MOSL: . EMAMI: Subdued result trend continues
- Emami (HMN)'s overall volume growth in 1QFY23 stood at 9.6% YoY, while it was 2.4% ex-Dermicool (merged from this quarter). The base of healthcare business along with pain management weakened (v/s good growth in other segments) in 1Q. However, it is likely to be less challenging in subsequent quarters. According to the management, material cost pressures are likely to persist for some more time.
- It is heartening, though, that HMN is investing on growth. Its ad-spends-to-sales ratio is expected to increase by over 100bp in FY23 and investments in Project Khoj (to augment rural distribution) will also continue.
- While sales growth continued to be unimpressive for a company of its size (with a five-/three-/two-year CAGR of 5.1%/5.8%/9.7%, respectively), the trend is getting relatively better. HMN's valuations are also inexpensive. Maintain BUY with a TP of INR520.
Sales and gross profit in line; significant miss on EBITDA
- Emami's consolidated net sales grew 17.8% YoY to INR7.8b (in line). EBITDA/PBT remained flat YoY at INR1.7b (est. INR1.9b)/ INR1.5b (est. INR1.8b), respectively. Adj. PAT before amortization rose 3.5% YoY to INR1.5b (broadly in line with our estimate).
- Domestic volume rose 9.6% YoY. However, ex-Dermicool it stood at 2.4%.
- Gross margin contracted 340bp YoY to 62.6%. (est. 63%).
- EBITDA margin too contracted 340bp YoY to 22.3% (est. 25%) due to higher ad-spends (+90bp YoY) and other expenses (+50bp YoY) partly offset by lower employee costs as a percentage of sales (-140bp YoY).
- Absolute ad-spends grew 24.1% YoY to INR1.4b.
- Overall domestic business improved 13% YoY. Dermicool contributed 8% to domestic sales. Domestic business salience during 1QFY23 was at 85%.
- International sales grew 45% YoY, driven by MENA and SAARC. International business salience during 1QFY23 stood at 15%.
Domestic segmental performance YoY in 1QFY23: Navratna (+29%), Pain Management (-30%), BoroPlus (flat), Kesh King (+20%), Male Grooming (+32%), Healthcare (-25%) and 7 Oils in One (+45%).
Emami markets personal and health care products. Co.'s brands and products include: Boroplus - antiseptic cream; Navratna - cool oil; Zandu Balm for relief from headaches, backache and cold; Fair and Handsome - cream for men; Mento plus balm for relief of headaches; Fast Relief - pain relief ointment; Zandu Sona Chandi - for immunity; Kesari Jivan - health supplement; Vasocare - herbal skin jelly; Zandu healthcare offers products from healthcare to lifestyle; 7 Oils in One - damage control hair oil and HE - deodorants. Co.'s subsidiaries are engaged in personal and healthcare, newsprint, ball pen tips manufacturing, retail, pharmacy, art, edible oils, healthcare, cement and bio diesel.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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