Shares of the personal care and healthcare company gained 4 per cent in a depressed market on Wednesday to close at Rs 549.
The Kolkata-headquartered company’s power brands include Navratna oil and talc, BoroPlus, Zandu, Mentho Plus, Kesh King, Glow and Handsome, among others.
Reasons for rally
The counter has been in high spirits on the back of multiple tailwinds such as price hikes, robust earnings, reduction of pledged shares and healthy cash on balance sheet.
Emami reported a three-fold jump in consolidated net profit to Rs 87.73 crore for the quarter ended March 31 against Rs 22.75 crore in the year-ago quarter. Revenue for the January-March period of 2021 jumped 37.2 per cent to Rs 730.76 crore from Rs 532.68 crore.
The company has raised product prices on an average by four per cent this month to offset the current input cost pressure. The company has been focusing on e-commerce growth as well for its ‘Zandu’ brand, which it acquired in 2008. The company boasts of healthy cash on balance sheets and is said to be prowling for acquisitions.
After a rough patch, the FMCG major has reduced the pledged shares by the promoters. The company sold its cement business to Nirma Group for Rs 5,500 crore. The percentage of pledged shares has come down sharply since the deal.
Brokerages’ views
Motilal Oswal is bullish on Emami, and has included it among its top investment ideas, citing inexpensive valuations, reduction of share pledges and higher rural salience. The brokerage said sales and volume growth in Q4FY21 was aided by the advance summer season, unlike the same quarter last year.
“Near-term outlook remains healthy for the herbal portfolio as well as rural growth. The management is confident of good double-digit sales growth after the lifting of lockdown restrictions. It expects to close FY22 with high single-digit growth,” the brokerage said.
Likhita Chepa of Capital Via Global Research said the company’s domestic and international business showed decent growth in March quarter of 2021. All major brands of the company’s healthcare range performed strongly on the growth charts.
Analysts’ Views
Brokerage firm Philip Capital has set a price target of Rs 650 for the stock with a ‘buy’ rating. “Investors go overweight on this stock, as there is a higher likelihood that it might generate significant alpha over Nifty and the Consumer Index,” it added.
Another domestic brokerage YES Securities has a ‘buy’ call with a price target of Rs 565.
“We expect the growth momentum to continue in the long run, backed by the firm’s evolving business strategies, improving demand scenario and increased focus on digitization. The stock can surge up to 10 per cent in next one year,” said Chepa of CapitalVia.
