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Emami (HMN IN, CMP: 466, Buy)
n Strong revenue and PAT growth; ~23% volume growth in Q2FY11
Revenues increased 26%, to INR 2.72 bn (versus our estimates of INR 2.6 bn). ~23%
volume growth was observed in Q2FY11. PAT increased 45%, to INR 534 mn; it was
better than our estimates. Other income stood at 59 mn for Q2FY11 vis-à-vis Q2FY10.
The company’s tax rate reduced 30bps to 14.6% Y-o-Y, however increased 500bps Q-o-
Q. The company restated Q2FY09 numbers as Zandu merger and Emami Realty demerger
was approved by High Court in December 2009 (i.e. post Q2FY10).
n EBITDA margin dip with higher COGS
EBITDA increased 9.8% to INR 575 mn. However, EBITDA margins declined 317bps,
following higher COGS of 554bps. LLP and menthol costs inflation have resulted in the
COGS surge. Staff costs, advertising & sales promotions (A&P) and other expenditure
decreased by 52bps, 17bps and 169bps, respectively.
n Robust performance of blockbuster products
Volumes in Boroplus antiseptic cream increased 20%, Prickly heat powder increased
13%, CSD increased by 67%, Zandu Balm by 26%, Menthoplus Balm by 18% and Fair
and Handsome (F&H) by 15%. Increased focus on rural distribution led to such
phenomenal volume growth. Navratna Oil sales increased 19%; the company is seeing
good growth of this product, with little competition risk.
n Outlook and valuations: Positive; ‘BUY’
Emami, like Dabur, is focused on mass-market product portfolio, is leader in several
categories, faces limited competition from MNCs and regional players, enjoys pricing
power, and has high growth potential. New product launches, combined with
rejuvenation of Zandu brands, should drive growth, going forward. We are bullish on
this domestic FMCG consumption story and maintain ‘BUY/Sector Outperformer’ on
the stock. We will come out with detailed note post conference call.
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