RESULT UPDATE
EMAMI Health and rural focus to bear fruit
India Equity Research| Consumer Goods COMPANYNAME
Emami’s consolidated Q1FY21 revenue (down 25.8% YoY), EBITDA (down EDELWEISS 4D RATINGS 8.3% YoY) and PAT (up 1.2% YoY) were better than our estimates. The Absolute Rating BUY lockdown affected performance in April and May, but June (domestic Rating Relative to Sector Performer business up 8% YoY) turned out to be well. The recovery has sustained Risk Rating Relative to Sector High with double-digit growth in July. Soft mentha prices expanded gross Sector Relative to Market Underweight margin 231bps YoY; with mentha prices remaining benign, we expect gross margin expansion to sustain. A sharp cut in ad spends (down 749bps YoY) led to 487bps YoY EBITDA margin expansion. The lockdown MARKET DATA (R: EMAM.BO, B: HMN IN) affected international business (IB) as well overall sales dipped 18% YoY CMP : INR 257 (however up 7% YoY in June). Going ahead, with promoter-level pledging Target Price : INR 296 52-week range (INR) : 358 / 131 concern alleviating in the wake of the recent Emami Cement sale, a slew Share in issue (mn) : 444.5 of launches in health & hygiene to capitalise on the topical upswing, and M cap (INR bn/USD mn) : 115 / 1,510 a higher rural contribution should hold the company in good stead. Avg. Daily Vol.BSE/NSE(‘000) : 958.1 Maintain ‘BUY’ with a TP of INR296.
SHARE HOLDING PATTERN (%)
Health & hygiene portfolio gains; discretionary portfolio suffers Current Q4FY20 Q3FY20 Key highlights: i) 43% of portfolio, which is aligned towards health & hygiene, grew Promoters * 53.9 52.7 52.7 29% YoY while the balance fell 44% YoY. Launches contributed 5% to domestic MF's, FI's & BK’s 29.8 31.5 28.7 revenue. ii) Gaining from the health & hygiene platform, the healthcare range, pain FII's 6.9 7.0 10.4 management range and BoroPlus revenue grew 23% YoY, 15% YoY and 28% YoY, Others 9.4 8.8 8.2 respectively. iii) Discretionary and summer-centric categories such as Navratna, Kesh * Promoters pledged shares : 48.3 King and the male grooming range were worst impacted; they slid 41% YoY, 33% YoY (% of share in issue) and 70% YoY, respectively. PRICE PERFORMANCE (%) EW Consumer Q1FY21 conference call: Key takeaways Stock Nifty Goods Index Domestic volume declined ~28% YoY. FY21 should end on a flat to positive note in 1 month 10.3 3.7 3.2 terms of revenue growth. Lost ~INR1,500mn of sales in Q1. The company is on the 3 months 42.3 21.4 16.4 verge of launching new brand in a month. This will be in the home hygiene space. 12 months (17.1) 3.3 7.1
Outlook and valuation: Gradual recovery; maintain ‘BUY’ As things normalise, we expect revenue growth to improve gradually as the rural business recovers, wholesale dependence recedes and product relaunches gain desired traction. Furthermore, alleviation of promoter-level pledging concern and launches in Abneesh Roy the health & hygiene space are added positives. We maintain ‘BUY/SP’ with a TP of +91 22 6620 3141 [email protected] INR296. The stock is trading at a PE of 23.8x FY22E. Financials (INR mn) Tushar Sundrani Year to March Q1FY21 Q1FY20 % change Q4FY20 % change FY20 FY21E FY22E +91 22 6620 3004
[email protected] Net rev. 4,813 6,486 (25.8) 5,327 (9.6) 26,549 25,842 28,472 EBITDA 1,230 1,341 (8.3) 985 24.8 6,905 7,365 8,171 Alok Shah Net profit 396 391 1.2 302 31.2 3,130 3,864 4,807 +91 22 6620 3040 [email protected] Dil. EPS (INR) 0.9 0.9 1.2 0.7 31.2 6.9 8.7 10.8 Diluted P/E (x) 37.3 29.6 23.8
EV/EBITDA (x) 16.9 15.4 13.5 ROAE (%) 15.7 20.1 22.2 August 7, 2020
Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL
Consumer Goods
Table 1: Trends at a glance Growth (% YoY) Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Consolidated sales 13.5 (0.0) 7.2 3.7 5.6 5.1 0.2 16.7 (25.8) Domestic volume 16.0 (4.0) 3.0 2.0 0.1 1.0 (3.0) (19.0) (28.0) Boroplus (15.0) (7.0) 4.0 17.0 (7.0) 39.0 (12.0) (77.0) 28.0 Navratna 19.0 3.0 10.0 1.0 4.0 (3.0) 11.0 (12.0) (41.0) Pain management 39.0 (8.0) 6.0 1.0 (6.0) 4.0 13.0 (5.0) 15.0 Male grooming 8.0 12.0 (2.0) (4.0) (7.0) (32.0) (39.0) (42.0) (70.0) Kesh King 10.0 2.0 26.0 15.0 30.0 (11.0) 18.0 (26.0) (33.0) Healthcare 28.0 1.0 18.0 9.0 (3.0) 0.1 4.0 (9.0) 23.0 International sales growth 7.0 4.0 18.0 19.0 34.0 20.0 18.0 (4.0) (18.0) CSD 28.0 (3.0) 2.0 (1.0) (4.0) 25.0 7.0 NA (38.0) 7 Oils in one 33.0 36.0 25.0 24.0 31.0 25.0 66.0 5.0 NA Source: Company, Edelweiss research
Q1FY21 conference call | Key Takeaways Covid-19 recovery and overall demand Performance in April and May impacted due to lockdown. Domestic volume declined ~28% YoY. No price increase effected. Domestic secondary sales declined lower at 15% YoY in Q1. In June and July, distributor stocks have further reduced. In June, distributor stock was 27-28 days and now it has dipped to 18-19 days. Distributor stock as at March was also at 29-30 days. Credit in the domestic business was 14-15 days, which is now down to 4- 5 days. FY21 should end on a flat to positive note in terms of revenue growth. Lost ~INR1,500mn of sales in Q1. New launches contributed 5% to domestic revenues in Q1. Lined up a slew of new launches in health and hygiene category. Going ahead also 5.0-5.5% contribution can come from NPDs. Most of the new launches have seen digital advertising. The company is on the verge of launching new brand in next one month. This will be in the home hygiene space. This market is large which is likely to double or triple over the next few years. 43% of portfolio is aligned towards health and hygiene. This portfolio grew 29% YoY. Balance 57% portfolio declined 44% YoY. Because of covid-19, focus has been on health and hygiene and the company has right products in the right category for consumers. Also, promoters’ focus is back on the business. Green shoots visible in June; double digit digit growth in July. Looking to end the year on a positive note. In July, secondary sales were higher than primary. Recovery has been largely on pan-India basis. Growth July onwards led by Zandu and pain management. Male grooming and Kesh king also picking up now. E-commerce doubled its contribution and grew >100%. CSD declined 38% YoY. Contribution of sachets has not gone up–remains in the 32-33% range.
2 Edelweiss Securities Limited Emami
Rural surpassed urban. Wholesale channel grew during the quarter. Retail and MT declining.
Boro plus is No. 2 brand in “More” & No. 3 in “Vishal Megamart” & “Walmart”.
10-12% shares pledged with Nuvoco on behalf of contingent liabilities. Pledged shares reduced to 55% and soon they will be below 50%. Overall promoter debt is INR11.3bn; management expects further debt reduction as sale of other asset happens.
No other family member has joined Emami.
Not looking for any acquisition opportunities.
Healthcare range
Grew 23% YoY for the quarter with 59% YoY growth in June.
On Chwayanprash, did 8x sales in Q1.
Going ahead, significant resources will be put behind the Zandu brand. Has separate sales force of about 350 people for Zandu.
In honey, price correction is undertaken. Momentum is good.
Pancharishta in July clocked double digit growth. For Q1, saw decline of about 10% YoY. With this pandemic, expects continued traction in brand.
Zandu overall is INR2bn. Chwayanprash, honey and Pancharishta put together are INR1bn within overall Zandu. Overall was doing INR150-160mn sales per month, which is now doing INR220-230mn; this is ~30% YoY growth.
Gross and EBITDA margins of Zandu are slightly higher than Emami’s margin.
New healthcare head has joined from Dabur – Mr. Bhatia.
Pain management
Grew 15% YoY for the quarter with 43% YoY growth in June.
Stress levels within people had increased during lockdown. Consumers were not taking pain killers and consumers instead moved to products like balm. These led to strong growth in sales of pain management category.
Boroplus range
Grew 28% YoY for the quarter with 92% YoY growth in June. Excluding sales of sanitizer, organic growth was minimal.
Boroplus is known for antiseptic and germ killing properties and hence it is also gaining good traction.
Toilet soap was launched in third week of June.
Sanitiser contributed 3% and balance products contributed 2% to overall sale of NPDs.
Navratna range
Saw decline of 41% YoY with 10% YoY decline in June. Season for Navratna is gone now and hence management cant do much.
3 Edelweiss Securities Limited Consumer Goods
Keshking range
Declined 33% YoY with 0% YoY decline in June.
Male grooming
Declined 70% YoY with 43% YoY decline in June.
Market remains tough for male grooming products.
Still would see subdued demand for F&H owing to WFH and lower application area.
New brand name of competitor is still matter of court to decide.
International business
Sales declined 18% YoY.
Hygiene products introduced in key geographies. Launched under Creme 21, Gold Turmeric and BoroPlus brands.
Planned 3P manufacturing in new geographies. This would be for Creme21 and will be in Srilanka and Middle East.
Raw material and margins
Margins increased despite lower sales due to stringent cost control measures and benign raw material prices.
Menthe prices continues to remain benign. Lot of R&D efforts have been put to cut cost of production.
AT Kearney is also helping in savings cost. Still see room for cost savings further. AT Kearney will help save approx. INR500-600mn for FY21.
Overall ad rates have come down. Also overall ad spends will be lower. Last year put higher money in HE category which will not happen this year. Overall marketing spends will be rejigged between brands.
Ad spends for the full year will be in the range of 17% for FY21. Tied up with media channels and have got good deals.
Bulk of savings in other expenses will flow to EBITDA margins.
No change in distributor commission.
Remains confident of achieving atleast 26% EBITDA margin.
Distribution
Contribution of e-commerce doubled.
Balance sheet and capex
Amortisation will be INR250mn per quarter. Amortisation will be on till June 2025.
FY21 ETR will be 19-21%.
Capex would be ~INR800mn. Last year paid two interim dividends. This year will decide on dividend going ahead.
4 Edelweiss Securities Limited Emami
Buyback of shares
Board of Directors approved buyback of shares from the open market at a maximum price of INR300 per share upto INR1.92bn as permitted by the Companies Act and SEBI on March 19, 2020.
Buyback completed on July 7, 2020, with 9.42mn shares purchased at an average price of INR203.78 (excluding brokerage, taxes & other levies).
All the shares bought back, extinguished within the statutory time frame.
Share capital post buyback reduced from INR453.9mn to INR444.5mn.
Consequently, promoter stake increased from 52.74% to 53.86%.
Outlook and valuation: Gradual recovery; maintain ‘BUY’ We appreciate Emami’s focus on enhancing its innovation pipeline in low-penetrated categories, which would propel growth. The company is also focused on improving direct distribution, which would lead to better control on overall sales.
However, watch out for the performance of Emami’s winter portfolio and male grooming range. The company is taking steps to revive its existing portfolio via: i) launch of new communication in F&H; ii) repositioning of Navratna as a multi-purpose oil (that relieves headaches, stress, sleeplessness and body ache); and iii) the relaunch of Kesh King with new packaging and an applicator. However, the launches are taking time to feed into overall revenue and profitability. Emami’s reliance on the winter portfolio too makes its earnings lumpy.
Overall, as the situation normalises, we expect revenue growth to improve gradually as the rural business recovers, dependence on wholesale recedes and product relaunches gain desired traction. Furthermore, the alleviation of promoter-level pledging concern and launches in the health & hygiene space are added positives. We maintain ‘BUY/SP’ with a TP of INR296. The stock is trading at a PE of 23.8x FY22E.
Chart 1: Sales split (consolidated)
CSD 4% International business 16%
Domestic business 80%
Source: Edelweiss research
5 Edelweiss Securities Limited Consumer Goods
Chart 2: EBITDA margin 40.0
34.0
28.0 (%) 22.0
16.0
10.0
Q3FY19 Q4FY20 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q1FY21 Q1FY17
Chart 3: A&P spend as % of sales 30.0
24.0
18.0 (%) 12.0
6.0
0.0
Q3FY19 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q1FY17
Chart 4: Domestic volume growth 20.0
10.0
0.0 (%) (10.0)
(20.0)
(30.0)
Q2FY18 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q1FY17 Source: Edelweiss research
6 Edelweiss Securities Limited Emami
Chart 5: One-year forward P/E 750
600 55x
450 45x
35x (INR) 300 25x
150 15x
0
Feb-17 Feb-18 Feb-19 Feb-20
Aug-16 Aug-17 Aug-18 Aug-19 Aug-20
Source: Company, Edelweiss research
Fig 1: New launches
Source: Company
7 Edelweiss Securities Limited Consumer Goods
Financial snapshot (INR mn) Year to March Q1FY21 Q1FY20 % change Q4FY20 % change FY20 FY21E FY22E Net revenues 4,813 6,486 (25.8) 5,327 (9.6) 26,549 25,842 28,472 Staff costs 781 773 1.1 721 8.4 2,995 3,049 3,103 Cost of goods sold 1,613 2,324 (30.6) 1,856 (13.1) 8,761 8,502 9,282 Gross profit 3,200 4,162 (23.1) 3,471 (7.8) 17,788 17,340 19,190 Advt. sales & promotions 597 1,291 (53.7) 989 (39.6) 4,711 3,928 4,840 Other expenses 592 757 (21.9) 776 (23.7) 3,176 2,998 3,075 Total expenditure 1,970 2,821 (30.2) 2,486 (20.7) 10,882 9,975 11,019 EBITDA 1,230 1,341 (8.3) 985 24.8 6,905 7,365 8,171 Depreciation 748 837 (10.6) 852 (12.3) 3,363 2,787 2,598 EBIT 482 505 (4.5) 133 262.6 3,542 4,578 5,573 Interest 47 44 8.0 24 95.0 210 185 160 Other income 67 115 (41.7) 145 (53.8) 571 525 706 Add: Prior period items Add: Exceptional items (74) (100.0) (107) Profit before tax 502 576 (12.9) 254 97.8 3,903 4,917 6,119 Provision for taxes 95 177 (46.4) (74) (228.6) 713 1,057 1,316 Minority interest (11) (8) NA (26) NA (60) 4 4 Associate profit share Reported net profit 396 391 1.2 228 74.0 3,023 3,864 4,807 Adjusted Profit 396 391 1.2 302 31.2 3,130 3,864 4,807 Diluted shares (mn) 454 454 454 454 445 445 Adjusted Diluted EPS 0.9 0.9 1.2 0.7 31.2 6.9 8.7 10.8 Diluted P/E (x) - - - 37.3 29.6 - EV/EBITDA (x) - - - 16.9 15.4 - ROAE (%) - - - 15.7 20.1 -
As % of net revenues COGS 33.5 35.8 34.8 33.0 32.9 32.6 Employee cost 16.2 11.9 13.5 11.3 11.8 10.9 Adv. & sales promotions 12.4 19.9 18.6 17.7 15.2 17.0 Other expenditure 12.3 11.7 14.6 12.0 11.6 10.8 EBITDA 25.5 20.7 18.5 26.0 28.5 28.7 EBIT 10.0 7.8 2.5 13.3 17.7 19.6 PBT 10.4 8.9 4.8 14.7 19.0 21.5 Reported net profit 8.2 6.0 5.7 11.8 15.0 16.9 Tax rate 18.9 30.7 (29.1) 18.3 21.5 21.5
8 Edelweiss Securities Limited Emami
Company Description Emami is the flagship company of Emami group. It is a leading FMCG player in India, operating in certain attractive segments such as skin care and hair oil. The company is promoted by Kolkata-based industrialists, Mr. R. S. Agarwal and Mr. R. S. Goenka. The company has been operating in health, beauty and personal care products for the past 30+ years and has sustained a prominent position in therapeutic and Ayurvedic based products, ensuring strong entry barriers for competition.
Over the years, Emami has innovated and built block-buster brands such as Navratna, Boroplus, and Fair and Handsome. With the acquisition of ‘Zandu’, another strong Ayurvedic brand was added to the portfolio. Emami recently acquired Kesh King where turnaround should be expected soon.
Investment Theme Emami’s product portfolio provides a play on Indian FMCG spend by virtue of its strong presence in less penetrated and high growth categories. More than 80% of Emami’s products have Ayurvedic base. The therapeutic usage gives customer loyalty leading to high gross margins, high barriers to entry, strong brand equity, mass acceptance and superior growth opportunities. Emami has a superior track record of launching new brands (Fair & Handsome captures ~64% market share of men’s fairness cream market) and transforming them into blockbusters.
Introduction of lower SKUs for Zandu balm and rejuvenating more than 200 of Zandu’s Ayurvedic-based prescription products will be another growth driver for Emami. Emami is slowly diversifying its portfolio (with foray into face wash, hair oils, deodorants, female hygiene care) to insulate itself from seasonal impact. Though we are enthused by Emami’s new launch aggression it needs to sustain investment on innovation and ad spends to remain competitive in the newer segments (MNC competition high).
Key Risks Seasonality risk is one of the biggest risks to Emami. Summer products’ (like Talc and cooling oil) and winter products’ (like Boroplus) sales depend upon the weather conditions. Any disruption in weather conditions can result in volatile sales of some of these products.
Ayurvedic products are produced by more than a thousand small companies in India, though only about a dozen are big national players. Given Emami’s success, entry of new competitors cannot be ruled out. Hence, Emami, like other FMCG players, will need to continuously invest in A&P to build superior brand equity and gain customer loyalty.
9 Edelweiss Securities Limited Consumer Goods
Financial Statements Income statement (INR mn) Key Assumptions Year to March FY19 FY20 FY21E FY22E Year to March FY19 FY20 FY21E FY22E Gross revenues 26,929 26,549 25,842 28,472 Macro Net revenue 26,929 26,549 25,842 28,472 GDP(Y-o-Y %) 6.8 4.8 (4.0) 7.0 Materials costs 9,230 8,761 8,502 9,282 Inflation (Avg) 3.4 4.3 3.5 4.0 Gross profit 17,699 17,788 17,340 19,190 Repo rate (exit rate) 6.3 4.4 3.0 4.0 Employee costs 2,797 2,995 3,049 3,103 USD/INR (Avg) 70.0 70.7 75.0 73.0 Ad. & sales costs 4,702 4,711 3,928 4,840 Company Other Expenses 2,218 2,459 2,274 2,335 Revenue growth (Y-o-Y %) Commission and Discount 108 106 103 114 Overall growth 6.0 (1.4) (2.7) 10.2 Freight and forwarding 619 611 620 626 Other inc as % of sales 1.2 1.9 1.7 2.2 EBITDA 7,255 6,905 7,365 8,171 EBITDA margin assumpn Depreciation 3,253 3,363 2,787 2,598 Staff costs (% of rev) 10.4 11.3 11.8 10.9 EBIT 4,002 3,542 4,578 5,573 COGS as % of sales 34.3 33.0 32.9 32.6 Less: Interest Expense 214 210 185 160 A&P as % of sales 17.5 17.7 15.2 17.0 Add: Other income 365.9 570.7 524.69 705.6 F&F as a % of sales 2.3 2.3 2.4 2.2 Profit Before Tax 4,154 3,903 4,917 6,119 EBITDA mar (Kesh King) 97.3 97.3 97.2 97.4 Less: Provision for Tax 1,009 713 1,057 1,316 Financial assumptions Less: Minority Interest (22) (60) 4 4 Tax rate (%) 24.3 18.3 21.5 21.5 Add: Exceptional items (98) (107) - - Capex (INR mn) (2,126) (3,216) (1,681) (2,000) Reported Profit 3,025 3,023 3,864 4,807 Debtor days 82 97 90 85 Exceptional Items (98) (107) - - Inventory days 25 36 35 33 Adjusted Profit 3,123 3,130 3,864 4,807 Payable days 105 128 110 110 Shares o /s (mn) 454 454 445 445 Cash conversion cycle 2 5 15 8 Adjusted Basic EPS 6.9 6.9 8.7 10.8 Dep. (% gross block) 11.0 10.4 8.0 7.1 Diluted shares o/s (mn) 454 454 445 445 Dividend payout 60.0 50.0 38.0 38.0 Adjusted Diluted EPS 6.9 6.9 8.7 10.8 Yield on cash 46.0 28.1 28.0 26.0 Adjusted Cash EPS 14.0 14.3 15.0 16.7 Dividend per share (DPS) 4.0 3.3 3.3 4.1 Dividend Payout Ratio(%) 70.8 59.0 44.8 44.8
Common size metrics Year to March FY19 FY20 FY21E FY22E Materials costs 34.3 33.0 32.9 32.6 Staff costs 10.4 11.3 11.8 10.9 S G & A expenses 10.9 12.0 11.6 10.8 Ad. & sales costs 17.5 17.7 15.2 17.0 Depreciation 12.1 12.7 10.8 9.1 Interest Expense 0.8 0.8 0.7 0.6 EBITDA margins 26.9 26.0 28.5 28.7 Net Profit margins 11.6 11.8 15.0 16.9
Growth ratios (%) Year to March FY19 FY20 FY21E FY22E Revenues 6.4 (1.4) (2.7) 10.2 EBITDA 0.8 (4.8) 6.7 10.9 PBT 5.5 (6.0) 26.0 24.4 Adjusted Profit 2.0 0.2 23.5 24.4 EPS 2.0 0.2 26.1 24.4
10 Edelweiss Securities Limited Emami
Balance sheet (INR mn) Cash flow metrics As on 31st March FY19 FY20 FY21E FY22E Year to March FY19 FY20 FY21E FY22E Share capital 454 453 445 445 Operating cash flow 6,223 5,949 7,102 7,635 Reserves & Surplus 20,307 17,784 19,916 22,567 Financing cash flow (4,289) (991) (2,177) (2,566) Shareholders' funds 20,761 18,238 20,360 23,012 Investing cash flow (2,126) (3,216) (1,681) (2,000) Minority Interest (2) (9) (13) (17) Net cash Flow (192) 1,741 3,244 3,069 Long term borrowings - - 185 160 Capex 2,126 3,216 1,681 2,000 Short term borrowings 1,099 2,102 1,667 1,442 Dividend paid (2,142) (1,784) (1,733) (2,156) Total Borrowings 1,099 2,102 1,852 1,602
Long Term Liabilities 505 601 601 601 Profitability and efficiency ratios Def. Tax Liability (net) 122 35 35 35 Year to March FY19 FY20 FY21E FY22E Sources of funds 22,485 20,967 22,835 25,233 ROAE (%) 15.2 15.7 20.1 22.2 Gross Block 30,591 34,091 35,591 37,591 ROACE (%) 19.3 19.5 24.0 26.8 Net Block 8,038 8,229 9,346 8,748 Inventory Days 82 97 90 85 Capital work in progress 352 69 250 250 Debtors Days 25 36 35 33 Intangible Assets 8,774 6,374 6,374 6,374 Payable Days 105 128 110 110 Total Fixed Assets 17,164 14,672 15,971 15,373 Cash Conversion Cycle 2 5 15 8 Non current investments 1,791 881 881 881 Current Ratio 1.6 1.9 2.2 2.7 Cash and Equivalents 2,113 1,874 2,714 5,783 Gross Debt/EBITDA 0.2 0.3 0.3 0.2 Inventories 2,217 2,447 2,096 2,162 Gross Debt/Equity 0.1 0.1 0.1 0.1 Sundry Debtors 2,164 3,080 2,478 2,574 Adjusted Debt/Equity 0.1 0.1 0.1 0.1 Loans & Advances 687 1,960 1,960 1,960 Interest Coverage Ratio 18.7 16.9 24.7 34.8 Other Current Assets 2,049 1,871 1,871 1,871
Current Assets (ex cash) 7,117 9,358 8,405 8,567 Operating ratios Trade payable 2,914 3,245 2,562 2,797 Year to March FY19 FY20 FY21E FY22E Other Current Liab 2,787 2,574 2,574 2,574 Total Asset Turnover 1.2 1.2 1.2 1.2 Total Current Liab 5,701 5,818 5,136 5,371 Fixed Asset Turnover 1.5 1.7 1.7 1.8 Net Curr Assets-ex cash 1,417 3,540 3,270 3,196 Equity Turnover 1.3 1.4 1.3 1.3 Uses of funds 22,485 20,967 22,835 25,233
BVPS (INR) 45.7 40.2 45.8 51.8 Valuation parameters Year to March FY19 FY20 FY21E FY22E
Free cash flow (INR mn) Adj. Diluted EPS (INR) 6.9 6.9 8.7 10.8 Year to March FY19 FY20 FY21E FY22E Y-o-Y growth (%) 2.0 0.2 26.1 24.4 Reported Profit 3,025 3,023 3,864 4,807 Adjusted Cash EPS (INR) 14.0 14.3 15.0 16.7 Add: Depreciation 3,253 3,363 2,787 2,598 Diluted P/E (x) 37.4 37.3 29.6 23.8 Interest (Net of Tax) 162 172 145 126 P/B (x) 5.6 6.4 5.6 5.0 Others 172 205 36 30 EV / Sales (x) 4.3 4.4 4.4 3.9 Less: Changes in WC (389) (815) 270 74 EV / EBITDA (x) 16.0 16.9 15.4 13.5 Operating cash flow 6,223 5,949 7,102 7,635 Dividend Yield (%) 1.7 1.4 1.4 1.7
Less: Capex (2,126) (3,216) (1,681) (2,000) Free Cash Flow 4,097 2,732 5,421 5,635
Peer comparison valuation Diluted P/E (X) EV / EBITDA (X) ROAE (%) Name FY21E FY22E FY21E FY22E FY21E FY22E Emami 29.6 23.8 15.4 13.5 20.1 22.2 Dabur 52.0 45.3 44.0 38.6 23.5 23.6 Godrej Consumer 43.3 38.5 30.7 27.4 19.4 19.3 Hindustan Unilever 65.4 56.5 45.8 40.0 33.8 23.1 Marico 43.1 38.3 29.2 26.4 31.2 30.5 Median 43.3 38.5 30.7 27.4 23.5 23.1 AVERAGE 46.2 40.1 32.8 29.0 25.6 23.8 Source: Edelweiss research
11 Edelweiss Securities Limited Consumer Goods
Additional Data Directors Data Shri R.S. Agarwal Chairman Shri Sushil Kr. Goenka Managing Director Shri R.S. Goenka Non – Executive Director Shri K.N. Memani Non – Executive Independent Director Shri Y.P. Trivedi Non – Executive Independent Director Shri C. K. Dhanuka Director Shri Amit Kiran Deb Non – Executive Independent Director Shri S.B. Ganguly Non – Executive Independent Director Shri Mohan Goenka Executive Director Shri Aditya Vardhan Agarwal Executive Director Shri Harsha Vardhan Agarwal Executive Director Smt. Priti Sureka Executive Director Shri P.K. Khaitan Non – Executive Independent Director Ms. Rama Bijapurkar Non – Executive Independent Director Shri Prashant Goenka Wholetime Director
Auditors - S. R. BATLIBOI & Co. LLP *as per last annual report
Holding – Top10 Perc. Holding Perc. Holding Sbi Funds Management 7.31 Uti Asset Management 1.45 Aditya Birla Sun Life Asset Management 2.89 Mirae Asset Global Investments 1.30 L&T Mutual Fund Tustee 2.85 Pi Opportunities Fund 1.24 Dsp Investment Managers 2.02 Bmo Financial 0.97 Avees Trading And Finance 1.74 Sundaram Asset Management 0.89 *as per last available data
Bulk Deals Data Acquired / Seller B/S Qty Traded Price
No Data Available
*in last one year
Insider Trades Reporting Data Acquired / Seller B/S Qty Traded
No Data Available
*in last one year
12 Edelweiss Securities Limited RATING & INTERPRETATION
Company Absolute Relative Relative Company Absolute Relative Relative reco reco risk reco reco Risk Asian Paints BUY SO M Bajaj Consumer Care HOLD SP H Berger Paints BUY SP L Britannia Industries BUY SO L Colgate HOLD SP M Dabur BUY SO M Emami BUY SP H Future Consumer HOLD SP M GlaxoSmithKline Consumer Healthcare BUY SP M Godrej Consumer BUY SO H Hindustan Unilever BUY SO L ITC HOLD SU M Marico HOLD SP M Nestle Ltd BUY SO L Pidilite Industries BUY SP M United Spirits REDUCE SU H
ABSOLUTE RATING
Ratings Expected absolute returns over 12 months
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
RELATIVE RETURNS RATING
Ratings Criteria Sector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe within the sector
RELATIVE RISK RATING
Ratings Criteria
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings Criteria Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
13 Edelweiss Securities Limited Consumer Goods
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098. Board: (91-22) 4009 4400, Email: [email protected]
Aditya Narain
Head of Research [email protected]
Coverage group(s) of stocks by primary analyst(s): Consumer Goods Asian Paints, Bajaj Consumer Care, Berger Paints, Britannia Industries, Colgate, Dabur, Future Consumer, Godrej Consumer, Emami, Hindustan Unilever, ITC, Marico, Nestle Ltd, Pidilite Industries, GlaxoSmithKline Consumer Healthcare, United Spirits
Recent Research
Date Company Title Price (INR) Recos
04 -Aug-20 Godrej India, Indonesia shine; Africa 692 Buy Consumer turnaround awaited; Products Result Update 30-Jul-20 Dabur Healthcare, launches fight out 492 Buy covid-19; Result Update 29-Jul-20 Colgate Good performance; 1448 Hold Palmolive Result Update
Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe Rating Interpretation
Buy Hold Reduce Total Rating Expected to
Rating Distribution* 161 67 11 240 Buy appreciate more than 15% over a 12-month period * 1stocks under review Hold appreciate up to 15% over a 12-month period > 50bn Between 10bn and 50 bn < 10bn 743 Reduce depreciate more than 5% over a 12-month period Market Cap (INR) 156 62 11 594
One year price chart 446 400
(INR) 297 350 149 300
(INR)
- 250
14
14 14
14 14
14
14
14
14
14
14
14
-
- -
-
-
-
-
- -
- - -
200
Jul
Jan
Jun
Oct
Apr
Sep Feb
Dec
Aug Nov
Mar May
150
19
19 20
19
20
19
20
19 20 20
20 20
20
-
- - -
-
-
-
- - -
- -
-
Jul
Jan
Jun
Oct
Apr
Sep Feb
Dec
Aug Aug
Nov Mar May Emami
14 Edelweiss Securities Limited
Emami
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15 Edelweiss Securities Limited
Consumer Goods
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16 Edelweiss Securities Limited
Emami
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