Emami Ltd reported a topline growth of 6.3% (IIFLe 4%) with Navratna-Dermicool and Healthcare range reporting a YoY sales growth of 12%/4% respectively. The gross margin expanded by 345bps on account of softening of commodity prices and judicious price hikes taken. The top-line was affected by poor demand sentiment especially in the rural markets, however analysts of IIFL Capital Services build in gradual recovery in volumes for H2FY24 marked by moderating inflation and improvement in rural demand sentiment. Maintain BUY; TP Rs560.
Beat on estimates:
The consolidated sales grew by 6.3% (IIFLe 4%). The domestic business reported a 4% top-line growth driven by 2% volume growth, driven by channels catering to Urban markets (MT and e-commerce) whereas the International business reported a 12% topline growth (16% in CC terms). Navratna and Dermicool, Healthcare range reported sales growth of 12% and 4% respectively. The gross margin (GM) expanded by 345bps on account of softening of commodity prices and judicious price hikes taken by the company. The Ebitda grew by 19.6% whereas the adjusted PAT (ex one-off) grew by 19%.
Gradual recovery expected:
With inflation moderating, anticipated improvement in agricultural yield and increased government spending on infrastructure (especially rural areas), analysts of IIFL Capital Services expect the demand sentiment to gradually improve and volume growth to pick-up. With winter season setting-in in the coming quarter, analysts of IIFL Capital Services expect sales from Boroplus range to pick-up from its current trajectory.
EPS for FY24/25/26 downgrade by ~7.5-8%:
Analysts of IIFL Capital Services expect a sales cut of ~1.5-2% on the back of a subdued H1FY24 performance reported by Emami. The Ebitda is estimated to remain unchanged and the Ebita margin for FY24 to expand by 200bps and to remain at ~27.5% for FY24/25/26. The EPS downgrade of ~5% is on account of change in assumptions for other income and depreciation.
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