Personal care products firm Emami stock spurts on growth expectations

Shares of the personal care products company, Emami hit over a six-year high at Rs 611.8, zooming 17.28 per cent on the BSE in Thursday’s trade in an otherwise weak market. This was led by management expectations that core brands would deliver a healthy all-round growth going forward, aided by recovery in rural segment, a strong summer and forecast of a good monsoon.

In Q4FY24, Emami demonstrated resilience and achieved volume led profit growth. The company reported 7 per cent year-on-year (YoY) sales growth at Rs 819.20 crore. Domestic business grew 8 per cent, led by volume growth of 6 per cent. Reported profit increased 4 per cent YoY to Rs 146.8 crore.

Major brands such as BoroPlus, the pain management range, the healthcare range, 7 Oils in One, The Man Company, and Brillare registered strong performance during the quarter.

Gross margin expanded 270 basis points YoY to 65.8 per cent. However, earnings before interest, tax, depreciation, and amortisation (ebitda) margin contracted 20 basis points YoY to 23.7 per cent on higher ad spends (up 39 per cent YoY).

Management has initiated several steps (e.g., team additions, new launches, hiring consultants, marketing spends, etc.) over the last three to four years to revive volume growth; however, the desired result has not yet been achieved. However, analysts expect volume growth acceleration in FY25, driven by rural growth improvement and seasonal tailwinds.

With the improving volume trajectory, rural recovery, and Emami’s own initiatives around distribution, new launches, and marketing spends, revenue growth is expected to accelerate in FY25, Motilal Oswal Financial Services said.

Although Emami commands a high market share in core categories, the share gain is no longer a catalyst for volume growth, the brokerage firm said. The stock is however trading above target price of Rs 600 per share.

First Published: May 31 2024 | 12:09 AM IST