“Emami is moving in the right direction as far as reducing promoter pledging is concerned. However, it has to deliver sustainable growth to command higher multiples,” says an analyst with a domestic broking house. He believes factors such as seasonality, increased competition, and higher share of wholesale distribution are key concerns for the company.
Notably, seasonal divergence has been playing spoilsport for Emami in recent times. For example, the delayed onset of winter took a toll on its December quarter domestic volumes, which were down 2 per cent.
As is the case with others, now Covid-19-led disruptions are likely to have impacted its summer-centric products, such as Navranta Cool Ayurvedic Oil and Himani Navratna Cool Talc (20-25 per cent of revenue). Unless Emami improves its portfolio mix, in terms of seasonality, structural growth looks bleak, say analysts.
Shirish Pardeshi, analyst at Centrum Broking, differs somewhat. He says although 40 per cent of Emami’s portfolio is seasonal in nature, the rest should help its overall numbers; the next two-year performance will get support, as the muted show will be in the base. He, however, agrees with the point that structural growth is missing in Emami and it requires strong revival strategy.
Finally, how long it takes to complete the deals (cement and solar power) in the current situation also needs to be seen. According to the Emami management, “The finalisation of the sale of the group’s cement business is on schedule and is expected to be completed soon.”
Overall, investors should not get lured till Emami’s performance improves.