Macquarie Research, :: Emami -Creating a niche in personal care

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Emami
Creating a niche in personal care
Event
 Emami is a key player in the niche „therapeutic‟ and „ayurvedic‟ segments of
the personal care and consumer healthcare categories. With over 30 brands
under its portfolio, Emami has grown at a 25% CAGR over the last few years.
Emami has four brands with sales greater than Rs1bn, and the company
plans to expand its “billion rupee brands” to six over the next two years.

Impact
 Key brands continue to grow strongly. Emami‟s power brands, Navratna,
Boroplus, Fair & Handsome and Zandu Balm, are the leaders in their
categories with market shares of 49%, 75%, 60% and 57%, respectively. We
believe these brands are likely to maintain their growth trajectory, as these
categories are still under-penetrated and the company continues to invest in
these brands to develop and expand the market.
 New launches continue to pay-off: Emami has been one of the most
innovative companies in the Indian consumer space. We expect Emami‟s
recent launches like Navratna Extra Thanda Oil, Navratna Talc and Boroplus
Lotion, Hair Life and Malai Kesar soap to contribute more than 20% to
Emami‟s FY12E revenue growth. We believe Emami‟s focus on innovation will
continue to pay off in the coming years.
 Limited competition in core brands. Emami has a dominant position in its
core brands like Navratna, Zandu Balm and Boroplus. As 80% of its revenues
come from the “wellness" category that offers health benefits, it enjoys
stronger brand loyalty and lower competition.
 Confidence in inorganic strategy boosted by Zandu. Emami‟s
management has re-affirmed its inorganic strategy, and we believe that
international acquisition can be an ideal fit for the company. Our conviction is
guided by success at the Zandu acquisition, which contributed more than 30%
of its 9-month FY11 profit. Emami has recently obtained board approval to
raise Rs50bn to actively pursue inorganic opportunities in both the domestic
and international markets.
Action and recommendation
 Outperform maintained. We maintain our positive view on Emami, given its
strong growth momentum, healthy product pipeline and new initiatives, which
should add growth and maintain leadership in key products.


Emami Aide Memoire
1. What is your revenue and volume guidance for next few years?
2. What are your plans for new product launches over the next two years?
3. What kind of competitive intensity do you see in your key categories like hair oil, skin care etc?
4. Can you discuss plans for the Zandu therapeutic product portfolio?
5. What is the profitability of newly launched brands such as Malai Kesar Cream, Boroplus Lotion?
6. Do you have any alternate strategy for acquisitions post disappointment in Paras?
7. Can you share your thoughts on what were the reasons behind your bid being rejected by the Paras board?
8. Any plans to raise fresh capital given your intention of acquisitions?
9. Future capex plans for the Egypt plant?
10. Do you feel current margin pressure will continue into the next fiscal year as well?