Broker’s call: Emami (Hold)

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Target: ₹500

CMP: ₹491.95

Emami’s Q1-FY24 domestic sales were impacted due to weak performance in its summer range (-5 per cent yoy; 40 per cent of Q1 sales) due to the impact of unseasonal rains and sluggish demand in rural markets. The non-summer range grew 16 per cent yoy.

E-commerce and modern trade salience increased to 9.7 per cent each in Q1-FY24 (up 260/250 bps yoy, respectively), reducing the dependence on the wholesale channel. International business (IBD) grew 8 per cent/11 per cent in reported/CC terms, respectively.

Management expects a steady double-digit growth in IBD. On the rural distribution expansion front, targets laid out under Project Khoj have been achieved (direct reach: 1m outlets) and the focus is now on improving throughput per dealer, led by trade schemes, to drive incremental growth.

Higher seasonality in Emami’s portfolio has increased the volatility in revenue/earnings growth. We retain HOLD rating on the stock with a higher target price of ₹500 (25x Jun 2025F EPS).

Management expects better results in the next nine months. The focus will remain on brand building and driving A&P spending to aid growth

Key upside/downside risks: Faster/slower-than-expected sales growth.