FMCG company Emami declares 400% dividend, posted muted performance in Q2

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With a market valuation of 20,511 Cr, Emami Limited is a large-cap company that engages in the FMCG industry. With a remarkable segment of well-known household brand names including BoroPlus, Navratna, Fair and Handsome, Zandu Balm, Mentho Plus Balm, Fast Relief, and Kesh King, Emami Limited is one of the leading personal and healthcare businesses in India. The company has released its Q2 earnings along with a 400% dividend.

The company has said in a stock exchange filing that “The Board of Directors at its meeting held on November 11, 2022, declared an Interim Dividend of 400% i.e. Rs. 4/- per equity share of Rs. 1/- each fully paid up. The Holding company has fixed November 21, 2022, as the Record Date for the purpose of determining shareholders entitled to receive the said Interim Dividend.”

The company declared net sales of 807.36 crore in Q2FY23 compared to 777.1 crore in Q2FY22, representing a YoY growth of 3.9%. The company declared revenue from operations of 813.75 crore in Q2FY23 compared to 787.12 crore posted in Q2FY22, representing a YoY growth of 3.4%. The company reported an EBITDA of 195.38 crore in Q2FY23 compared to 277.18 crore posted in Q2FY22, representing a fall of -29.5% YoY. The company reported a net profit of 184.18 crore in Q2FY23 compared to 185.27 crore posted in Q2FY22, representing a YoY fall of -0.6%. The company’s EPS stood flat at 4.17 per share.

The research analysts of the broking firm Motilal Oswal said “A significant miss on our expectations and the improbability of a sharp revival led to a reduction of ~8% each in our FY23/FY24 EBITDA forecast. However, due to the 10% tax rate guidance for FY23/FY24 v/s its earlier estimate of 17.5%/18%, there is no material change at the EPS level for both fiscals. HMN’s sales CAGR of 9.7% over FY20-22 was far better than the 3% sales CAGR over FY16-20. If this trajectory leads to a sustainable and strong double-digit sales growth, a further re-rating could be on the cards.”

“We maintain our Buy rating on the stock, led by its: a) inexpensive valuations at 21.1x FY24E EPS (23.2x including amortization), b) increase in ad-spends, and 3) expansion in its rural distribution reach. We arrive at our TP of INR550 (valuing the company at 24x Sep’24E EPS, at a 40% discount to its peers on a pre-amortization basis). We maintain our Buy rating,” they further added.

The shares of Emami Ltd closed on Friday at 465.20 apiece, up by 0.043% from the previous close of 465. During its last trading session, the stock recorded a total volume of 197,166 shares compared to the 20-Day average volume of 155,090 shares. On a YTD basis, the stock has fallen 10.83% so far in 2022.

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