Emami records sharpest intraday gain in three years post Q4 results


Emami has moved higher by 13% to Rs 1,110, its sharpest intra-day gain since February 2013 on the BSE, in an otherwise weak market after the company said EBITDA (earnings before interest, taxes, depreciation and amortization) margins expanded by nearly 200 basis points (bps) for the quarter ended March 31, 2016 (Q4FY16).

Despite the high increase in advertisement & promotion (A&P) spends at 19.0% of sales, the company’s EBIDTA margins at 27.2% rose by 190 basis points (bps) in the fourth quarter and by 170 bps at 26.1% in FY16, mainly on account of gross margin expansion.

The net profit during the quarter under review declined 45% year on year (YoY) at Rs 75.85 crore because of one-off amortisation costs worth Rs 73 crore towards Kesh King acquisition. Net sales rose 21% at Rs 6,708 crore on YoY basis.

“Benign input costs, price hikes and integration of the Kesh King business pushed up gross margins to 68.5%. However higher ad spends and staff costs partially offset by lower other expenses resulted in EBITDA margin expansion,” Religare Institutional Research said in a results review.

Emami’s performance continues to be affected by seasonality. Besides, to achieve its FY17 organic growth target of around 15-16% amid a tough macro, with a slew of product launch/re-launches, would necessitate higher A&P investments. This is likely to keep margins range-bound in the near term, added report.

According to Elara Capital, Emami’s business performance is overdependent on seasonal factors and thus its performance is less consistent and less predictable v/s fast moving consumer goods (FMCG) peers. In the near term, it having benefited from hefty decline in raw materials gross margins stands a risk of contracting if raw material prices rebound.

The company has guided for healthy topline growth of 15-16% led by re-launch in all its power brands, new launches and revival in Kesh King and price increases (2-2.5%). However, higher ad spends on new & re-launches could curtail EBITDA margins, said Emkay Research in a results update.

The stock pares half of its gain and was up 6% at Rs 1,041 at 12:50 pm, as compared to 0.29% decline in the benchmark S&P BSE Sensex. A combined 747,935 shares changed hands so far against an average sub 200,000 shares that were traded daily in past two weeks.

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