Sharekhan has given Buy recommendation for Emami with a target price of Rs. 550 in its research report issued on Mar 29, 2022
Sharekhan’s research report on Emami
Emami has acquired Dermicool, a leading brand in prickly heat and cool talc category, from Reckitt Benckiser (India) Ltd. for a consideration of Rs. 432 crore (~4x price/sales). Low penetration of prickly heat and cool talc category at 11-12%, combined market share of 45%; strong distribution synergies and growth opportunities in adjacent categories makes it a good acquisition from medium to long-term perspective. Slowdown in domestic market and raw material inflation remain key headwinds in the near term. We have reduced our earnings estimates for FY2023/24 by 10% and 7% respectively due to the near-term headwinds.
Emami’s stock price has corrected by ~13% in the past one month (26% in last six months) and trading at discounted valuations of 24.7x/20.3x its FY2023E/24E earnings. We maintain our Buy recommendation with revised PT of Rs. 550.