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In-line (quantitative and qualitative)

Emami reported a good 3Q with 4% YoY revenue growth (2-year CAGR: +9%) and good EBITDA margin print (35%). Healthcare and Pain Management continued to deliver steady performances. Most of the portfolio, except Male Grooming, largely continues to perform well. Upcoming season for Navratna is key as Emami has faced some disruptions in the previous two seasons. Healthcare continues to see good momentum in existing products as well. We like management efforts on maintaining the momentum for pain management led by recent brand activation measures. There is some concern on RM pressure but seems to be largely manageable, for now

We believe Emami has become much nimbler and has seen a marked improvement in execution over the last few quarters. While some parts of the portfolio did struggle due to Covid-led challenges, several initiatives are being taken simultaneously to drive growth. We especially like the plans (1) to ramp-up healthcare business particularly through thrust on Zandu portal, (2) focus on distribution expansion including rural markets and chemist outlets and (3) thrust on new launches and e-commerce channel (including D2C offerings) to drive premiumisation. Maintain ADD. The founders Mr R. S. Agarwal and Mr R. S. Goenka are now Chairman Emeritus and Non-Executive Chairman, respectively. Mr Harsha Vardhan Agarwal is Vice Chairman-cum-MD and Mr Mohan Goenka is Vice Chairman-cum-Whole Time Director.

Decent performance on an overall basis: Consolidated revenue grew 4% YoY, implying good 9% growth on 2-year CAGR basis. Volume growth for the domestic business was flat (YoY) and a healthy 6.3% on 2-year CAGR basis. International business grew 7% YoY (2-year CAGR: +16%). EBITDA performance was also good with 14% growth (2-year CAGR). BoroPlus grew only 2% YoY due to some preloading in Sep-21 (Sep-Dec’21 growth was strong at 9%). The growth in BoroPlus is led by brand extensions; it has also launched a soap SKU of Rs10. Pain Management continues to do well with 7% YoY and 9MFY21 growth of 21% – focus on brand campaigns continues. Healthcare continued to do well with the segment seeing continued innovations. Kesh King continues to do fine while male grooming still has not recovered from the Covid-led disruption – we believe the recovery will be long-drawn here. On Navratna, the upcoming summer season will be key, as the brand has faced disruption in the last two seasons

Emami witnessed good growth in MT (up 14% YoY) with e-commerce also doing well (+75%). Emami is witnessing the benefits of the recent distribution expansion initiatives – (1) Rural presence – additional 5,800 towns added through Project Khoj in 9MFY22, (2) Focused expansion in standalone modern trade outlets and (3) added 26,000 healthcare outlets.

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