Emami rises nearly 3% as Credit Suisse expects growth to pick-up in FY20

Emami

Emami shares gained as much as 2.7 percent on Wednesday Credit Suisse said it expects company’s growth to pick-up in next financial year.

The stock was quoting at Rs 400, up Rs 6.70, or 1.70 percent on the BSE, at 1016 hours IST.

While maintaining outperform call with a price target at Rs 480 apiece (implying 22 percent potential upside), the global investment firm said the company is in midst of a weak growth phase, but it expects pick-up in FY20.

The company is facing near-term headwinds from an extended winter season, but management targets double-digit volume growth in FY20 as input cost is under control and management is looking at driving cost efficiencies, the brokerage house said.

The key trigger for the stock is a revival in volume growth to high single digits, it added.

Recently promoters sold 10 percent stake in the company and raised Rs 1,600 crore.

Though earlier media speculation suggested a structured credit deal with the US private equity firm KKR, Emami group has instead gone for an equity deal with SBI Mutual Fund, PremjiInvest, Amundi, IDFC, L&T Mutual Fund. Proceeds from the stake sale will be used to reduce promoter debt raised for the group’s other businesses such as cement, solar power and others.

Hence, the level of pledged shares has come down, Credit Suisse said.

Pursuant to the stake sale, the promoter holding in Emami will be down at 62.74 from 72.74 percent earlier. The management clarified they don’t plan for any further dilution of stake in the foreseeable future.

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