Emami stock upgraded to ‘buy’, target price raised; Citi says company to gain from demand recovery

Citi has upgraded its rating to ‘buy’ for Emami and revised the target price to Rs 600 from Rs 455. This is a jump of 32 percent jump in target price.

Citi expects Emami to benefit from investments for its long-term strategic initiatives. The brokerage firm believes that Emami is well placed to benefit from potential recovery in demand trends.

Citi also expects the company’s margin to expand, led by input cost moderation. Emami’s management has guided for 200-250 basis points expansion in EBITDA margin in FY24, and has forecast a gross margin improvement.

Also read: Emami Q1 results: Net profit jumps 86.6% to Rs 137.7 crore, revenue rises 6.8%

In the April-to-June quarter, favourable trends in the prices of key raw materials have contributed to the expansion of gross profit margins for Emami.

The numbers

Emami’s management remains optimistic of rural demand trends going forward, aided by moderating inflation and a near-normal monsoon. It expects growth for the rest of FY24 on the back of a normal winter season. Emami’s D2C channel experienced a growth of 27 percent in the April-to-June quarter and is expected to contribute 4-5 percent to FY24 sales, the management said in its Q1FY24 earnings conference call.

In the April-June quarter, Emami’s net profit increased 87 percent year-on-year (YoY) to Rs 137 crore. Revenue increased 6 percent YoY to Rs 826 crore in the same period.

The stock was up 1.64 percent at Rs 533.15 at 10.17 am on the National Stock Exchange.

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