Emami slips 8%, stock hovers near 5-year low on growth slowdown concerns

In the past four weeks, Emami's market has underperformed the market by falling 21 per cent as compared to the unchanged S&P BSE Sensex during the same period

Emami shares slipped 8 per cent to Rs 283 in intra-day trade on the BSE, trading close to its five-year low, on concerns of growth slowdown.

The stock was trading at its lowest level since August 13, 2014 and has tanked 53 per cent from its 52-week high level of Rs 599, touched on August 1, 2018.

In the past four weeks, Emami has underperformed the market by falling 21 per cent on weak March quarter (Q4FY19) earnings as compared to the unchanged S&P BSE Sensex during the same period.

The personal products company’s Ebitda (earnings before interest, taxes, depreciation and amortisation) margin declined by 390 bps at 24.2 per cent in Q4FY19, due to increase in raw material costs. Net profit during the quarter remained flat at Rs 121 crore, while revenues grew single digit by 3.7 per cent at Rs 640 crore over the previous year quarter.

The management said 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.

The challenging operating environment and general sluggishness in demand across sectors, especially rural, over the past few quarters restricted the company’s growth for FY19 to single digit.

With rural outlook uncertain and all-round growth elusive, FY20 may prove to be another tough year, according to analysts.

“The performance of the company continues to be volatile because of seasonality and we do not expect the earnings growth of the company to continue trailing its peers,” analysts at Nirmal Bang Securities said in result update.

The fundamental concerns relating to the modest innovation pipeline and growth of key brands still remain. However, we believe the significant underperformance in the recent past to some degree captures this low earnings growth profile, it said.

At 03:06 pm, Emami was trading 6 per cent lower at Rs 289 on the BSE, as compared to a 1.2 per cent decline in the S&P BSE Sensex. A combined 996,631 shares have changed hands on the counter on the NSE and BSE so far.