Khambatta Securities has reiterated a BUY recommendation on Emami Limited, assigning a target price of Rs 525 against the current market price of Rs 405, implying a potential upside of approximately 30%. The brokerage believes the company’s weak fourth-quarter performance was largely driven by temporary external factors, including an unusually delayed summer season and geopolitical disruptions in the Middle East. While these challenges weighed on revenue growth and profitability, Emami’s core domestic franchise remained resilient. The company is also strengthening its future growth engine through acquisitions in premium beauty, personal care, and healthy beverage segments. With improving demand trends already visible in April-May 2026 and management expecting margin recovery in FY27, Khambatta Securities remains constructive on the stock's medium-term outlook.

Khambatta Securities Reaffirms BUY Call on Emami

Despite a challenging quarter, the brokerage remains optimistic about Emami's long-term growth trajectory.

Emami reported a subdued performance during the fourth quarter of FY26 as seasonal and geopolitical factors adversely affected business operations. However, Khambatta Securities views these issues as temporary and expects the company to regain momentum during the first half of FY27.

The brokerage has valued the company at 25 times FY28 estimated earnings, resulting in a target price of Rs 525 per share. The revision from the earlier valuation multiple reflects the rollover into a new financial year rather than any deterioration in the long-term business outlook.

Summer Portfolio and International Operations Weigh on Revenue

Delayed summer season significantly impacted seasonal product sales.

Consolidated revenue for the fourth quarter stood at Rs 925.1 crore, representing a decline of 3.9% year-on-year. The biggest drag came from Emami's summer-focused brands, which experienced a sharp slowdown due to delayed seasonal demand.

International operations also faced pressure as geopolitical tensions in the Middle East disrupted logistics and supply chains, affecting shipments across GCC, CIS, and South Asian markets.

For the full financial year FY26, consolidated revenue declined marginally by 0.8% to Rs 3,779.5 crore.

Brand Portfolio Delivers Mixed Performance

Non-seasonal brands continued to demonstrate resilience despite broader challenges.

While summer-oriented products struggled, several key brands delivered encouraging growth:

Kesh King grew approximately 14%
Pain Management portfolio increased 11%
Healthcare segment advanced 7%
7 Oils in One registered robust growth of 34%
Strategic investments portfolio, including The Man Company and Brillare, expanded 34%

On the other hand:

Navratna and Dermicool declined around 21%
Boroplus portfolio fell nearly 40%
Men's grooming range contracted by 4%

The performance highlights the increasing diversification of Emami's revenue base beyond seasonal products.

Domestic Business Remains a Key Source of Strength

Core domestic operations continued to gain traction across organized retail channels.

Excluding the summer portfolio, Emami's domestic business recorded a healthy 11% year-on-year growth during the quarter.

Management highlighted several positive structural trends:

Organized channels now contribute around 32% of domestic revenue.
Quick commerce recorded exceptional growth of nearly 70%.
GT Marts expanded approximately 25%.
Wholesale channel dependence reduced to 27% of domestic sales.

These developments indicate improving channel quality and stronger penetration across modern retail ecosystems.

Strategic Acquisitions Expand Growth Opportunities

Management is investing aggressively in premium and high-growth consumer categories.

During the first quarter of FY27, Emami announced two significant acquisitions:

Both businesses operate in premium consumer categories that offer stronger growth prospects and attractive margin structures.

To accelerate execution, the company has also appointed Dhruv Aggarwal as Chief Growth Officer, with a mandate to drive annual growth of over 30% across strategic investment businesses.

Margin Performance Reflects Investment-Led Growth Strategy

Higher promotional spending impacted profitability despite stronger gross margins.

One of the notable positives during the quarter was gross margin expansion.

Gross margins improved by approximately 260 basis points year-on-year to 68.4%, supported by:

Favorable raw material costs
Cost optimization initiatives
Recent price hikes of around 3%

However, higher advertising and promotional expenditure resulted in EBITDA pressure.

Management expects margins to improve during FY27, although it remains cautious about volatility in crude-linked input costs.

FY27 Recovery Expected as Seasonal Demand Returns

Early indicators suggest the worst of the seasonal weakness may already be behind the company.

According to management commentary, both Navratna and Dermicool have already delivered double-digit growth during April and May 2026, signaling a revival in summer demand.

Additionally, international supply chain issues have largely been resolved, creating conditions for normalized growth across overseas markets.

The combination of recovering seasonal brands, improving distribution efficiency, strategic acquisitions, and ongoing premiumization initiatives could provide multiple growth levers for FY27 and FY28.

Financial Outlook and Investment View

Khambatta Securities forecasts a return to healthy earnings growth over the next two years.

The brokerage believes these projections support a higher valuation as earnings growth normalizes and strategic investments begin contributing meaningfully to consolidated profits.

Investment Levels to Watch

Brokerage Recommendation: BUY

Current Market Price: Rs 405

Target Price: Rs 525

Potential Upside: Approximately 30%

52-Week Range: Rs 386 – Rs 634

Khambatta Securities believes Emami's near-term earnings weakness does not alter the company's long-term growth narrative. The brokerage views the recent correction as an opportunity for investors seeking exposure to a well-established FMCG franchise with improving channel dynamics, expanding premium categories, and a clear path toward earnings recovery.