Kolkata-based fast moving consumer goods company Emami Ltd’s September quarter earnings were largely in line with expectations. In Q2 FY22, its consolidated revenue grew nearly 8% year-over-year (yoy), driven by volume growth of 6.2%, including the institutional business. Analysts said Emami’s domestic sales growth showed the impact of a slowdown in demand for immunity boosters and balms on a higher base in the base year. That said, some categories like Male Grooming, BoroPlus and Kesh King did well. On a two-year CAGR basis, Emami’s domestic sales were 11% ahead of most peers, according to analysts at Emkay Global Financial Services Ltd. CAGR is the compound annual growth rate.
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On the operational performance front, Ebitda margin was flat at 35%. However, despite a 3.5% price hike, gross margin declined by 150 basis points due to higher input prices. One basis point is one hundredth of a percentile. In the post-earnings conference call, management said that input prices are likely to normalize and it does not expect a gross margin hit of more than 80-100bps in Q3. Since most sectors have been battling cost inflation for quite some time, it bodes well for investor sentiment towards the stock. but that’s not all.
There are some favorable factors that are viewed as support margins. Analysts at Prabhudas Lilladher said in a report, “We remain cautiously optimistic on the near-term outlook given the onset of winter in Hindi, which augurs well for the skin/healthcare portfolio, even that the slowdown in rural demand in select geographies creates some uncertainty.”
Analysts are excited about Khoj, the firm’s rural distribution project, which has a presence in 5,200 towns/villages and is expected to reach 8,500-9,000 cities by the end of the year.
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