Emami targets 8-10% sales growth despite rural slowdown, price hike

Expecting a recovery in rural demand in the later part of the current fiscal year, Emami Ltd is targeting an 8-10 per cent growth in its revenue which is expected to be fuelled by a further strengthening of its power brands, new product launches in under-penetrated segments, particularly healthcare, and focus on international markets.

It will come against the backdrop of a 2.5 per cent average price hike in the portfolio and increased emphasis on modern and e-commerce sales.

“Though the overall environment continues to be challenging, we expect the consumer sentiments to pick up, driven by a young aspirant population, growing rural incomes, normal monsoon and increased government impetus. Your Company is attractively placed to capitalize the opportunity of the upscaling of the demand momentum that is expected to set in the second half of FY 2019-20”, the R.S. Agarwal, chairman at Emami, told shareholders at the company’s 36th Annual General Meeting (AGM) here.

In the last fiscal year, the company had registered net sales of Rs. 2,659 crore which grew by 7 per cent. 

“This year, the growth (in revenue) is estimated to be around 8-10 per cent. In the first quarter (Q1) of this fiscal year, we have already registered a six per cent growth and it is expected to improve further”, Mohan Goenka, director at Emami, said on the sidelines of the AGM.

As compared to its peers, where the rural and semi-urban economy accounts for around 30-35 per cent of the topline, Emami’s dependence on rural India is higher as it accounts for around 50 per cent of its revenues which is largely driven by wholesales and indirect distribution channels. 

However, the company has engaged Boston Consulting Group to nearly double its sales from modern and e-commerce sales channels and is currently working over products in the healthcare and personal care categories tailored for online and modern trade sales.

In the last fiscal year, sales from modern trade reported a 43 per cent growth thereby increasing its contribution from 6 per cent to 8 per cent to the domestic business while e-commerce segment also grew by 112 per cent.

Moreover, it is considering bringing in the German Creme 21 brand to India which it acquired in the recent past.

“We are working on products which can be sold particularly via the online and modern trade platforms and will take a call on introduction of Crème 21 to India by the end of the second quarter of this fiscal year”, Harsha V. Agarwal, director at Emami said.

Most of these products are expected to be rolled out towards the second half of the 2019-20 fiscal year.

In Q1FY20, Emami posted a topline of Rs 649 crore while its net profit grew by 47 per cent at Rs 39 crore.

Faced with the ongoing slowdown of rural consumption, the company has been focussing on rationalisation of costs including logistics & supply chain, advertising  & promotional expenses and several other categories which boosted profitability.

According to Abneesh Roy, executive vice president of institutional equities at Edelweiss Research, Emami’s domestic volume growth has likely been flattish in the Q1 period on a high base of 16 per cent.