Emami zooms 19%, hits over 2-year high on healthy business outlook

Shares of Emami, the personal care products company, hit over two-year high at Rs 619, zooming 19 per cent on the BSE in Thursday's intra-day trade amid heavy volumes in an otherwise weak market as the management expects core brands to deliver a healthy all-round growth going forward, aided by recovery in rural, a strong summer and forecast of a good monsoon.

The stock surpassed its previous high of Rs 588.65 touched on January 1, 2024. The stock was trading at its highest level since August 2021. At 10:22 am; Emami was quoting 15 per cent higher at Rs 598, as compared to 0.57 per cent decline in the S&P BSE Sensex. The average trading volumes at the counter jumped over six-times, with a combined 7.4 million equity shares changing hands on the NSE and BSE.

In Q4FY24, Emami demonstrated resilience and achieved volume led profit growth. The company reported 7 per cent year-on-year (YoY) sales growth at Rs 819.20 crore. Domestic business grew 8 per cent, led by volume growth of 6 per cent. Reported profit increased 4 per cent YoY to Rs 146.8 crore.

Major brands such as BoroPlus, the Pain Management range, the Healthcare range, 7 Oils in One, The Man Company, and Brillare registered strong performance during the quarter.

Gross margin expanded 270 bp YoY to 65.8 per cent. However, earnings before interest, tax, depreciation, and amortisation (ebitda) margin contracted 20bp YoY to 23.7 per cent on higher ad spends (up 39 per cent YoY).

Emami remains optimistic about future growth, supported by a favourable economic landscape, forecast of a normal monsoon, anticipated rural market recovery, government initiatives, and promising macroeconomic factors, all contributing to a confident outlook for sustained positive performance. It is encouraging to witness signs of market recovery with rural areas gradually bouncing back, the management said.

Management has initiated several steps (e.g., team additions, new launches, hiring consultants, marketing spends, etc.) over the last three to four years to revive volume growth; however, the desired result has not yet been achieved. However, analysts expect volume growth acceleration in FY25, driven by rural growth improvement and seasonal tailwinds.

With the improving volume trajectory, rural recovery, and Emami’s own initiatives around distribution, new launches, and marketing spends, revenue growth is expected to accelerate in FY25, Motilal Oswal Financial Services said.

The brokerage firm models 8 per cent revenue CAGR over FY24-26, primarily driven by volume growth. Ebidta margin is already at an elevated level (much higher than peers). MOFSL model a 27.4 per cent Ebitda margin for FY26 vs. 26.5 per cent for FY24.
Emami's core categories are niche and they have been witnessing slow user addition over the last five years. Although Emami commands a high market share in core categories, the share gain is no longer a catalyst for volume growth, the brokerage firm said. The stock is however trading above target price of Rs 600 per share.