Emami nears 52-week low on disappointing Q4 results; stock down 5%

Emami shares dipped 5 per cent to Rs 340 on the BSE in intra-day deal on Tuesday, after the company’s Ebitda (earnings before interest, taxes, depreciation and amortisation) margin declined by 390 bps at 24.2 per cent in March quarter (Q4FY19), due to increase in raw material costs.

The stock is trading close to its 52-week low of Rs 338, hit on February 11, 2019. The trading volumes on the counter more-than-doubled with a combined 404,113 shares changing hands on the BSE and NSE till 01:45 pm.

The company said during the quarter, the domestic business was impacted due to a prolonged winter affecting the sales of summer products like cool oils, talcs and deodorants. Weak rural sentiment and adverse liquidity condition also, impacted demand during the quarter, it said.

Emami reported 6 per cent declined in its consolidated net profit at Rs 56 crore. Net sales during the quarter grew by 5 per cent at Rs 635 crore over the previous year quarter. Domestic business was up 3 per cent due to muted growth of summer brands.

The management said an extended winter pushing back the onset of summer has adversely impacted the performance of the company’s summer portfolio which contributes over 40 per cent to the March quarter topline. The agrarian crisis too moderated the rural growth.

“Strategy for recovery in Fair and Handsome (F&H) would be implemented in 2H19, however recovery is unlikely in the near term. We believe that softening of Input cost pressures and 2.5-3 per cent price increase should enable the company maintain margins,” analysts at Prabhudas Lilladher said in result update.

“Barring Q4FY19, when rural growth suffered, the top-line growth for Emami’s rural dependent peers like Hindustan Unilever and Dabur was actually healthy. Yet, Emami struggled over this period; with rural outlook uncertain and all-round growth elusive, FY20 may prove to be another tough year,” brokerage firm Motilal Oswal Securities said in result update.