Emami – Dermicool Acquisition, Positive, But Not A Game Changer: Prabhudas Lilladher

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Prabhudas Lilladher Report

Emami Ltd.’s Dermicool acquisition for Rs 4.32 billion funded by internal accruals will make it a market leader in cool talc category. Assuming mid-single digit growth and synergy benefits, we believe it will add Rs 0.16 and Rs 0.22 to earnings per share (net of interest income loss and ex amortisation).

We believe that the move is positive, but not a game changer as it does to change the seasonality impact in the company. Near term growth remains a concern given slowdown in rural demand and sharp jump in input costs in past month.

While we expect 2/3% price increase in April, poor demand and high inflation will impact Emami’s profit growth in H1 FY23 on a high base. We cut EPS estimates of FY23/24 by 5.9/1.3% amid near term uncertainty.

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