Healthy revenues; strong profits. Emami reported a strong 1QFY11, with revenue and PAT growing 28% and 127% respectively. We expect Emami to register earnings CAGR of 28% over FY10-12 on the back of key brands' decent performance and new launches being well accepted. Retain Buy. n Strong revenue growth. Emami registered overall revenue growth of 28% yoy in 1QFY11, driven by strong volume growth of 25%. Emami has witnessed revenue growth of >20% for the eighth consecutive quarter. All major brands and new launches are doing well. Strong investments in key brands and sub-segmentation strategy are driving the outperformance. n All brands in good form. All key brands, such as Navratna oil and Zandu balm, have seen >20% growth. Fair & Handsome saw 8% growth mainly owing to lower volume growth due to price hike. Recently launched Navratna Cool Talc saw whopping volume growth of >125% due to a harsh summer. Strong performance by new products augurs well for future growth. n Higher raw material prices push down margin. With rising menthol prices, EBITDA margin was down 66bps. However, the company expects maintaining margins going forward, given lower crude oil prices and lowering inflation. On account of tax credit of goodwill amortization, net profit is up 127%. n Valuation. We retain Buy on Emami with target price of Rs502 at target PE of 25x on FY12e earnings. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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