wait for signs of consistent improvement in key categories before becoming more constructive on the stock. Thus, maintain our Accumulate rating on the stock with a revised target price of Rs. 330 (based on P/E multiple of ~21x on September’21 EPS), implying an upside of 10% from CMP.
Changes to the model have resulted in 3-4% reduction in our EPS forecast. The outlook on recovery is unclear, and management is facing significant headwinds to grow its Male Grooming category. However, the sharp reduction of pledge earlier this week after the sale of the group cement business and inexpensive valuations of 21.2x/18.6x FY21/22E EPS lead us to maintain Buy with a TP of INR355 (18% upside).
We remain cautious on Emami on 1) low growth in key categories like premium hair oil, male skin creams and Pancharishtha 2) slowdown in rural demand given high dependence (54-55%) and 3) limited success in categories beyond traditional strongholds. Benign input costs are likely to support margins in medium term and will enable 12.3% Adj. PAT CAGR over FY19-22. and value the stock at 23xFY22 EPS to arrive at a price target of Rs361 (Rs359 at 25xSept21EPS earlier). Retain Accumulate. Reduction in promoter pledge and revival in growth holds key to re-rating of the stock.
Valuation: We have broadly maintained our earnings estimates for FY2020 and FY2021, respectively as the performance of Q2FY2020 was in-line with our expectation. The management expects H2FY2020 to be better against the backdrop of an expected good winter season. Also, rural sales growth (55% of Emami’s domestic business) was in-line with urban sales growth, which is a positive sign of improving demand in the coming quarters. Operationally, performance is expected to improve going ahead. However, the promoter’s pledge of ~63% of its holding remains a key overhang on the stock. Hence, we maintain our Hold recommendation with an unchanged price target (PT) of Rs. 352.
We remain cautious on Emami on 1) low growth in key categories like premium hair oil, male skin creams and Pancharishtha 2) slowdown in rural demand given high dependence (54-55%) and 3) limited success in categories beyond traditional strongholds. Mentha prices have corrected by 28% since Mar’19 which will support margins. We estimate 13.9% Adj. PAT CAGR over FY19-22 and value the stock at 25x Sept21 EPS to arrive at a price target of Rs 373. Retain Accumulate. Overhang of promoter pledge remains a key issue, any resolution of same can re-rate the stock.
We estimate PAT to grow at 27.2% FY19-21E CAGR and EBITDA margin to improve to 28.8% by FY21E. However, given limited upside, we assign HOLD rating to the stock with a target price of Rs. 312 based on 28x FY21E adj. EPS.
We have reduced earnings estimates by 2.4% and 2.2% respectively for FY2020 and FY2021, to factor in the lower growth in the domestic business. Ayurveda oil brand Kesh King has seen a strong recovery in performance post strategic initiatives undertaken by the company. However, growth in healthcare and male grooming categories is yet to revive. Also, seasonality remains one of the key decisive factors for Emami’s product portfolio to perform well. Hence, we expect that a revival will take some time and maintain our Hold recommendation with a revised price target (PT) of Rs. 352, valuing the stock at 22x its FY2021E earnings.
Weak performance persists Our fundamental concerns relating to the modest innovation pipeline and growth of key brands still remain. We anticipate revival in performance post a good monsoon and expect that the company would benefit from government’s impetus on rural income growth. We have retained Accumulate rating on the stock due to concerns regarding category growth and the ongoing rural slowdown with a target P/E multiple of 25x (from 28.5X earlier), giving us a TP of Rs350, up 12% from CMP.
Challenges in business to stay for a while We remain positive on Emami led by 1) sustained market share gains in core categories despite challenging environment, 2) increased traction in Kesh king post its relaunch and decrease in competitive intensity by Patanjali and 3) improved performance in 7 oils in one hair oil. Growth in International business was mainly led by acquisition of Crème 21. We believe margins to expand from the current level as Mentha prices have corrected by 22.3% sinceMar’19. Seasonality remain a key challenge in the stock. We estimate 10.3%Adj. PAT CAGR over FY19-21 and value the stock at 28x June21 EPS to arrive at a price target of Rs 386. Retain Accumulate.
Although Emami Group is indicating divestment of non- core businesses to reduce group debt, still visibility remains poor given high debts in their balance sheet. Although risk reward seems favourable at 22.1xFY21 EPS, returns are likely to be back ended given issues on promoter debt and poor growth numbers from past 3 years. We estimate 11% PAT CAGR over FY19- 21 and value the stock at 28xFY21 EPS arriving at a target price of Rs382. (Earlier Rs475 at 31xFY21 EPS). Retain Accumulate.
The key positive takeaway from the management conference-call was that the company is trying to rework its strategy across brands and could possibly see an improvement in the second-half of FY20. On the negative side, the performance of the company continues to be volatile because of seasonality and we do not expect the earnings growth of the company to continue trailing its peers. We have retained Accumulate rating on the stock with a target price of Rs410 based on a P/E multiple of 28.5x, implying an upside of 13% from the current market price or CMP.
Emami’s stock was under pressure due to consistent weak operating performance and rising promoter share pledge. Although recovery in operating performance is delayed, the pressure on the stock w.r.t. share pledging is now behind after promoter divested 10% stake for Rs 16bn @Rs 355/share. With this, the promoter share pledge will decline from 48% as of now. This step will provide the promoter a breathing space to monetize its other group company assets (Cement, Power or AMRI Hospital) and to recover Emami Ltd’s performance. Hence, we believe promoter pledge can further decline. As a result, we believe promoter stake sale is a positive and will reduce the risk associated with the stock. On the business side, the company has also enhanced the quality of its distribution (direct reach up 1.5x post demonet) but is awaiting a favorable season to benefit from the same. We maintain our BUY rating and expect a re-rating in the stock.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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