13 July 2017
Update
| Sector:
Consumer
BSE SENSEX
32,037
S&P CNX
9,892
Emami
Buy
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CMP: INR1,073
TP: INR1,265 (+18%)
Building platform for strong long-term growth
Key takeaways from Emami’s (HMN) FY17 annual report:
Innovation remained the key focus area in FY17
Near-term prospects look challenging due to high wholesale dependence
Took much-needed efforts to boost direct reach via Project Race/Project Dhanush
Continued to emphasize on growing the Kesh King franchise
Healthy operating cash flow growth, led by reduction in other assets
Right portfolio, low penetration, focused spending brighten growth
potential
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val ( INRm)/Vol m
Free float (%)
HMN IN
227.0
1261 / 937
-7/-17/-19
243.6
3.8
188
27.3
Financials Snapshot (INR b)
Y/E Dec
2017 2018E 2019E
Net Sales
24.9
28.5
32.8
EBITDA
7.6
8.4
9.8
PAT
6.0
6.4
7.7
EPS (INR)
26.5
28.3
33.9
Gr. (%)
4.5
6.6
20.0
BV/Sh (INR)
77.3
92.1 107.1
RoE (%)
35.8
33.4
34.1
RoCE (%)
31.0
34.1
38.5
P/E (x)
40.5
38.0
31.6
P/BV (x)
13.9
11.7
10.0
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-17 Dec-16 Mar-16
72.7
2.7
15.6
8.9
72.7
2.8
16.3
8.2
72.7
1.2
16.3
9.8
80% of the portfolio comprises high-demand problem-solving products, and the
remaining 20% is discretionary products. This insulates the company from
volumes risk in an adverse consumer environment.
Penetration is low in many categories. We note that HMN is the dominant
player in its leading categories, which puts it at the forefront to drive category
growth.
Brands like Fair & Handsome (now with a wide men’s personal care portfolio)
are available in only 1.4m out of the 4.3m outlets that HMN reaches across the
country. Balms is another category, where penetration is low at 36% (Zandu
balm reaches only 1.6m outlets, and
Mentho Plus
only 1.2m outlets).
While Zandu is already strong with its balms and Chyawanprash products, it can
also emerge as a strong Ayurvedic products brand. Management believes that
the company’s strength lies in its ability to validate product efficacy on the basis
of data derived from systematic scientific research at NABL and Ministry of
AYUSH accredited laboratories.
HMN spends more on R&D than most FMCG companies in India; it incurred
INR231m (0.99% of sales) in FY17.
Despite demonetization, absolute A&P spend grew from INR4.3b in FY16 to
INR4.43b in FY17. In terms of A&P as a percentage of sales, HMN stands among
the top in the FMCG space.
Over the past five years, the company has introduced more than 25 products,
variants and extensions.
Some of the prominent new launches in FY17 were Boroplus Perfect Touch
Cream, Navratna Almond Cool Oil, Navratna i-Cool Talc, Fair & Handsome 100%
Oil Clear Instant Fairness Face Wash, He Respect deodorant, He Range of
perfumes and deodorants, Kesh King Ayurvedic Medicinal Oil with blend of
coconut oil, and He ‘On-the-Go’ Waterless Face Wash.
The company increased its direct reach to 0.73m outlets from 0.64m in FY16,
with a target to reach 0.8m in FY18. However, for a company with a pan-India
reach of 4.3m outlets at end-FY17, the direct reach is well below that of peers
and also weak in terms of proportion of total outlets.
New launch momentum stays robust
Targeting to significantly increase direct, rural reach
FII Includes depository receipts
Krishnan Sambamoorthy
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 6129 1545
Vishal Punmiya
(Vishal.Punmiya@MotilalOswal.com); +91 22 6129 1547
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

Emami
HMN initiated ‘Project Race’ in FY17 to expand its direct reach in urban towns.
The company has engaged AC Nielsen to conduct a study in the top 30 towns to
understand the best way to take the expansion plan forward.
During the year, the company also initiated ‘Project Dhanush’ to enhance its
rural direct reach via van operations (which were introduced in ~1,500 routes
covering 6,000 towns with a population of below 5,000). The target is to double
its rural reach in two years.
Kesh King was able to become cash EPS-accretive within the first year of
operations, creating the foundation for rapid repayment of debt raised for its
acquisition.
Kesh King’s reach was 0.54m outlets prior to the acquisition (MAT March 2015),
which has been increased to 0.75m (MAT December 2016). The brand now has
32.1% market share v/s 30% at the time of acquisition.
Operating leverage potential is huge as the product reaches only 3% of
households in India.
Apart from increasing distribution, management is planning targeted
communication, leading to product trials.
The company launched sachet SKUs in the shampoo category. Sachets are a
strong driver in the shampoo category, accounting for 65% of overall category
sales. We believe that while growth of Kesh King is likely to be muted in
1Q/2QFY18 due to its high wholesale dependence (70% of sales), the brand will
be a source of strong revenue and profitability growth (gross margins of over
70%) in the medium-to-long term.
Strong summer and abundant rainfall enabled 15% YoY domestic business sales
growth in 1HFY17, along with 29% EBITDA growth. However, 2HFY17 was
impacted by demonetization, and thus, sales declined 2% YoY with flattish
EBITDA.
While profit growth was unimpressive, net operating cash flows increased to
INR7.3b in FY17 from INR5.6b in FY16, led by lower other assets.
Debentures of INR 3b are scheduled to be redeemed in three tranches in FY18
(INR1.5b on 22 May, INR750m on 22 August and INR750m on 22 November).
Management reiterated its target to become debt-free by end-FY18.
Despite significant near-term challenges due to likely higher sales disruption
following GST implementation (as it has high wholesale channel dependence v/s
peers), we believe that HMN remains a credible long-term play due to (a)
expected healthy growth in the existing product categories, where it has
dominant market share, (b) demonstrated ability to leverage on its innovative
ability, customer understanding and distribution reach to turnaround
acquisitions, (c) best-of-breed R&D and A&P spend, innovative products and
ability to back-up innovation with strong marketing and (d) efforts toward
improving its direct distribution reach.
Valuations at 31.6x FY19E EPS are inexpensive relative to peers. We like the
company’s healthy long-term earnings growth prospects and return ratios in the
mid-30s. We thus maintain our
Buy
rating with a target price of INR1,265,
implying 18% upside to CMP.
Kesh King expected to be strong revenue/profitability driver
Financial highlights – FY17 was a story of two halves
Valuation and view
13 July 2017
2

Emami
Several positives make HMN a credible long-term play
‘Thou shall not imitate’ is an important credo that we believe is and will be a key
distinguishing factor driving growth for HMN.
80% of the portfolio comprises high-demand problem-solving products, and the
remaining 20% is discretionary products. This insulates the company from
volumes risk in an adverse consumer environment. Its product portfolio includes
Ayurvedic antiseptic cream, fairness cream, prickly heat powder, cool talc, pain
relievers, herbal petroleum jelly, cool oils, face washes, Ayurvedic medicines/
oils.
The company has seven power brands, all of which have clocked sales of over
INR1b.
Exhibit 1: Key products have delivered CAGR of ~10% over last six years
Source: Company, MOSL
Penetration is low in many categories. We note that HMN is a dominant player
in its leading categories, which puts it at the forefront to drive category growth.
Brands like Fair & Handsome (now with a wide men’s personal care portfolio)
are available in only 1.4m out of the 4.3m outlets that the company reaches
across India.
Balms (an INR9b market) is another category where penetration is low at 36%.
Zandu balm and Mentho Plus reach only 1.6m and 1.2m outlets, respectively,
out of its overall reach of 4.3m outlets.
Zandu and Mentho Plus brands put together have ~55% market share. Mentho
Plus witnessed strong off-take in south India in FY17, with market leadership in
Andhra Pradesh and Karnataka.
Zandu can also emerge as a strong Ayurvedic products brand. Management
believes that the company’s strength lies in its ability to validate product
efficacy on the basis of data derived from systematic scientific research at NABL
and Ministry of AYUSH-accredited laboratories, accreditation for which was
achieved in FY17. HMN’s products are herbal/vegetarian, and developed via
proprietary methods using quality scientific tools. As of 31 March 2017, the
company’s field-force reached more than 21,000 doctors across the country.
HMN has engaged an external consultant to grow this business, and already
embarked on test-marketing products across select states.
13 July 2017
3

Emami
The company spends more on R&D than most Indian listed FMCG companies.
FY17 spend stood at INR231m (0.99% of sales), of which INR207m was recurring
R&D and INR24m was capital R&D.
Despite demonetization, absolute A&P spend grew from INR4.3b in FY16 to
INR4.43b in FY17. On a percentage to sales basis, Emami is easily among the top
players in the FMCG space.
Innovation-led new launches in FY17
Boro Plus Perfect Touch Cream
Navratna Almond Cool Oil
Navratna i-Cool Talc
Fair & Handsome 100% Oil Clear Instant Fairness Face Wash
He Respect deodorant
He Range of perfumes and deodorants
Kesh King Ayurvedic medicinal oil with blend of coconut oil
He ‘On-the-Go’ Waterless Face Wash
Over the last five years, the company has launched more than 25 products, variants
and extensions.
Exhibit 2: Launched “HE-On the Go” Waterless Face Wash in
April’17
Exhibit 3: Also launched Zandu Gel and Spray in the Pain
Reliever category
Source: Company, MOSL
Source: Company, MOSL
Project Race and Dhanush to expand reach in urban and rural areas
The company has 3,250 distributors, 6,500 sub-stockiest, 1,800 field sales
personnel and 33 warehouses. It has covered over 1,200 distributors under the
outreach-secondary sales software in FY17.
HMN products are available in more than 16,700 villages and towns where the
population is less than 50,000.
The company has a diversified base of 15,000 suppliers, which ensures
consistent availability of materials.
The company initiated ‘Project Race’ in FY17 to expand its direct reach in urban
towns. It has engaged AC Nielsen to conduct a study in the top 30 towns to
understand the best way to take the expansion plan forward.
During the year, the company also initiated ‘Project Dhanush’ to enhance rural
direct reach via van operations (which were introduced in ~1,500 routes
covering 6,000 towns with a population less than 5,000). The target is to double
its rural reach in two years.
The company increased its direct reach to 0.73m outlets from 0.64m in FY16,
with a target to reach 0.8m in FY18. For a company with a pan-India reach of
4
13 July 2017

Emami
4.3m at end-FY17, the direct reach was well below that of peers and also weak
in terms of proportion of total outlets.
In FY17, the company improved the Stock Availability Index to 94%, and
controlled monthly loss in sales to less than 1% through automation of the DRP
tool.
Exhibit 4: Total reach is still low compared to some of its peers
Total reach (m outlets)
8.0
4.5
5.8
5.3
4.3
5.6
4.6
3.9
2.8
Source: Company, MOSL
Manufacturing facilities ready to cater pan-India market
Competitiveness is also brought about by four of its eight manufacturing units
having tax incentives, including the newly commissioned Pacharia plant in
Assam (Capex INR3b), which will enjoy these legislations until 2027.
Exhibit 5: Emami’s plant locations
Plant (#)
1
2
3
4
5
6
7
8
Locations
West Bengal
Assam (Amingaon Plant)
Assam (Abhoypur Plant)
Assam (Pacharia Plant)
Maharashtra
Gujarat
Uttarakhand
Dadra & Nagar Haveli
Source: Company, MOSL
The new Pacharia plant is HMN’s largest, spread across 19 acres, and will cater
to the pan-India market (with its fiscal benefits – income tax and excise
exemption for 10 years, and capital subsidy, outweighing logistical cost),
particularly strong demand in the north-east region. The facility has state-of-
the-art technology, with high-end machineries like automatic high-speed
packaging machines, automated tracking and monitoring systems, high-end
HVAC systems, and state-of-the-art storage/handling facility.
Acquisitions – Zandu and Kesh King – have done well till date
Zandu off-take has trebled since acquisition, and profits have improved
manifold, breaking even in the first year of operations.
Kesh King was able to become cash EPS-accretive within the first year of
operations, creating the foundation for rapid repayment of debt raised for its
acquisition.
5
13 July 2017

Emami
The company has taken numerous efforts to make progress in its Kesh King
brand. It has increased the number of herbs from 16 to 21 for higher efficacy,
introduced eye-catching packaging and launched the brand in the hitherto
uncharted south Indian market. Sales performance was very good in 1HFY17
before the impact of demonetization kicked in. Kesh King is a premium product
and has a high wholesale dependence at 70% of sales. Thus, sales were muted in
2HFY17 post demonetization.
New acquisitions and products are margin-accretive. Both Zandu and Kesh King
have over 70% gross margins.
Kesh King reached 0.54m outlets prior to its acquisition (MAT March 2015),
which has now been increased to 0.75m outlets (MAT December 2016).
The brand has 32.1% market share v/s 30% at the time of acquisition.
Kesh King’s growth was 300bp higher than the overall Ayurvedic medicinal oil
category in FY17.
Operating leverage potential is huge as the product reaches only 3% of
households in India. Apart from increasing distribution, management is planning
targeted communication, leading to product trials.
It has sachets SKUs in the category. Sachets are the strong driver in the shampoo
category, accounting for 65% of overall category sales.
Recognizing the need to keep pace with changing business dynamics
Management is cognizant that all companies have to evolve to cope with the
changing business dynamics. According to Knight Frank and RAI, the size of
modern trade will double by end-2019 to INR1.72t from INR870b currently.
E- Commerce is expected to be a USD120b (INR7.7t) market in India by 2020,
according to Google.
Exhibit 6: Retail spending across channels in Top 7 cities projected by Knight Frank in 2019
Source: Company, MOSL
13 July 2017
6

Emami
International business accounted for 11% of revenues in FY17
Interestingly, the recently launched ‘7 Oils In One’ product did better
internationally in terms of sales relative to India.
Boro Plus is a leading brand in the healing and topical supplements category in
Russia and Ukraine.
Fair & Handsome is the market leader in the UAE, and the second largest in
Saudi Arabia and Bangladesh in the men’s face whitening and fairness cream
category.
Navratna leads the cool oil market in the UAE, Saudi Arabia and Bangladesh.
In FY17, Emami Bangladesh reported sales of INR1.07b, up from INR976m in
FY16, while PAT increased sharply to INR154.8m from INR87.5m.
Emami International FZE, the Middle Eastern business, reported a decline in
sales to INR1.49b in FY17 from INR2.05b in FY16. PAT declined to INR19.8m
from INR235.8m in FY16.
Management remuneration formed 0.6% of sales in FY17
Remuneration of key management personnel stood at INR155.2m in FY17 (0.6%
of sales).
Average increase in salaries of employees other than managerial personnel in
the financial year was 10.42%, whereas the increase in managerial
remuneration stood at 6.25%.
Exhibit 7: Remuneration of key managerial personnel
Name of MD/WTD/Manager (INR m)
Shri R. S. Agarwal
Shri R. S. Goenka
Shri S. K. Goenka
Shri Mohan Goenka
Shri H. V. Agarwal
Smt. Priti A. Sureka
Shri Prashant Goenka
Total
Gross Salary
30
30
9
7
7
6
4
94
Sweat Option Commission
25
25
0
0
0
0
0
50
PF contribution
4
4
1
1
1
1
1
11
Total
59
59
10
8
8
6
5
155
Source: Company, MOSL
Exhibit 8: Percentage change in remuneration
Name (INR m)
Shri R. S. Agarwal
Shri R. S. Goenka
Shri S. K. Goenka
Shri Mohan Goenka
Shri H. V. Agarwal
Smt. Priti A. Sureka
Shri Prashant Goenka
Shri N. H. Bhansali
Shri A. K. Joshi
Designation
Executive Chairman
Whole Time Director
Managing Director
Whole Time Director
Whole Time Director
Whole Time Director
Whole Time Director
CEO - Finance, Strategy & Business Development and CFO
Company Secretary & VP - Legal
FY16
55
55
8
6
6
6
4
19
4
FY17
59
59
10
8
8
6
5
20
4
Change (%)
6.1
6.1
27.7
32.2
33.1
5.5
16.5
2.7
7.1
Source: Company, MOSL
13 July 2017
7

Emami
Financials
In FY17, domestic sales grew 9.6% YoY to INR21.4b, while international sales
declined 15.7% YoY to INR2.85b. Institutional business grew 1% YoY to
INR1.05b.
FY17 was a story of two halves. Strong summer and abundant rainfall enabled
15% YoY domestic business sales growth in 1HFY17, along with 29% EBITDA
growth. 2HFY17, however, was impacted by demonetization, with sales
declining 2% YoY and EBITDA coming in flattish.
There was an increase in amortization costs YoY from INR2.1b to INR2.59b due
to Kesh King and She Comfort.
Among other expenses, repairs and maintenance saw a sharp increase both on
absolute and percentage of sales basis.
While profit growth was unimpressive, net operating cash flow increased to
INR7.3b in FY17 from INR5.6b in FY16.
Total borrowings (including debentures to be redeemed amounting to INR3b
under other current liabilities) reduced 29% YoY to INR4.8b. Net debt, including
cash and cash equivalents, declined 24% YoY to INR4.3b.
Management reiterated its target of becoming debt-free by end-FY18.
Forex outgo was INR467.6m in FY17 (1.9% of sales) largely due to materials and
capital goods, while forex income was INR910.8m in FY17 (3.7% of sales) mainly
accrued due to exports.
In FY17, a sum of INR19.2m was underspent on CSR expenditure relative to the
prescribed amount (INR75.5m v/s INR94.7m prescribed) due to extraneous
factors and better planning & negotiations.
Debentures of INR3b are scheduled to be redeemed in three tranches in FY18
(INR1.5b on 22 May, INR750m on 22 August and INR750m on 22 November).
Exhibit 9: Information relating to statutory dues; amount under litigation under various acts
Name of Statute
Name of
Dues
Amount under dispute not yet
deposited (INR in m)
1.4
18.6
Central Sales Tax Act and Local
Sales Tax
Sales Tax Act
50.9
26.4
11.4
The Central Excise Act, 1934
Income Tax, 1961
Excise
Duty
Income
Tax
2.8
0.5
7.1
FY to which the amt. relates
Forum where the dispute
is pending
2005-06
ADC
1996-2001, 2009-11, 2012-13, AC(A), DC(A), JC(A) & Addl.
2014-151 2016-17
CCT
1990-91, 2000-06, 2010-12, 2013-
Tribunal/Board of
14, 2015-17
Revenue
1999-2000, 2004-07
High Court
1989-90, 1993-97
2009-13, 2014-15
1993-96, 2009-10
2008-09 & 2010-11
Supreme Court
Commissioner (Appeals)
CESTAT
CIT (A)
Source: Company, MOSL
Guarantees and counter guarantees given amounted to INR667m in FY17 v/s
INR545m in FY16.
Estimated amount of commitments net of advances on capital account not
provided for declined to INR356.5m in FY17 from INR749.4m in FY16.
For FY17 and FY16, every percentage appreciation in the exchange rate between
INR and USD affected the company’s PAT by ~INR6.7m.
13 July 2017
8

Emami
Significant related-party transactions in FY17 included the sale of property plant
and equipment to entities where key management personnel or relatives have
influence amounting to INR52m.
Valuation and view
Despite significant near-term challenges due to likely higher sales disruption
following GST implementation (as it has high wholesale channel dependence v/s
peers), we believe that HMN remains a credible long-term play due to (a)
expected healthy growth in the existing product categories, where it has
dominant market share, (b) demonstrated ability to leverage on its innovative
ability, customer understanding and distribution reach to turnaround
acquisitions, (c) best-of-breed R&D and A&P spend, innovative products and
ability to back-up innovation with strong marketing and (d) efforts toward
improving its direct distribution reach.
Valuations at 31.6x FY19E EPS are inexpensive relative to peers. We like the
company’s healthy long-term earnings growth prospects and return ratios in the
mid-30s. We thus maintain our
Buy
rating with a target price of INR1,265,
implying 18% upside to CMP.
13 July 2017
9

Emami
Story in Charts
Exhibit 10: Brand-wise revenue share (%)
Others
22
OTC
products
10
BoroPlus
16
Fair &
Handsome
28
Exhibit 11: Region-wise contribution to export revenues (%)
ROW
9
CISEE
11
FY17
Navratna
24
Source: Company, MOSL
MENAP
27
FY17
SSEA
53
Source: Company, MOSL
Exhibit 12: Domestic volumes grew 6.9% in FY17
Domestic volume growth (%)
20.0
15.3
12.3
11.8
14.0
6.9
0.9
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Exhibit 13: Expect revenue CAGR of 14.6% over FY17-19
36.7
Revenue (INR b)
Revenue growth (%)
22.1
16.6
16.9
7.2
21.8
23.6
6.4
24.9
5.7
14.2 15.1
10.2 12.5 14.5 17.0 18.2 22.2
28.5 32.8
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
*FY16 & FY17 as per IND-AS
Source: Company, MOSL
Source: Company, MOSL
Exhibit 14: Gross margin to contract by 40bp over FY17-19
Gross Margin (%)
64.8
62.8
58.0
62.6
57.9
65.6
66.6
65.8 66.2
Exhibit 15: Adspend to increase led by new launches
Advertising and Promotion (%)
19.0
17.6
15.8
16.4
15.2
17.7
18.3
17.8
18.5 18.3
56.9
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
*FY16 & FY17 as per IND-AS
Source: Company, MOSL
FY10 FY11 FY12E FY13 FY14 FY15 FY16 FY17 FY18E FY19E
*FY16 & FY17 as per IND-AS
Source: Company, MOSL
13 July 2017
10

Emami
Exhibit 16: Expect EBITDA CAGR of 13.4% over FY17-19
92.3
EBITDA (INR b)
EBITDA growth (%)
9.8
Exhibit 17: EBITDA margin to contract by 60bp over FY17-19
EBITDA Margin (%) 30.5
29.4 29.8
29.1
24.0
21.3
19.2 20.1
24.4 24.2
2.5
2.7
8.2
2.8
5.1
3.4
22.5
4.4
30.1
6.9
5.4
28.3
20.5
7.6
8.4
10.5 10.1
16.8
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
*FY16 & FY17 as per IND-AS
Source: Company, MOSL
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
*FY16 & FY17 as per IND-AS
Source: Company, MOSL
Exhibit 18: Expect adj. PAT CAGR of 13.1% over FY17-19
PAT (INR m)
95.7
5.8
6.0
6.4
PAT Growth (%)
7.7
4.9
Exhibit 19: Return ratios expected to improve
ROCE (%)
ROE (%)
47.1 44.9
42.4
40.5
38.8
37.1
35.8
34.8
33.4 34.1
43.2 44.0
38.5
35.8
35.6
34.1
31.0
27.9 27.5 28.6
1.8
27.2
2.6
2.3
3.1
27.9
21.6
20.7 18.7
4.5
4.0
6.6
20.0
13.2
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
*FY16 & FY17 as per IND-AS
Source: Company, MOSL
Source: Company, MOSL
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
*FY16 & FY17 as per IND-AS
Exhibit 20: Net working capital days (average basis) increased in FY17 due to higher inventory days and lower creditor days
Cash conversion cycle
INR m
Inventory
Account Receivables
Account Payables
Days
Inventory days
Debtor days
Creditor days
Cash conversion cycle (Days)
FY07
412
458
413
28
29
22
35
FY08
401
350
477
26
26
28
23
FY09
738
710
1,201
28
26
41
13
FY10
826
755
890
28
26
37
17
FY11
FY12
FY13
FY14
1,411
793
1,480
26
19
25
19
FY15
1,267
1,027
1,990
22
15
29
8
FY16
1,505
1,309
2,487
21
18
35
5
FY17
1,792
970
1,847
24
17
32
9
FY18E FY19E
1,859
1,504
2,758
23
16
30
10
2,124
1,640
2,588
22
18
30
10
1,234 1,122 1,140
1,087 1,005 1,122
883 1,071 1,061
30
27
26
31
30
26
25
31
24
23
23
24
Source: Company, MOSL
Exhibit 21: Emami P/E (x)
20.0
15.0
10.0
5.0
0.0
9.0
2.4
PB (x)
Peak(x)
Avg(x)
17.9
Min(x)
Exhibit 22: Emami P/E premium v/s Sensex
600
500
10.5
400
300
200
100
0
240.6
Emami PB Relative to Sensex PB (%)
LPA (%)
283.0
Source: Company, MOSL
Source: Company, MOSL
13 July 2017
11

Emami
Exhibit 23: Valuation matrix
Company
Consumer
Asian Paints
Britannia Inds.
Colgate-Palm.
Dabur India
Emami
Godrej Consumer
GlaxoSmith C H L
Hind. Unilever
ITC
Jyothy Lab.
Marico
Nestle India
P & G Hygiene
Page Industries
Parag Milk Foods
Pidilite Inds.
United Breweries
United Spirits
Retail
Jubilant Food.
Titan Company
Reco
CMP
(INR)
Neutral 1,124
Buy
3,722
Buy
1,074
Neutral
302
Buy
1,073
Neutral
982
Sell
5,491
Buy
1,133
Buy
339
Neutral
367
Neutral
327
Sell
6,785
Buy
7,991
Buy
16,798
Neutral
238
Neutral
823
Neutral
810
Neutral 2,659
Sell
Neutral
1,111
535
Target
Price
(INR)
1,240
4,450
1,335
315
1,265
930
4,500
1,260
380
405
360
5,990
9,082
19,125
240
835
850
2,415
730
545
Mkt. Cap
Upside
(INR B)
(%)
10
20
24
4
18
-5
-18
11
12
10
10
-12
14
14
1
1
5
-9
-34
2
1,086
444
293
536
241
659
232
2,444
3,993
66
418
658
260
185
20
419
217
388
73
471
(USD B)
16.9
6.9
4.5
8.3
3.7
10.2
3.6
37.9
62.0
1.0
6.5
10.2
4.0
2.9
0.3
6.5
3.4
6.0
1.1
7.3
EPS Growth YoY (%)
FY17
FY18E
FY19E FY17
18.6
23.3
21.1
18.3
18.8
14.6
9.3
18.4
20.4
22.4
21.1
17.6
16.6
26.2
64.7
14.8
51.9
38.7
47.4
18.2
53.5
50.5
50.6
41.7
40.5
51.9
35.2
57.7
40.3
32.7
52.1
57.5
55.1
70.4
66.2
49.2
93.2
99.4
111.0
59.2
P/E (x)
FY18E
48.6
43.5
41.9
39.1
37.6
45.0
33.0
49.7
35.1
41.1
47.1
57.2
51.3
53.0
32.1
44.6
83.5
71.2
91.3
52.0
FY19E
41.0
35.3
34.6
33.0
31.7
39.3
30.2
42.0
29.2
33.5
38.9
48.6
44.0
42.0
19.5
38.9
55.0
51.3
61.9
44.0
RoE (%) Div. (%)
FY17
28.5
36.9
50.4
28.4
35.8
24.6
22.2
65.6
23.5
21.1
36.7
39.0
45.3
40.0
5.9
28.2
10.4
21.3
8.2
20.6
FY17
1.0
0.6
0.9
0.8
0.7
0.6
1.0
1.5
1.6
1.6
0.9
0.9
4.6
0.5
0.0
0.6
0.1
0.0
0.2
0.5
8.7
10.0
7.3
16.0
-5.7
20.8
1.9
6.7
4.5
7.6
12.4
15.4
0.9
6.5
1.9
16.1
9.4
14.9
175.7 -20.4
12.1
10.5
-1.6
0.6
11.5
7.5
15.0
32.8
-46.4 106.4
6.7
10.2
-23.0 11.6
87.1
39.7
-32.1
18.5
21.6
13.8
Source: Company, MOSL
13 July 2017
12

Emami
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
COGS
Gross Profit
Gross Margin (%)
Operating expenses
EBITDA
Change (%)
Margin (%)
Depreciation
Int. and Fin. Charges
Financial Other Income
Profit before Taxes
Change (%)
Margin (%)
Tax
Tax Rate (%)
Adjusted PAT
Change (%)
Margin (%)
Amortization
Reported PAT
2014
18,208
7.2
6,803
11,405
62.6
6,961
4,444
30.1
24.4
352
54
622
4,660
26.4
25.6
636
11.7
4,025
27.9
22.1
0.0
4,025
2015
22,172
21.8
7,800
14,373
64.8
9,018
5,355
20.5
24.2
343
51
964
5,924
27.1
26.7
994
18.1
4,856
20.7
21.9
0.0
4,856
2016
23,583
6.4
8,121
15,462
65.6
8,589
6,873
28.3
29.1
423
540
445
6,354
7.3
26.9
597
7.4
5,762
18.7
24.4
2,127
3,635
2017
24,930
5.7
8,336
16,595
66.6
9,003
7,591
10.5
30.5
469
580
311
6,853
7.9
27.5
836
14.1
6,021
4.5
24.2
2,617
3,404
2018E
28,466
14.2
9,737
18,729
65.8
10,368
8,362
10.1
29.4
519
185
342
7,999
16.7
28.1
1,584
19.8
6,416
6.6
22.5
2,400
4,016
(INR Million)
2019E
32,761
15.1
11,082
21,679
66.2
11,913
9,767
16.8
29.8
546
0
393
9,614
20.2
29.3
1,914
19.9
7,700
20.0
23.5
2,400
5,300
2020E
37,720
15.1
12,758
24,962
66.2
13,694
11,267
15.4
29.9
573
0
453
11,147
15.9
29.6
2,296
20.6
8,851
15.0
23.5
2,400
6,451
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Loans
Deferred Liability
Capital Employed
Goodwill on consolidation
Gross Block
Less: Accum. Depn.
Net Fixed Assets
Capital WIP
Investments
Curr. Assets, L&A
Inventory
Account Receivables
Cash and cash equivalents
Others
Curr. Liab. and Prov.
Account Payables
Other Liabilities
Provisions
Net Current Assets
Application of Funds
E: MOSL Estimates
2014
227
9,094
9,321
0
450
48
9,819
0
10,341
6,382
3,959
119
2,958
5,987
1,411
793
2,700
1,083
3,203
1,480
341
1,383
2,783
9,819
2015
227
12,079
12,306
46
470
120
12,942
41
6,393
1,882
4,511
265
5,013
6,934
1,267
1,027
3,541
1,100
3,821
1,990
468
1,363
3,113
12,942
2016
227
15,889
16,116
41
6,838
90
23,086
41
24,162
4,408
19,754
616
474
6,037
1,505
1,309
1,084
2,138
3,836
2,487
660
689
2,200
23,086
2017
227
17,320
17,547
14
4,846
422
22,829
41
27,341
7,357
19,983
129
1,277
4,687
1,792
970
501
1,425
3,288
1,847
622
819
1,399
22,829
2018E
227
20,675
20,902
14
1,846
422
23,184
41
28,841
7,846
20,995
129
849
5,480
1,859
1,504
142
1,974
4,310
2,758
569
983
1,169
23,183
(INR Million)
2019E
227
24,087
24,314
14
0
422
24,750
41
30,341
8,360
21,981
129
764
6,125
2,124
1,640
164
2,196
4,290
2,588
522
1,179
1,835
24,750
2020E
227
24,994
25,221
14
0
422
25,657
41
31,841
8,899
22,941
129
688
6,863
2,437
1,784
189
2,454
5,004
3,110
479
1,415
1,859
25,658
13 July 2017
13

Emami
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout %
Valuation (x)
P/E
Cash P/E
EV/Sales
EV/EBITDA
P/BV
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Debtor (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
2014
17.7
19.3
41.1
7.0
39.5
60.5
55.7
13.1
53.6
26.1
0.7
47.1
43.2
56.3
16
1.6
-0.8
2015
21.4
22.9
54.2
7.0
32.7
50.2
46.9
10.6
44.0
19.8
0.7
44.9
44.0
50.9
17
1.4
-0.3
635
2016
25.4
27.2
71.0
3.0
11.8
42.3
39.4
10.6
36.2
15.1
0.3
40.5
35.8
39.1
20
1.1
0.3
2017
26.5
28.6
77.3
8.7
33.0
40.5
37.5
9.9
32.5
13.9
0.8
35.8
31.0
28.1
22
1.1
0.2
2018E
28.3
30.6
92.1
9.0
31.8
38.0
35.1
8.6
29.2
11.7
0.8
33.4
34.1
27.9
19
1.2
0.1
2019E
33.9
36.3
107.1
9.0
26.5
31.6
29.5
7.4
24.8
10.0
0.8
34.1
38.5
31.2
18
1.4
0.0
2020E
39.0
41.5
111.1
9.0
23.1
27.5
25.8
6.4
21.5
9.7
0.8
35.7
42.4
34.1
17
1.5
0.0
Cash Flow Statement
Y/E March
OP/(loss) before Tax
Int./Div. Received
Interest Paid
Direct Taxes Paid
(Incr)/Decr in WC
CF from Operations
(Incr)/Decr in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Invest.
(Incr)/Decr in Debt
Dividend Paid
Others
CF from Fin. Activity
Incr/Decr of Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2014
4,444
177
-54
-547
139
4,159
-591
3,568
-1,327
-1,918
-751
-1,743
136
-2,358
-117
2,817
2,700
2015
5,355
1,012
-51
-1,070
512
5,758
3,802
9,560
-2,054
1,748
19
-1,727
-4,956
-6,664
842
2,700
3,541
2016
6,873
705
-540
-472
-1,544
5,022
-18,121
-13,099
4,539
-13,582
6,369
-820
554
6,103
-2,457
3,541
1,084
2017
7,591
721
-580
-966
218
6,984
-2,691
4,293
-803
-3,494
-1,992
-2,354
272
-4,074
-584
1,084
500
2018E
8,362
0
-185
-1,584
371
6,965
-1,500
5,465
428
-1,072
-3,000
-2,516
-734
-6,250
-358
501
142
(INR Million)
2019E
9,767
0
0
-1,914
-644
7,209
-1,500
5,709
85
-1,415
-1,846
-2,516
-1,410
-5,773
21
142
163
2020E
11,267
0
0
-2,296
1
8,973
-1,500
7,473
76
-1,424
0
-2,516
-5,008
-7,524
25
164
189
13 July 2017
14

Emami
NOTES
13 July 2017
15

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Disclosure of Interest Statement
Emami
Analyst ownership of the stock
No
Served as an officer, director or employee -
No
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Emami
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In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Varun Kumar
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Motilal Oswal Securities Ltd
13 July 2017
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