400% Dividend Payout: FMCG Stock Trading Near Rs 500 Seen To Give 21% Returns; Ex-Dividend Date Nearing

One of India's leading FMCG companies engaged in manufacturing & marketing of personal care & healthcare products, Emami Ltd is set to trade ex-dividend in the coming days. After its Q2 results, brokerages have recommended buying or accumulate this FMCG stock and have set target prices ranging from Rs 560 to Rs 625 levels, indicating up to nearly 21% upside at least. The stock is currently a little over Rs 500 per share.

As per the regulatory filing, Emami considered and approved the first interim dividend of 400% amounting to Rs 4 per share having a face value of Re 1 each for the financial year 2023-24. The record date to determine the names of the members who will be entitled to receive the Interim Dividend is Wednesday, 15th November 2023.

Hence, Emami shares will turn ex-dividend on November 15.

On the upcoming dividends, Emami said, "The Company's ability to navigate challenges and achieve significant growth and profitability signals a promising trajectory and highlights its commitment to innovation, strategic partnerships, and value creation for its stakeholders."

In FY23 alone, Emami paid a whopping 800% dividends amounting to Rs 8 per share to shareholders. Currently, it has a dividend yield of 1.56%.

On BSE, Emami shares ended at Rs 513.60 apiece, down by 1% on Friday with a market cap of Rs 22,830.23 crore.

Emami reported consolidated revenues of Rs 865 crore, up by 6% YoY. The Domestic Business witnessed a commendable 4% growth with a volume growth of 2%, driven by channels catering to urban markets such as Modern Trade and E-commerce. The International business also expanded by an impressive 12% during the quarter, delivering a constant currency growth of 16%, primarily attributed to robust performances in the SAARC and MENAP regions. Moreover, the Profit for the period surged to Rs 316 crore, reflecting a strong 23% growth.

Prabhudas Lilladher has recommended accumulating Emami shares for a target price of Rs 564, while Centrum has suggested buying with a target price of Rs 621 per share.

In its view, PL's note said, "We increase our FY24E/FY25E EPS estimates by 3.6%/2.1% following higher than expected gross margin expansion and higher volume growth at 2% in 2Q. Emami has given a cautiously optimistic outlook given benign raw material prices, expected pickup in rural demand and likely traction from various new launches under Zandu and international business. 2Q saw volume growth of 2% led by robust growth in both MT & E-commerce channel. HMN remains positive on OTC Healthcare, Navratna & new launches under Boroplus."

PL's note further said, "Emami is investing for growth with 1) new launches in existing categories like Boroplus, Zandu, Kesh King and new product launches in D2C 2) investment in new D2C new age businesses & Modern Trade 3) increase in direct town coverage to 60k and 4) strengthen its healthcare portfolio with the acquisition of Axiom Ayurveda (blend of fruit juice and aloe Vera). We estimate 9.6% PAT CAGR over FY23-26 and value the stock at 26x Sep25 EPS assigning a value of Rs564 (Rs524 earlier). Retain Accumulate."

Meanwhile, Centrum's note said, "We expect Emami's performance to be driven by: (1) high A & P investments, (2) focus on distribution excellence through Project Khoj, driving direct coverage - now 1mn, and (3) new product interventions (D2C portfolio and healthcare). Management remains confident to deliver +15% growth in international business led by recovery in SAARC markets, however, expect gradual recovery in rural markets led by better MSP and govt. impetus on rural programs. Further with closure AMRI hospital divestment the pledge on books now cut to ~15%. HMN announced interim dividend of Rs4/ share."

Further, Centrum added, " Though improved rural commentary we remain positive on Emami's growth story however raise concern on high seasonality impact on the business. With weak 1HFY24 we cut FY24E/FY25E earnings by 2.7%/3.2% introduce FY26E and retain Buy with a revised DCF-based TP Rs621 (implying 28.2x avg. FY25E/FY26E EPS). Key risks include prolonged rural slowdown and competition."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.