Motilal Oswal has given Buy recommendation for Emami recommended buy rating on the stock with a target price of Rs 650 in its research re with a target price of Rs. 650 in its research report issued on Oct 30, 2021

Motilal Oswal’s research report on Emami

HMN’s 2QFY22 sales were in line with our expectations. Domestic sales/ volumes grew 9%/6.2% YoY. With a pickup in the pace of vaccination and diminishing fears of a severe third COVID wave, Healthcare grew only 5% YoY. Nevertheless, the segment was still up 26% on a two-year CAGR basis. On a positive note, revival in mobility led to double-digit growth in discretionary categories BoroPlus, Kesh King, and Male Grooming. While there has been some recent moderation in rural demand, its fundamentals are intact. The outlook for winter demand is positive. The International business (~15% of sales) declined by 6% YoY owing to the second COVID wave and a higher base of Personal Hygiene. Margin performance in 2QFY22 was better than expected due to price hikes, cost savings, and lower A&P spends. However, the management expects gross margin compression in 2HFY22, led by continued RM pressure. A&P spends are also expected to pick up, leading to a pressure on EBITDA margin in 2HFY22. -The key to a further re-rating would be whether sales growth, after a period of extremely weak performance (3.7% CAGR over FY16-20), can revive to double-digit levels on a sustainable basis. We maintain our Buy rating.


We arrive at our TP of INR650/share (valuing the company at 32x Dec’23E EPS, a 40% discount to its peers).

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