On Monday, ICICI Securities adjusted its price target for Emami (NS:EMAM) Ltd (HMN:IN), a leading Indian personal care company, from INR730.00 to INR680.00. The firm maintained its Add (2) rating on the stock. Following a meeting with Mohan Goenka, Vice Chairman & Executive Director of Emami, the firm relayed several key takeaways that influenced their decision.
The analyst noted that Emami is looking to bolt-on acquisitions as a significant strategy for achieving double-digit revenue growth. This approach is in response to external headwinds that have made it challenging for the company to maintain organic growth at the same rate. The firm also plans to revitalize key brands such as Kesh King and Fair & Handsome with brand refreshes and extensions.
Navratna, another of Emami's brands, is expected to continue its strong performance, particularly with a favorable summer season that could enhance market penetration and adoption rates. The company's international business and digital-first brands are anticipated to recover following temporary setbacks experienced in Q2FY25.
The analyst highlighted Emami's ability to sustain operating margins around 26% over the past five years. This has been achieved despite an increased share of organized channels, which typically offer lower margins compared to general trade, and the initial losses incurred by digital-first brands. The resilience of Emami's brand portfolio has been a key factor in maintaining these margins.
Furthermore, the potential improvement in profitability of these segments could drive margin expansion in the medium term, as indicated by the analyst's remarks. The Add (2) rating suggests that ICICI Securities sees potential for the stock to outperform in the future, despite the lowered price target.
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