Emami shares rally 13% intraday post Q4 results, should you buy?

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New Delhi | Updated: May 6, 2016 4:54:18 PM

Emami share price rallied as much as 13 per cent on Friday despite the company reported 45.17 per cent fall in its consolidated net profit for the quarter ended March 2016.

EMAMI SHARES BSE SENSEXEmami share price rallied as much as 13 per cent on Friday despite the company reported 45.17 per cent fall in its consolidated net profit for the quarter ended March 2016. (Photo: Reuters)

Emami share price rallied as much as 13 per cent on Friday despite the company reported 45.17 per cent fall in its consolidated net profit for the quarter ended March 2016. However, FMCG major beats estimates in terms of revenue and EBITDA growth.

For the quarter ended March 2016, Emami registered net profit of Rs 75.85 crore against Rs 138.33 crore in the same quarter a year ago.

Net sales during the quarter under review was up 21.16 per cent to Rs 668.98 crore as against Rs 552.12 crore of the same period last fiscal.

Reliance Securities in a research note said, “Emami’s consolidated revenue grew 21.2 per cent yoy in 4QFY16, ahead of our estimate of Rs 630 crore. The Company’s consolidated EBITDA surged 30 per cent yoy to Rs 180 crore – exceeding our estimate of Rs 170 crore on account of lower input costs.”

“Net Profit, however, was impacted by Rs 73 crore and by Rs 210 crore for Q4 and 2015-16 respectively mainly because of amortisation of Kesh King intangibles,” the company said.

Emami has revamped most of its product portfolio in FY16 and expected to benefit from the same in coming fiscal. The management of the company sees 15-16 per cent revenue growth and expects to maintain gross margin profile in 2016-17.

According to Reliance Securities, Emami’s performance going forward would depend on a mix of seasonal factors, performance of Kesh King and new product pipeline. The brokerage house expects Emami to post revenues of Rs 3,070 crore and Rs 3,550 crore and net profit of Rs 430 crore and Rs 560 crore in 2016-17E and 2017-18E, respectively. Based on normalised expected EPS of Rs 31 in FY18E, the stock is trading at price earnings of 31.6x. Reliance Securities has changed its recommendation on the stock from ‘Neutral’ to ‘Accumulate’ with a target price of Rs 1,022.

However, Religare Institutional Research has ‘Sell’ rating on Emami shares. The brokerage house in a note said, “Emami’s results were ahead of estimates. Emami’s performance continues to be affected by seasonality. Besides, to achieve its 2016-17 organic growth target of 15-16 per cent amid a tough macro, with a slew of product launch and re-launches. This is likely to keep margins range-bound in the near term. Valuations at 35x FY17E/ 30FY18E appear rich. We therefore maintain ‘Sell’ on the stock.”

Shares of the company ended 6.20 up at Rs 1039.20.

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