Religare maintains ‘Buy’ on Emami post Q3 results

MUMBAI: Religare Institutional Research has maintained a ‘buy’ recommendation on Emami on back of strong domestic volume growth, recovery in the international business and reasonable valuations.

The company reported a net profit of Rs 115 crore for the quarter ended December 2012, up 21.5 per cent, against a net profit of Rs 95 crore in the corresponding quarter last fiscal.

Emami’s net sales grew 21.3 per cent, Year-on-Year (Y-o-Y) to Rs 5.5 billion with the domestic business reporting a strong 21.7 per cent Y-o-Y growth. The international business bounced back with a 25% Y-o-Y growth during the quarter led largely by SAARC and Africa. CSD sales also grew 12% Y-o-Y.

“We trim our FY14/FY15 earnings estimates by ~5 per cent each as we roll over to a March’14 target price of Rs 650. Key risks to our call are slowdown in domestic volume growth, slowdown in international business, and a rise in input costs (especially Mentha Oil) which could impact gross margins.