Emami Ltd.

Emami Limited (EL), the flagship company of the Kolkata-based Emami group. It is one of the leading FMCG companies in India. It is engaged in the manufacturing of herbal and ayurvedic products in personal, cosmetic and health care segments. Its products are sold under the brands, ‘Emami’ (Personal & Cosmetic), ‘Himani’ (Ayurvedic), ‘Zandu’ and Kesh King.

2. Analysis

Peer Analy
aluation,

Conclusion

3. |About

2

emami Emami Ltd. Latest Date | 04-Jan-19

Latest Price (Rs)
Emami Limited (EU, the flagship compar

‘of the Kolkata-based Emami group. tis one
‘of the leading FMCS companies in India. It
is engaged in manufacturing of herbal and

52 Week Hi

‘ayurvedic products in personal, cosmetic Face Value(Rs)
and health care segments. ts products are

Sold under the brands, ‘Emam (Personal &
metic, “Himani (Ayurvedi

and Kesh King

was
partnership firm, which
-osmetie products and Dividend Viele
and was marketin
brand ‘Eman’. In 1978, the p MCop/TTM Sets) 231 |
EL took over Himani Limited, engaged in | yiapker cap asin c apes
manufacturing and selling of cosmetic
pr In 1995, Kemco Chemicals was 23104
renamed as EL and in 1998, Himani Ltd,

Be Latest no. of shares In Cr)

EL currently markets several
accepted ayurvedic, herbal, Shareholding Pattern
personal and health care

‘comprising oil, talc, cream, bali, medicine

and cosmetic. These products are sold in

India and more than 60 countries

worldwide. EL enjoys significant. market

share in Boroplus Antiseptic Cream,

Navratna Oil, Zandu Balm and Fair and

Handsome and Kesh King

4. oir level in last 4 years, investment in rural sector by the government and more In lin
sing disposable income levels through various Government schemes Ike NA

+ minimum support price (MSPs) for agricultural produce, loan waivers, et. Higher ing

has resulted in high aspiration nd increasing brand consciousness amon

apture this market, the company has accelerated its direct rural household marketing th
us innovative schemes and "Project Dhanush’ (whereby its field staff covered rural ma

hie)

experienced

¡ding postion in the niche ayurvedic segment (both personal and healt
fined by the market leadership of its key products, Naveatna (64% mf
fe by volume in the cooling ol segment), Boroplus (74% share in antiseptic cream:
tho Plus (54% share in balms), Kesh King (28% in ayurvedic har ol), and Far and Hand]
3). Emami has 6 brands w

revenue per annum.

y Financial position:

cial sk profile is aided by strong and improving cash generation (Rs 208 crore f
hy debt metrics which is further reducing, and prudent capital spending, Debt undertal
12026 to acquire Kesh King is expected to be completely repaid in fiscal 2019 through in

Product Portfoli

of the products are for the young generation and also, they are the ones with lo
tration which leaves a sound scope for them in the coming future

5. |ternationl Bus. Sales growth

[concerns and Risks

y of Keeping its shares in pledge to fund other comp
ound 40% of the promoter’s shares are in pledge to fund 2
Épanies of the group, namely, Emami Cement and Emami Edible oik. The ad
er, approx 1/3" of which has been employed in Emami Cement and the rest for edb
ni Agrotech is a much larger company than Emami Ltd. with a turnover ofa
le same time Emami Cement is incurring loss

key raw material for EL is menthol, packaging material and vegetable oll. The pri
Imers (used for packaging material) is linked to the price of crude, which is volatile in no]
hing product), LLP (crude derivative), Rice Bran C
material used in health care and personal care prod

In FMCG market is characterized by a large number of organized and unorgania

rs with duplicate products being rampant. The domestic organized sector comprises of
old's biggest giant in tis business. Asa result, they are better positioned to comm
I as quality edge over the competitors. Overall, the FMCG market remains
rented with widespread use of unbranded and unpacked homemade products in rural ml
fever, considering the low penetration levels of various products-segments, the FMCG ind]
tioned for along term growth,

jor portion tly related to

6. investment in its direc distribution channels will put some pressure on its margins.

all it appears to be more ofa volume game than margins forthe company

7. FMCG Industr

past three years have been aii challenging for almost all the segments ofthe FMCG In
cia, but this is expected to change fail significantly from 2HFY18 (especially HPC segm

lay growth in discretionary demand (6%- 8% in volume terms and about 10%-12% in
for consumer durables led by urban demand during the period FY14-FY17) also augursl

Jia! of demand for non-seetionary goods sich as home and personal are whic
eed a meagre growth of Sn the sme period

res e orl care and bay wah cold remain mi inet whereas mers oo
a acre are elt inde mojo bok again ant ene growth n double te
Penetration and per apta spending in these categories are ay low, produc ste in |
jories are increasingly aligned with consumer preferences and importantly, consumer iff

Lignes to premi onen by mure room à Tay Mao of

hory perspective, globally per capita spending on skin cae itself is north of US$15 per ar

[per capita spending by men, is estimated to be about 1/10th of what is spent by wor
similar to overseas countries.

Per capita spending (USD) on beauty and personal care

8. he past decade, companies invested substantially in strengthening. their distrib

structure and improving their reach through several distribution and customer out
rammes. Growth in modern trade and e-commerce will substantially outpace growth th
channels in the medium term. Rural markets, which have witnessed significant deceled
cent years, wil also see improvement, but the pace could be somewhat slow asthe whol

Which contributes substantially currently - will continue to remain in an adjust

Urban - Rural Growth

2013 2014 2015 2016 2017

9. tive to pricing, increasingly most consumers have gone natura/green in their prefe

lief that natural products do not have any side ef
atural-focused players such as Dabur Inda, Himalaya and finally Patanjal
4. Besides natural, a slew of products such as organic, antipoll

M being and health also wit

panies wil ako have to manage the gal and technology paradox which & bol
Lrtunity and technolo paradox. In order to maintain sector growth rate, companies will
ever about 335% grom per onaum rom Innovative products and about 20% 4

ship in their respective categories

Rural ve Urban Rural vs Urban
value growth volume growth

WU AS am

Rural volumes now growing at1.5x urban we value is at 13x of urban

bugh pricing will be somewhat sluggish on acc inflation, it is expected
uct innovation, fast growth in modern channels and importantly productivity gait
nue to support margin expansion by most HPC players, The share of affluent and

10. tanjali has emerged as a large spender and ranks No.7 in the FMCG spac
5 on overall basis, The disruptive challenges by Patanjali need to be watched cl

gory itself, This certainly will be a challenge to most players looking to di
[ing green/ayurvedic products. The mentioned brand now reaches nearly 53%

onal care and 26% in food products, up nearly 100% from a year ago. Even in rural house
Is built a good reach by achieving nearly 24% market share in personal care and 7%

rages. Important, the brand has a very good retention rate and is certainly a challengf
personal product manufacturers

11. Business of the Company

ys set up in 1974 as Kemco Chemicals, a partnership firm, which manufactured cos
ucts and ayurvedic medicines and was marketing the same under the brand “Emam. In
romoters of EL took over Himani Limited, engaged in manufacturing and selling of cos
fcts In 1995, Kemco Chemicals was renamed as EL and in 1998, Himani Ltd. was merged

urrently markets several widely accepted ayurvedic, herbal, cosmetic, personal and hj
products comprising ol tl, cream, balm, medicine and cosmetic. These products ares
and more than 60 countries worldwide. EL enjoys significant market share in Bord
Écptic Cream, Navratna Ol, Zandu Balm and Fair and Handsome and Kesh King

Ih, East, Wes, South region accounts for 32%, 19%, 29%, 20% of sales respectively.

14. | 201637 |

Market
share are
Goole a

AA m |

Cream

brand, Zandu, to its portfolio when it acquis

Lidin Rs 710 cro
King brand of hair and scalp care products from
ponfolo includes hair il, shampoo,

15. Imi has manufacturing plants in Kolkata (West Bengal), Guwahati (Assam, Pant
rakhand), api, Sivassa, and Talasari (Maharashta). In fiscal 2014, Emami, through one:
¡caries - Emami Bangladesh, has setup a facility in Ghazipur, Bangladesh.

Jeepen is footprint in a growing market, Emami commissioned a third-party manufact
in Sr Lanka (operated through a Sr Lankan subsidiary) an

Pavratna

1208, the company has acute a strategic stake in Helios st pt (20
[tre scence Pt L (290 in order fo foray int profeon salon and one
day ofthe company, acqled 754% stake in M wi

three distinct marketing channels, iz, retail, export and rural trade. Retail sales ta
Lun 3,150 distrbutors and wholesalers. The company uses network of 250
and 6,500 sub-stockists in rural areas in India to reach out to 25,000 villages
5,000 and above) and cover around 13,000 towns through van operations
pany has a direct coverage through 8.5 lakh retllers and an indirect coverage via 43]
er

16. Direct Reach

I witnessing healthy growth o

ith of 2% in FYB (5

the past few years, the operating income witnessed

in FYA7) due to implementation of GST in July 2017 (demonetizati
1016). EUs operating margin has remained healthy over the past few
count of efect

‘aw material sourcing through long term booking at competitive
alized advertising expenditure, cost management program across all functions.

ncial performance of the company improved in QIFYI9 over QLYIS as performan

18 was hit by destocking by dealers and distribu

ue to implementation of GST i

R&D Spends

18. maria | y

19. Report Date

21. er Analysis

npanies Business Strategy

22. Distr

Programme

23. dent on product dferentiation, methods used for valuing the company are
dering CFO earnings growth), PE multiple, Discounted Cash Flow, Expected Returns Mol

hod 1- PEG [CEO]

don the mentioned method of Reverse PEG, current market price of 420 has already
Puntes for the FY19 at -16% growth rate on 2018 CFO EPS,

e, for FY19, growth in EPS of more than 16% only will appeal for a reratig, given, the
n't go south from the current price level.

has given a YoY negative growth in FYAB and grew at CAGR of “13% in las years

24. [| iscountmate Pes |
{termina Growin fate | |

| Reverse Discounted Cash Flow Eu 7]

Current Market

ET 10 years PAT202

A
| CC A
=

volume and realization growth, dominant market position.

and the cost of Equity has not bee taken into account

25. IRecommendation

pected to be a significan beneficiary on this
major changes in the market share category
growth st

Imi accounts for 50% of rural mix and is
panys core products has not shown a
Though, company is engaging in inorgan

‘upcoming segments in the FMCG mi

tegorie. Performance of Kesh|

pined stable over the last 5 year
‘and geting int joint ventures with ne

ith several new products in several

direct distribution channels in rural market, turn around of o

cet are the key aspects tow

tion (CMP 420)

N a premium FMCG brand in the ind

«st share among other fact
fed and any further weak performance in the co

ough, the company appears overva
ers can cause the stock to experience a
all, the company is expected to be able to increase it
rate. Financials may increase on the account of sales figures without getting much

in medium term but not

ican
rom the marins.

26. Ace Analyser
Indian Consumer Sector - Nirmal Bang

28. MahindraGlE

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