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Key Takeaways
Revenue growth target 20%+ over the next few years; Fair and Handsome,
Zandu to drive growth
Over the past five years, Emami (HMN) posted 25% revenue CAGR through strong
volume growth, judicious pricing and acquisitions (Zandu). The management is
confident of achieving 20%+ organic revenue growth over the next few years.
Fair and Handsome and Zandu posted 67% and 27% growth respectively in 1QFY12.
The management expects the brands to be main growth drivers in FY12 led by
strong activation and category growth.
Input cost pressures persist; Price hikes, cost savings to keep margins at
FY11 levels
Menthol prices (25% of RM) doubled over the past one year and rule firm and LLP
prices are up 40% YoY. HMN raised prices by 4% and plans another price increase
towards the end of 2QFY12.
Although gross margins are likely to be lower in FY12 with savings on A&P spends
(17-18% expected in FY12 v/s 19.5% in FY11) and operating leverage, the
management expects to maintain EBITDA margins at FY11 levels.
Bangladesh facility to become operational by 3QFY12, Egypt on hold, exports
do well
Exports increased 31% in 1QFY12 and the management is focused on increasing
distribution in focus markets of SAARC, Africa and the Middle East.
HMN's Bangladesh facility will become operational by 3QFY12. Egypt plans are on
hold and will be reviewed in a couple of quarters.
Emami open to domestic acquisitions, to consider opportunities when they
arise
Although international acquisition opportunities are many, HMN is keener on domestic
opportunities. There has been no activity regarding Paras Pharma's personal-care
brands and the management maintains it will evaluate the opportunity if it arises.
Valuation and view
HMN continues to grow ahead of its peers through niche positioning and leadership
in key categories. Margin pressure and acquisition intent in the domestic market will
be key factors to watch for in the near term.
The stock trades at 30.4x FY11 EPS of INR15.1. Not Rated.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Revenue growth target 20%+ over the next few years; Fair and Handsome,
Zandu to drive growth
Over the past five years, Emami (HMN) posted 25% revenue CAGR through strong
volume growth, judicious pricing and acquisitions (Zandu). The management is
confident of achieving 20%+ organic revenue growth over the next few years.
Fair and Handsome and Zandu posted 67% and 27% growth respectively in 1QFY12.
The management expects the brands to be main growth drivers in FY12 led by
strong activation and category growth.
Input cost pressures persist; Price hikes, cost savings to keep margins at
FY11 levels
Menthol prices (25% of RM) doubled over the past one year and rule firm and LLP
prices are up 40% YoY. HMN raised prices by 4% and plans another price increase
towards the end of 2QFY12.
Although gross margins are likely to be lower in FY12 with savings on A&P spends
(17-18% expected in FY12 v/s 19.5% in FY11) and operating leverage, the
management expects to maintain EBITDA margins at FY11 levels.
Bangladesh facility to become operational by 3QFY12, Egypt on hold, exports
do well
Exports increased 31% in 1QFY12 and the management is focused on increasing
distribution in focus markets of SAARC, Africa and the Middle East.
HMN's Bangladesh facility will become operational by 3QFY12. Egypt plans are on
hold and will be reviewed in a couple of quarters.
Emami open to domestic acquisitions, to consider opportunities when they
arise
Although international acquisition opportunities are many, HMN is keener on domestic
opportunities. There has been no activity regarding Paras Pharma's personal-care
brands and the management maintains it will evaluate the opportunity if it arises.
Valuation and view
HMN continues to grow ahead of its peers through niche positioning and leadership
in key categories. Margin pressure and acquisition intent in the domestic market will
be key factors to watch for in the near term.
The stock trades at 30.4x FY11 EPS of INR15.1. Not Rated.
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