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Accumulate Emami; target of Rs 386: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Emami with a target price of Rs 386 in its research report dated August 08, 2019.

August 09, 2019 / 04:22 PM IST
 
 
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Prabhudas Lilladher's research report on Emami

We cut our EPS estimates of FY20-21 by 1-1.4% led by 1) muted revenue growth guidance of only 8-9% for the balance year and 4) Structural issues in F&H and Pancharishta which are likely to drag for another six months. 1Q performance remained muted due to 1) only 2% overall volume growth and flat Domestic volumes 2) only 4% sales growth in Navratna despite its peak season and 3) decline in gross margins on higher raw material costs. 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% since Mar'19. Seasonality remain a key challenge in the stock.

Outlook

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.

For all recommendations report, click here

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first published: Aug 9, 2019 04:22 pm

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