Emami share price rallied over 4% to hit a 52-week high on the BSE, extending the stellar rally seen over the past one week. Emami shares jumped as much as 4.34% to a fresh high of ₹588.65 apiece on the BSE.
In the past one week, Emami shares have risen 16%, which is largely a factor of attractive valuations, analysts said.
Emkay Global Financial Services maintained its positive stance on the stock with a ‘Buy’ rating and a target price of ₹625 per share on 31x P/E, in line with its last 10-year average forward P/E, implying an upside of 10.7% from Friday’s closing price.
The positive view on the stock is underpinned by its enhanced focus, further to which the company has roped in professionals who are helping it get the right fit for addressing wider consumer needs.
The promoter group has been tackling the share pledge issue and, with buybacks, is seeing expansion in shareholding.
“With ~52% of revenue coming from the Rural and high seasonal portfolios, we see that valuation re-rating from its last 10Y average would be a factor of stability in topline growth. High rural revenue focus grants an edge in on-demand recovery for Emami, while seasonality remains the key risk," Emkay Global said.
The brokerage believes Emami’s management guidance of mid-to-high single-digit growth across segments in India over the medium term looks achievable.
“We remain hopeful of better seasonality ahead, wherein recovery in Rural makes Emami a strong play. Q3FY24 delivery is likely to be muted, given weak seasonality and sustained slowdown in Rural demand," Emkay Global said.
The brokerage suggests any weakness in the stock from poor near-term delivery would be an ‘entry’ opportunity.
In the near-term, the brokerage firm believes the domestic business will see low single-digit growth with flat volume growth, due to a weak winter. The company’s international business is likely to sustain double-digit growth momentum.
“Owing to a muted topline and the anticipated rise in A&P spending, we expect EBITDA margin expansion to be moderate YoY. Overall earnings growth in Q3FY24 is likely to be a mid-single digit," said the brokerage.
At 11:00 am, Emami shares were trading 1.36% higher at ₹571.85 apiece on the BSE.