Hold Emami Ltd for the Target Rs 440 by Prabhudas Liladhar Ltd
Core & D2C business to lead the way
We raise our FY28/FY29 EPS estimates by 2.1%/3.8%, led by
1) Healthy demand outlook in core business
2) rising contribution from D2C brands, with revenue guidance increased to Rs10bn from Rs8.5bn
3) international business returning to a positive growth trajectory. HMN delivered a strong quarter, with revenue and EBITDA growing 36.2% and 24.5% YoY, respectively, while gross margins contracted 520bps, driven by elevated input costs and changing mix from acquired businesses.
Hair & Scalp Care and Skincare performed well, growing 30% and 31%, respectively, while OTC witnessed soft growth led by international supply chain issues. IBD sales declined 2% YoY, whereas D2C sales grew 73% YoY. HMN remains focused on strengthening its presence across MT/QC and D2C brands, alongside evaluating further acquisition opportunities. We value the stock at 22x Sep’28E EPS, arriving at a revised TP of Rs440 (Rs448 earlier). Valuations remain comforting at 17.4x FY29E EPS, however, sustained execution remains key to driving further upside. Retain HOLD.
Revenue grew by 36.2% and LTL volumes grew by 26%:
Revenues grew by 36.2% YoY to Rs10.9bn (PLe: Rs9.902bn). Gross margins contracted by 520bps YoY to 65.8% (Ple: 67.5%). EBITDA grew by 24.5% YoY to Rs2.2bn (PLe:Rs.2.079bn); Margins contracted by 192bps YoY to 20.4% (PLe:21%). Adjusted PAT declined of 1.9% YoY to Rs1.5bn (PLe: Rs1.335bn). Domestic LTL volume came at 26%, while domestic business reported volume growth of 43%
Segmental summary
* Total Domestic business sales grew by 49%+. (LTL value growth 32%)
* Hair & Scalp Care grew by 30%, with strong growth in Navratna Cool Oils and 7 Oils in One and contributed 22% to overall domestic business.
* Skin Care grew by 31%, led by the BoroPlus and Talc portfolios and contributed 31% to overall domestic business.
* Health Care grew by 11%, led by the Pain Management range and contributed 28% to overall domestic business.
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SEBI Registration number is INH000000933
