Emami - Q3FY11 results - in-line with our expectations: Edelweiss

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Emami - Q3FY11 results - in-line with our expectations
Net sales increased 14.9% to INR 4.06 bn (vs. our estimate of INR 4.15 bn) while PAT
increased 9.3% to INR 856 mn (vs. our estimate of INR 900 mn). Muted sales growth was
because of slow sales of Boroplus (due do delayed start of winters) and Fair & Handsome
(lower SKU not doing well).
EBITDA declined 3% to INR 1.02 bn, while margins declined 464bps. COGS inflation (up
553bps) was partially offset by lower other expenses (down 10bps), lower advertising and
sales promotion (A&P) costs (down 66bps) and lower staff expenses (down 13bps).
Growth rates in Q3FY11 of various products were as follows:
Navratna Oil – 19%
Zandu – 20%
Boroplus – ~6%
Chyawanprash – 20%
Menthoplus – 25%
Fair & Handsome – ~3%
Fast Relief – ~6%
Exports – 15%
Input costs – Menthol (~10% of COGS) has corrected recently while Light Liquid Paraffin
(~10% of COGS) continue to remain high
Price increases – Emami has taken ~4% price increases on a blended basis in FY11.
Increased Zandu INR 20 SKU prices to INR 22 (10% price increase) in December 2010 and
also increased Navratna (oil + talcum powder) prices by ~4% in January 11. Full year price
increases likely to be in the range of ~5-6%.
Advertising & sales promotion (A&P) costs – are likely to remain high.
Competitive intensity – is not a big concern. Muted sales growth this quarter is because of
muted Boroplus growth.
Conference call is on Monday, 31st January, 2011. We will come out with a detailed note post
that.