Multi bagger - Emami Limited

[UAE Exchange Etrade]

NSE Symbol - EMAMILTD

Emami Limited is a leading FMCG player in India. It has been in the health, beauty and personal care since the last 35 years and has sustained its prominent position in Ayurvedic products.

The company posted smart numbers for the quarter ending December 2012. The Revenues for the quarter ended December 2012 of Rs 548.65 crores rose by 21.29% from Rs.452.36 crores y-oy driven by strong volume growth across all the key product categories. Operating profit surged 13.30% at Rs.162.42 crores as against Rs.143.35 crores in the like period last year due to steep increase in menthol prices. The company has reported 21.64% rise in its net profit at Rs 114.95 crore for the quarter as compared to Rs 94.50 crore for the same quarter in the previous year. EPS for the quarter stood at Rs.7.60.

Boroplus clocked volume growth in the range of 28% to 30% aided by good winter season; Balms grew between 18%-20%, in Fair and Handsome it is about 10% to 12% and in Navratna Oil it is about 5% in the quarter ended December 2012.

All power brands reported strong and consistent performance during the quarter despite various challenges in the macroeconomic environment and input cost pressures. In value terms Boroplus grew by over 30%; Navratna grew by 13%; balms grew by 17%; Fair and Handsome grew by 19%. Healthcare division comprising of the OTC, ethical and generic products also performed credibly in this quarter, registering a very strong growth of 25%. Zandu Pancharishta sales tripled in this quarter.

Valuation

With increasing penetration, sustained sales momentum, powerful brands, judicious price increases and new launches; Emami's growth prospects looks promising. We believe Emami Ltd. is trading at an attractive valuation at 28.84x and 24.95x of FY13EPS of Rs 20.77 and FY14EPS of Rs 24.01. We initiate a 'BUY' on the stock with a target price of Rs 740 (appreciation of about 24%) with the medium to long term investment horizon.