Emami shares experienced strong demand on Tuesday, following a robust quarterly performance report by the Kolkata-based FMCG company. The stock surged by Rs 10.2 or 2.2 percent to reach Rs 471.9 apiece on the Bombay Stock Exchange (BSE). This marked the second consecutive session of gains for the Emami stock after the announcement of its earnings report.
The positive momentum continued after Emami's first-quarter results were released, with the company's share price increasing by over 9 percent. Experts in the field anticipate further upside potential for the stock, and here's what they have to say about it.
In the first quarter of the fiscal year, which ended in June (Q1FY24), Emami reported a notable 86.5 percent year-on-year rise in its consolidated net profit, amounting to ₹137.72 crore. However, there was a sequential decline of 4.6 percent in consolidated net profit from ₹144.43 crore in the previous quarter (Q4FY23).
During the quarter, the company's consolidated revenue from operations witnessed a 6.8 percent year-on-year increase, reaching ₹825.66 crores, up from ₹773.31 crore in the same period of the previous fiscal year (Q1FY23).
According to the information provided in an exchange filing, the company managed to improve its gross margins for the quarter by 240 basis points, reaching 65.4 percent. This was attributed to a reduction in the pressure arising from the escalation of raw material costs.
Rajesh Bhosale, an Equity Technical and Derivative Analyst from Angel One, shared his insights regarding Emami's stock price movement. He mentioned that the stock opened with a gap up and saw substantial follow-up buying, backed by increased trading volumes. He predicted that this upward trend is likely to persist, with a potential test of the previous high around the 520 level. He also noted that 470 could serve as an immediate support level, suggesting a "buy on dip" approach for traders.
In summary, Emami's strong quarterly performance has led to a surge in its stock price. Analysts and experts see further potential for the stock's growth, with attention on key support and resistance levels as potential indicators of its future trajectory.
What do brokerages say?
Nuvama Institutional Equities:
The brokerage stated that Emami reported good Q1FY24 numbers, with Revenue/EBITDA/PAT rising by 7%/10%/84% YoY - above Street and forecasts. Domestic volumes increased by 3% YoY for the period. The healthcare line, BoroPlus, and pain management all saw double-digit growth.
"We increase our FY24E/FY25E EPS by 2%/1.4%. This, along with a roll over to Q1FY26E, yields Emami share price target of ₹550 from earlier of ₹520. Retain 'Buy'," said the brokerage.
The company does not currently have any plans to de-seasonalize its portfolio, the brokerage claimed, citing Emami's Q1 results concall takeaways. It still has high hopes that the hospital deal would close by the end of August 23. Depending on Emami stock price after the hospital sale, the total pledge will drop to 18–20%.
"The company is getting aggressive on A&P. International business is expected to grow at 15% in the long-term. In FY24, focus is to work on improving margins in the MT and e-commerce channels. Dermicool products are not cannibalising Navratna Cool Talc. Navratna (largest), Fair and Handsome (second-largest), Crème 21, 7 Oils in One, Boroplus, OTC portfolio are the key brands in international market," said the brokerage in its report.
Motilal Oswal Financial Services:
According to the brokerage, Emami Q1 results were in line with their estimates. In FY24, the management has predicted a 200–250 basis point increase in the EBITDA margin and strong focus category advertising. From Q2FY24, it expects male grooming to expand by double digits. As a result of lower raw material prices, it is anticipated that international trade will maintain its upward trend and produce better results. The business anticipates an increase in gross margin in FY24.
"We reiterate our BUY rating, as Emami with over 50% of sales from the rural segment could be a beneficiary of a gradual rural revival; valuations are inexpensive at 24xFY25E EPS; improving revenue performance and investments in terms of rural distribution expansion and ad-spends in recent times.
Valuations are inexpensive at 20x FY25 EPS and hence we reiterate our 'buy'rating with a Emami share price target of ₹560," said the brokerage.