Marico, Emami, Praj Ind, and others in focus post Q3: Buy, Hold, or Sell?

1. Marico:

Marico posted a 5% growth in net profit to ₹333 crore in Q3FY23, compared to a profit of ₹317 in the year-ago period. Revenue from operations climbed 2.6% to ₹2,470 crore in Q3FY23 as against ₹2,407 crore in Q3 of the previous fiscal. EBITDA also climbed to ₹456 crore versus ₹431 crore in Q3FY22.

Amnish Aggarwal – Head of Research – Prabhudas Lilladher said, “The company saw pick up in volumes given price stability in Coconut Oil & Edible Oils. Domestic volumes at 4% grew ahead of the industry helped by price corrections in key packs. International business report high single-digit constant currency growth at 8%. We believe the company should continue to see favourable RM basket in the near term.”

He added, “We have a HOLD rating on the stock with a TP of Rs531. The stock currently trades at 42.0x/36.4x FY24/FY25 EPS.”

On BSE, Marico shares closed at ₹493.80 apiece down by 1.16% on Friday.

2. Emami:

During the third quarter, Emami posted a 6.12% growth in net profit to ₹232.97 crore versus ₹219.52 crore in Q3 of the previous fiscal. Revenue picked up marginally by 1.2% to ₹982.72 crore as against ₹971.06 crore in Q3FY22.

Emami said, during the quarter, demand patterns for the FMCG sector remained sluggish, with rural markets experiencing continued demand pressure. Further, a warmer winter season across the country impacted sales even more.

The domestic business grew by 1% during the quarter translating into a 3-year CAGR of 6%, while the international business grew by 7% during the quarter translating into a 3-year CAGR of 13%.

On Emami, Aggarwal said, “though Emami delivered top-line growth of 1.2% vs our de-growth expectations of 4.5%, GM/EBITDA margins miss our estimates by 144bps/106bps. However, PAT was in-line with our estimates due to elimination of amortisation for the Kesh King acquisition. GM contracted on account of adverse RM basket while EBITDA margins contracted due to rise in employee and other expenses.”

On valuation, he said, “We have an ACCUMULATE rating on the stock with a target price of ₹521, ” adding, “Stock currently trades at 22.4x/20.3x FY24/FY25 EPS.”

Emami’s share price ended at ₹419.30 apiece down by 0.76% on BSE.

3. Kansai Nerolac:

One of the leading paint companies in India, Kansai Nerolac Paints posted a standalone net profit of ₹112.3 crore in Q3FY23 down by 15.2% YoY, while it earned net revenue of ₹1,717.1 crore up by 1.4% YoY. EBITDA was at ₹188.5 crore down by 10.2% YoY.

Anuj Jain, Managing Director, of Kansai Nerolac Paints Ltd said, “The company was able to conclude the price increases with all its key OEMs during the quarter which will help partly offset the high inflation witnessed over the last two years.” He added, “looking forward, it is expected that demand would remain healthy in the short to medium term.”

According to Aggarwal, KNPL has reported numbers below our estimates on all fronts due miss in volumes. Demand trends are expected to strengthen in 4Q.

“We expect margins to further recover in 4Q23 due to gradual cool down in RM basket. We have an Accumulate rating on the stock with a TP of Rs563,” added Aggarwal,” Stock trades at 29.8x/23.1x FY24/FY25 EPS.”

On BSE, Kansai’s share price closed at ₹419 apiece up by 1.13% on Friday.

4. Praj Industries:

In Q3FY23, Praj Industries garnered 68.17% growth in consolidated net profit to ₹62.31 crore compared to ₹37.05 crore in December 2021 quarter. Consolidated revenue climbed 55.4% to ₹909.97 crore in Q3FY23 versus ₹585.64 crore in Q3FY22.

Amit Anwani – Research Analyst, Prabhudas Lilladher said, “Praj reported strong revenue growth of 55.4% YoY to Rs9.1bn (vs PL estimate of ~Rs9.2bn and consensus estimates of Rs8.9bn), owing to strong execution of opening order book (Rs33.6bn as on Q2FY23). EBITDA grew 82.3% YoY to Rs860mn (PL estimate of ~Rs721mn and consensus estimate of Rs798mn), with EBITDA margin expanding by 139bps YoY to 9.5%, on account of better absorption of fixed overheads and softening commodity prices. PAT grew 68.2% YoY to Rs623mn (vs PL estimate of Rs527mn and consensus estimate of Rs608mn), mainly due to strong operating performance.”

On valuation, Anwani said, “the stock is currently trading at PE of 30.1x/20.8x/19.9 FY23/24/25E. We have a Buy rating on stock with TP of Rs520, we may revise our estimates post-conference call.”

On BSE, Praj’s stock price closed at ₹351.60 apiece down by 0.69% on Friday.

5. JK Tyre:

In the third quarter of FY23, JK Tyre registered a 24% growth in consolidated net profit to ₹67 crore compared to ₹54 crore in the same period a year ago. Total income soared to ₹3,623 crore in Q3FY23 as against ₹3,084 crore in Q3FY22.

Also, the company’s board has approved fundraising to the tune of ₹240 crore via the issuance of securities.

Mitul Shah, Head of Research at Reliance Securities said, “JK Tyre & Industries (JKI IN) delivered a healthy performance in 3QFY23 with EBITDA margin coming in at 9.4%, vs. our estimate of 8.6%, while Adj PAT was largely in line with our estimates. Lower margin performance in Mexico impacted profitability.”

Shah added, “We expect market share gain by JK tyre and subsidiary Cavandish to support volumes for the company. Moreover, volume pick-up in 2W/3W tyres with new capacity and recovery in M&HCV sales would improve its profitability. In view of the expected revival in replacement demand and ongoing traction in OEM, at present, we have a BUY rating on JKI.”

On BSE, JK Tyre’s share price closed at ₹167.60 apiece up by 1.36%.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.