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    Motilal Oswal has a buy call on Emami, target price Rs 245

    Synopsis

    Emami has the opportunity to recover after a likely weaker first quarter FY21 vis-a-vis its peers.

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    Motilal Oswal has given a buy rating to Emami with a target price of Rs 245. The share price moved up by 4.72 per cent from its previous close of Rs 205.55. The stock’s last traded price is Rs 215.25.

    The brokerage says Emami has reported another quarter of disappointing earnings growth, along with guidance for a weak first quarter of FY21. However, the company also has the highest dependence on rural sales to domestic sales (around half) among peers. With the rural outlook likely to be positive over the next 12–18 months relative to urban, Emami has the opportunity to recover after a likely weaker first quarter FY21 vis-a-vis its peers. However, its high wholesale dependence and the relative discretionary nature of its portfolio may hamper sharp recovery. The impending conclusion of the group cement business transaction within the next fortnight is a positive.

    Investment Rationale

    According to the brokerage, the fourth quarter FY20 results were disappointing and concluded another underwhelming year for Emami. Changes to the brokerage model have resulted in an 11.6 per cent/8.9 per cent cut in FY21/FY22 EPS. sales / EBITDA / Adjusted PAT has witnessed a ~5 per cent CAGR or lower for five years now, which is particularly disappointing given Emami’s smaller size versus its peers.

    The brokerage maintains a buy rating, on account of an improving rural outlook (Emami has the highest domestic sales proportion among peers at around 50 per cent) and the announcement that the group cement business sale would be concluded within the next fortnight, thereby sharply removing the pledge, and also inexpensive valuations of 16 times FY22 EPS.

    Emami-MotilalOSwalJune302020
    Source: Motilal Oswal

    Financials

    For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 532.68 crore, down -34.45 per cent from last quarter sales of Rs 812.64 crore and down -16.72 per cent from last year's same quarter sales of Rs 639.64 crore. The company reported net profit after tax of Rs 25.32 crore in the latest quarter.

    Promoter/FII Holdings

    Promoters held 52.74 per cent stake in the company as of March 31, 2020 while FIIs held 7 per cent, DIIs 31.46 per cent and public and others 8.8 per cent.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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