Consolidated net sales declined 16%, while EBITDA and adjusted PAT plummeted 46% and 56% y-o-y. India sales declined 16% with volume decline at 20% y-o-y. International sales fell 19% due to sustained pressure in MENAP business. OPM contracted 800 bps y-o-y to 14.8% hit by negative operating leverage. We note that the GST led hit on Emami has been much higher than peers and possibly is an indication of its distribution strength. Slow growth in core brands is a key concern (India sales CAGR ex Kesh King is 10% over FY12-17). We believe most of the core brands are losing relevance due to consumer up-trading. Slowdown in healthcare and all-time high margin add to our concern. Valuation at FY19E P/E of 37x remains expensive. Maintain ‘sell’ with a revised TP of Rs 985 based on 32x forward P/E (vs. Rs 920 earlier).
Domestic sales declined 16% y-o-y with volume decline at 20% y-o-y. Its core summer centric Navratna portfolio declined 11%, with Navratna cooling oil down 15% and Cool talc down 3%. Amid GST related pipeline correction, its relatively discretionary offerings Fair and Handsome range, Kesh King and Healthcare, declined sharply by 19%, 28% and 23%. In healthcare, Pancharishtha declined 43%, while Nityam Churna and tablets grew by 15%. Its pain management portfolio declined 16%, with Balm declining by 21%.
BoroPlus range grew 20% in the non-season. 7 oils in One grew 16% y-o-y. There were no new product launches in Q1. International sales declined 19% y-o-y on slowdown and political instability in the West Asia. SAARC and MENAP sales declined 29% and 42%, while CIS grew 8%. The company highlighted that escalation of tension between Qatar and other GCC countries and Opec’s failure to extend crude production cuts have turned business atmosphere turbulent in West Asia. The company has reduced stock levels across the key markets.