Should investors buy Emami shares after Q4 results? Here’s what experts say
FMCG player, Emami’s share price reacted positively to the company’s Q4 numbers despite the performance being patchy. Among the key positives of the quarter were Emami’s growth in modern trade, e-commerce segment, and male grooming range, while OPM expanded. However, the drawbacks were excluding acquisitions, the domestic business volume growth was negative in Q4. Also, healthcare pain management and Navratna range registered a decline in revenue in the quarter.
On Friday, Emami’s stock price closed at ₹401.45 apiece up by 4.3% on BSE.
In Q4FY23, Emami posted a 60% YoY drop in consolidated net profit to ₹142 crore due to subdued demand. However, revenue from operations picked up by 9% YoY to ₹836 crore in the quarter.
Further, in Q4 of FY23, the company saw 5% growth in domestic sales, while international sales climbed by 19% despite high inflation, currency depreciation and geopolitical challenges in several key markets.
Emami said that the FMCG industry witnessed a mixed demand environment in Q4FY23, as discretionary categories like personal care continued to remain muted on account of the reduction of nonessential expenditure by rural consumers.
Overall, Emami posted a soft performance in March 2023 quarter.
What should investors do with Emami shares post-Q4 results?
Sharekhan in its report said, ” Emami delivered a muted performance in FY2023 with revenue growth in high single digit and contraction in OPM. For FY2024, the domestic business is expected to grow by 8-10%, largely driven by strong growth in the newly acquired businesses, while OPM is expected to be higher than 27%.”
The brokerage’s note added, Emami has a strong brand portfolio and its sustained focus on product launches, distribution expansion, scale-up of emerging channels, a strong pipeline of D2C brands, growth in international business, and improved penetration will help to improve its growth prospects in the medium term. OPM is expected to improve in the coming years with raw-material prices stabilising.
On the stock price, Sharekhan’s note said, “The stock has corrected by 11% in the past six months and is currently trading at 20.4x and 17.2x its FY2024E and FY2025E earnings, respectively. We maintain our Buy recommendation with a revised price target (PT) of Rs. 460.”
On the other hand, Amnish Aggarwal – Head of Research, Prabhudas Lilladher has given an ‘Accumulate’ rating on Emami shares.
Aggarwal said, “We increase our EPS estimates for FY24/FY25 by 3.4%/6.5% which factors in impact of easing raw material inflation, pickup in rural demand across categories (ex of summer portfolio) and increased ad spends behind core brands. 4Q results saw volume growth of 2% while summer portfolio was impacted due to unseasonal rains across India.”
He further highlighted key categories like Pain Management and Health Care are expected to grow (after 2 years of COVID numbers in base) in FY24. Input cost pressures have come off, which gives promise for demand in upcoming quarters.
Moreover, Aggarwal also said, “Emami is investing for the future with 1) new launches in existing categories like Boroplus, Zandu and new product launches in D2C 2) investment in D2C businesses and Modern Trade 3) increase in direct town coverage to 60k (from 52k) by FY24 and 4) increasing ad-spend to gain market share. We estimate 19.4% PAT CAGR over FY23-25. We value the stock at 25x Mar25 EPS and assign a value of Rs517/share (Rs485 earlier). Retain Accumulate.”
But ICICI Securities in its note said, “We believe Emami has been taking several initiatives to drive growth, but results are yet to be seen. Weak macros have further added to the pain. We like the plans – (1) focus on distribution expansion including rural markets, chemist outlets and (2) thrust on new launches and new channels (including D2C offerings) – to drive premiumisation. Gains in MT and e-commerce are good. ADD. TP: Rs420.”
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.
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Updated: 27 May 2023, 10:47 PM IST
