Emami is engaged in manufacturing & marketing of personal care & healthcare products with a portfolio of household brand names such as BoroPlus, Navratna, Fair and Handsome, Zandu Balm, Kesh King, Zandu Pancharishta, Mentho Plus Balm and others.

Demand is yet to pick up after weakening in the December quarter for both the company and the sector. Sales growth in many of Emami’s key categories has been impacted in recent years due to rural slowdown (52% rural dependency), liquidity crunch (~40% wholesale contribution) and category growth issue. However, none of these are structural issues and thus Emami will be a key beneficiary when the tide turns.

Cash flows from the Rabi crop will be in the hands of the farmers after harvest in March. This will lead to a relatively improved outlook. Emami will likely launch a host of new products across categories once demand and trade liquidity improve.

Kesh King has started witnessing better offtake in recent months with high-single-digit growth. The company is likely to relaunch “Fair & Handsome” in Mar’20.

Terms of trade to distributors have become worse with credit of 10-12 days.

Management expects the money from the group cement business sale to be received in May-Jun’20. The group has pledged debt of over Rs.3000 Cr., which will come down to Rs.700 Cr. after repayment.

Valuations are at ~60% discount to peer average and ~50%/40% discount to its own 5/10-year average offers enough comfort.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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