30 October 2021
2QFY22 Results Update | Sector: Consumer
Emami
Buy
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
HMN IN
454
235.2 / 3.1
621 / 344
-9/-15/-4
388
Margin to come under pressure, but sales traction to
continue
CMP: INR529
TP: INR650 (+23% )
Financials & Valuations (INR b)
Y/E March
2021 2022E 2023E
Sales
28.8 32.4 36.0
Sales Gr. (%)
8.5 12.4 11.2
EBITDA
8.8
9.8 11.0
EBIT Margin (%)
30.7 30.3 30.6
Adj. PAT
7.2
7.9
8.3
Adj. EPS (INR)
16.3 17.8 18.7
EPS Gr. (%)
31.1
9.6
5.1
BV/Sh.(INR)
39.7 45.7 46.5
Ratios
RoE (%)
40.3 41.7 40.6
RoCE (%)
40.0 44.6 47.0
Payout (%)
49.2 64.6 69.5
Valuation
P/E (x)
32.7 29.8 28.4
P/BV (x)
13.4 11.6 11.4
EV/EBITDA (x)
26.1 23.2 20.5
Div. Yield (%)
1.5
2.2
2.4
Shareholding pattern (%)
As On
Sep-21 Jun-21
Promoter
53.9
53.9
DII
24.2
24.5
FII
12.7
12.5
Others
9.3
9.2
FII Includes depository receipts
HMN’s 2QFY22 sales were in line with our expectations. Domestic sales/
volumes grew 9%/6.2% YoY. With a pickup in the pace of vaccination and
diminishing fears of a severe third COVID wave, Healthcare grew only 5%
YoY. Nevertheless, the segment was still up 26% on a two-year CAGR basis.
On a positive note, revival in mobility led to double-digit growth in
discretionary categories – BoroPlus, Kesh King, and Male Grooming.
While there has been some recent moderation in rural demand, its
fundamentals are intact. The outlook for winter demand is positive.
The International business (~15% of sales) declined by 6% YoY owing to the
second COVID wave and a higher base of Personal Hygiene.
Margin performance in 2QFY22 was better than expected due to price
hikes, cost savings, and lower A&P spends. However, the management
expects gross margin compression in 2HFY22, led by continued RM
pressure. A&P spends are also expected to pick up, leading to a pressure on
EBITDA margin in 2HFY22.
The key to a further re-rating would be whether sales growth, after a period
of extremely weak performance (3.7% CAGR over FY16-20), can revive to
double-digit levels on a sustainable basis. We maintain our
Buy
rating.
Sales in line; margin outperforms
Sep-20
53.9
28.6
9.0
8.6
Consolidated net sales grew 7.4% YoY to INR7.9b
(in line). EBITDA/PBT/
adjusted PAT before amortization grew 7.8%/20.1%/18.7% YoY to INR2.8b/
INR2.9b/INR2.5b (est. INR2.5b/INR2.3b/INR1.9b).
Domestic volumes grew 6.2% YoY in 2QFY22.
Gross margin fell 150bp YoY to 68.8% (est. 67.3%).
EBITDA margin expanded by 20bp YoY to 35.1%
(est. 32%) due to lower
employee costs (-30bp), ad-spends (-140bp), and flat other expenses as a
percentage of sales.
Absolute ad-spends declined by 2.6% YoY to INR1.1b.
Sales/EBITDA/adjusted PAT before amortization grew 19.2%/17.6%/26.7%
YoY in 1HFY22.
The domestic business
grew 9% YoY, with a two-year CAGR of 11%.
International sales
declined by 6% YoY, but clocked a two-year CAGR of 2%.
Institutional business
(3% of sales) grew 29% YoY, with a two-year CAGR of
12%.
Within domestic,
HMN reported a YoY sales growth in all categories –
Healthcare (+5%), BoroPlus (+29%), Kesh King (+15%), Pain Management
(+6%), and Male Grooming (+15%), except Navratna (-9%), in 2QFY22.
Krishnan Sambamoorthy – Research Analyst
(Krishnan.Sambamoorthy@MotilalOswal.com)
Research Analyst: Dhairya Dhruv
(Dhairya.Dhruv@MotilalOswal.com)/Kaiwan
Jal Olia
(kaiwan.o@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
6 November 2020
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