To regain investors’ confidence, Emami needs to sustain the revival in key segments like Kesh King and Zandu Pancharishta, besides improvement in other products, say analysts. The management, however, is sceptical of how the March quarter pans out, as a delayed winter could impact its non-winter portfolio.
Moreover, margins are unlikely to improve despite the management indicating its reluctance to fuel volumes at the cost of profitability. Emami’s recent acquisition of Creme-21 will also weigh on margins, say analysts, given that Creme-21 earns 9-10 per cent operating profit margin, way lower than Emami’s 27-30 per cent.
Softening input prices (crude and mentha oil), however, will provide some relief. In Q3, due to higher input prices, Emami’s Ebitda (earnings before interest, tax, depreciation and amortisation) margin fell 209 basis points YoY to 32.9 per cent.
Overall, analysts recommend not to bottom fish even as the stock trades at 29 times FY20 earnings, a 20-30 per cent discount to its peers.