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Buy Emami; target of Rs 1244: Edelweiss

May 16
23:25 2018

Edelweiss’ research report on Emami

Emami’s Q4FY18 revenue growth of 6.8% YoY came in line, while 2.7% and 25.6% YoY EBITDA and PAT decline, respectively, was below estimate. The PAT slip was sharper owing to one-time MAT credit reversal of INR1.4bn. Domestic volumes recovered partially—up 9% YoY on a base of -1.5%. Rebound in volumes was partially aided by 6% YoY value growth in Kesh King (19%/16% value dip in Q3FY18/Q2FY18). International business sprung a positive surprise—jumped 37% YoY—albeit on a soft base. However, factoring slower off take and heightened ad spends, we prune FY19/20E EPS 15.0%/9.4%. We retain 35x target multiple to arrive at revised TP of INR1,244 (earlier INR1,328). Maintain ‘BUY’ factoring in anticipated rural recovery (~50% revenue contribution).

Outlook

We expect Emami’s revenue growth to improve led by rural recovery, likely rural focused-government initiatives and receding reliance on the wholesale channel. We retain 35x target multiple to arrive at revised TP of INR1,244 (earlier INR1,328). With anticipated rural recovery (~50% revenue contribution), we maintain ‘BUY/SP’. At CMP, the stock trades at 41.1x unadjusted FY20E EPS.

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