Last month, Emami Group completed divestment of its 100 per cent stake in Emami Cement
to Nuvoco Corporation for an enterprise value of Rs 5,500 crore. Now, with most of the deleveraging concerns behind, analysts expect promoters to focus on the core business.
In keeping with the accent on health and hygiene in the wake of Covid-19, Emami will be focusing on Zandu and BoroPlus, two of its major brands in the segment.
The Zandu brand has seen a 27-30 per cent growth in the past three to four months. Emami plans to cash in on the momentum and 20-30 new launches under Zandu have been identified.
According to the company’s investor presentation after June quarter results, the health care range has seen a 23 per cent growth in the quarter; in June, growth was at 59 per cent. The BoroPlus range saw a 28 per cent growth in the first quarter and 92 per cent in June.
The deleveraging exercise at the promoter level, coupled with growth from the health care range amid tight cost control, led to a rerating of the stock.
After it surprised the market by maintaining profit despite revenue fall, the Emami scrip rose 2.6 per cent, up from Rs 340 apiece and closed at Rs 349 on Wednesday.
For cost reduction, Emami had appointed AT Kearney to chart out the course, which helped it increase margins during the quarter.
Gross margins increased 230 basis points (bps) at 66.5 per cent and earnings before interest, tax, depreciation, and amortisation margins by 490 bps at 25.5 per cent. The cost reduction target for the year is Rs 50-60 crore.
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