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Emami’s Q1FY25 print was in line; consolidated revenue/EBITDA/PAT grew 9.7%/13.9%/ 10.1% YoY. Domestic revenues surged by 10%, led by 8.7% volume growth, yet international business saw 11.0% growth (CC). Management alluded despite challenges in rural company’s enhanced distribution/village coverage helped to capture good growth around extreme heatwave in the north. Higher spends on brand building (BTL) resulted in volumeled growth reflecting rural growth continue to outpace urban in Q1. Navratna/Dermicool grew 27% followed by Healthcare at 11%, while Pain management declined by 7%. Boroplus range grew 4%, while Kesh king/Male grooming declined by 15%/5%. Sales for D2C brands TMC and Brillare (~6% of sales) grew 23% YoY. MT/ecom and CSD channels continued to post strong growth, while GT saw good recovery. Gross margin inched up to 67.7% (+226bp) aided by lower RM/PM prices. Despite higher ad-spends (+21.0%), and employee/other expenses +9.5%/+5.2%, EBIDTA margins settled at 23.9% (+88bp). Management guided for HSD growth in domestic business. With strong rural recovery we tweak earnings and retain BUY with a revised DCF-based TP Rs826 (implying 28.5x avg. of FY26E/FY27E EPS). Q1 sales surged 9.7% YoY, on back of 8.7% volume growth in domestic business

Emami’s Q1FY25 revenue grew by 9.7% to Rs9.1bn led by 10%/8.7% growth in value/volume in the domestic business. With 15% revenue contribution, international business grew 11% (CC) driven by SAARC & SEA and MENA region reporting string double digit growth. Management alluded despite challenges in rural, company’s enhanced distribution helped to capture good growth around extreme heatwave in the north. Higher spends on brand building (BTL) resulted in volume-led growth reflecting rural growth continue to outpace urban in Q1. Navratna/Dermicool grew 27% followed by Healthcare at 11%, while Pain management declined by 7%. Boroplus range grew 4%, while Kesh king/Male grooming declined by 15%/5%. Sales for D2C brands TMC and Brillare (~6% of sales) grew 23% YoY. MT/ecom and CSD channels continued to post strong growth, while GT saw good recovery. With strong focus on Healthcare segment, HMN launched 5 new digital first products in Zanducare. With good monsoon, rising wage growth, and govt. focus on rural infra may influence strong recovery in rural markets, especially in middle India. That’s said, we expect rural growth to lead ahead of urban. Further focus on medico marketing/doctor coverage could yield better results for the healthcare business in our view.

Benign RM prices influenced margins uptick; HMN aspires hold EBITDA margins +27%

In Q1, correction in input prices (menthe + LLP) resulted in higher gross margin inching up to 67.7% (+226bp). Despite higher ad-spends (+21.0%), employee cost (+9.5%) and other expenses (+5.2%), EBIDTA grew 13.9% to Rs2.2bn settling EBIDTA margins at 23.9% (+88bp). We expect despite higher investments in brands, focus on high-margin NPD to boost margins.

Valuation comfort, revenue momentum to drive re-rating

We note Emami’s performance to be driven by: (1) prioritizing distribution excellence to drive throughput, (2) product innovation and scaling up high margin NPD, (3) judicious price hikes, (4) reinvesting in marketing to build equity. Though HMN expects double digit growth in international business focus on SAARC/MENA markets to continue. Given early sign of recovery in rural, led by better MSP and govt. impetus on rural programs, and normal monsoon, we remain upbeat on Emami’s growth story. With strong narrative we tweaked earnings for FY25E/FY26E by +0.3%/(1.3%) and introduce FY27E. We retain Buy with a revised DCF-based TP Rs826 (implying 28.5x avg. FY26E/FY27E EPS). Key risks include prolonged rural slowdown & competition.

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