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Report on Emami Ltd.

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Submitted By SabrinaNourin
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Emami Ltd.
Stock Note HDFCSec Scrip Code EMALIMEQNR Industry FMCG CMP (Rs.) 588.9

CMP: Rs. 588.9
March 22, 2013 Recommended Action Buy at CMP & add on dips Averaging Price Band (Rs.) 551-563 Price Target (Rs.) 686 Time Horizon 1-2 quarters

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Background
Founded in 1974 & promoted by Mr. R.S. Agarwal & Mr. R. S. Goenka, Emami Ltd., a flagship company of Emami Group, is one of the leading FMCG players engaged in manufacturing & marketing of personal care & healthcare products. With over 300 diverse products, Emami’s portfolio includes trusted power brands like Zandu, Boroplus, Navratna, Fair & Handsome, Mentho Plus, Fast Relief & Sona Chandi Chyawanprash.

Triggers
We expect Emami’s Net Sales & PAT to grow by 16.9% & 219.7% respectively over FY12-14. Growth momentum could continue in its power brands viz Boroplus, Navratna, Fair & Handsome & Zandu, led by higher A&P spends, distribution expansion and brand extensions. The management aims to grow each of its power brands to Rs 8-10 bn over the next 5 years. Strong R&D & aggressive marketing & distribution would continue to support portfolio expansion, like in the past. The company’s sub-segmentation strategy of launching variants and brand extensions has worked out well. Emami is a market leader in under penetrated segments like Fairness cream, Antiseptic cream and Cold cream market. Robust outlook of personal care market could prove to be beneficial for Emami going forward. Even the cooling oil market outlook is robust & hence Navratna Oil would do well. Rural India would be a major growth catalyst going forward. Emami expects its revenue share to go up further through focus on value for money products, increase in brand promotion (with the help of celebrities as brand ambassadors) & distribution and rise in rural household incomes. After a flattish growth in 9MFY13, the management expects the

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