Stock Buzz: Valuations are quite supportive for Emami

ET Now’s Nikunj Dalmia shares his views on Emami. Excerpts:


Nikunj Dalmia: FMCG stocks are the only game in the town now. After yesterday’s majestic rally in HUL, everyone is of the view that it is now time to focus on B-rung FMCG stocks and Emami is interestingly positioned.

First, it is all about buzz and the buzz is that Credit Suisse is aggressively looking at increasing their stake, but through the open market Credit Suisse has a decent exposure to Emami.

My understanding is that they are buying large quantities on behalf of a client, that is the buzz. Now let us understand the fundamental picture, and what is the current PE multiple for Emami. Based on FY14 estimates, it is trading at something like 25 times which is not very expensive for the FMCG sector at a time when HUL is trading at something like 40 plus based on FY15 estimates.

Emami has been a trending stock. In the last three months Emami has appreciated by about 20% plus and if we look at the big picture, Emami up until now has managed to grow at a run rate which is much higher than the industry average. They are in some specific hair care market where MNC competition is not there. They are also enjoying some degree of pricing power.

There is also a buzz that they are hunting for two or three midsized domestic brands in order to really expand their product reach because they missed out on Paras Pharma. So the appetite to acquire domestically something clearly is there and the management has indicated that in the past.

So, news will keep that stock warm. There is a buzz from Credit Suisse valuations are looking attractive and as a group FMCG is looking charged up. Volumes could be a concern there. On an average it trades about 2.5 lakh to 3 lakh volumes on a daily basis, but if you mark the delivery based buying here for Emami, it has picked up. So my understanding is that these are classic HNI investors or may be PMS schemes which are actively accumulating Emami simply because it is in a niche segment and valuations are quite supportive.