Khambatta Securities has given Buy recommendation for Emami with a target price of Rs. 657 in its research report issued on Aug 12, 2021

Khambatta Securities’ research report on Emami

Emami’s 1Q FY22 growth rate appears high as a result of the lower base of 1Q FY21 owing to the national lockdown during the first wave of covid-19. 1Q FY22 revenues were marginally higher (+2%) than that registered in 1Q FY20 as the second wave of covid impacted the company’s performance, especially the summer portfolio and in rural markets. Compared to 1Q FY20, the domestic business recorded 5% growth while the international business de-grew by 9% owing to lockdowns across several markets including the Middle East. Healthcare, Pain Management and the BoroPlus range returned the strongest growth rates vis-à-vis 1Q FY20. Profitability improved strongly from 1Q FY20 levels (gross margin +180 bps; EBITDA margin +500 bps; PAT margin +570 bps) and to a lesser extent over 1Q FY21 (gross margin -50 bps; EBITDA margin +20 bps; PAT margin +350 bps). The company reported record profits and margins in spite of covid 2.0 and the consequent lockdown, coupled with high input costs.

The Emami stock has appreciated by 11% since our 4Q FY21 update report of 26 May 2021 and by 51% since our intro research note dated 23 September 2020. Based on an unchanged target P/E multiple of 40.0x, our price target is Rs 657 as we maintain a BUY rating with an upside of 19% from current levels.

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