The index for FMCG stocks on the BSE is up 15 per cent over the past year. The stock of Emami has, however, raced far ahead with a 66 per cent gain. Besides successful product launches, Emami’s strong rural market and good growth in bread-and-butter brands aided the stock. What also helped was that bigwigs in the FMCG basket, such as HUL, Godrej Consumer, GSK Consumer and Dabur India, had already had an extended dream run for over two years now and were thus quite expensive. The past two quarters have seen Emami bounce back with strong growth after the lacklustre earlier quarters. Emami’s domestic sales jumped 20 per cent in the recent September quarter, backed by healthy volume growth of 13 per cent. Behemoth HUL, in comparison, managed just 5 per cent volume growth in the quarter.

A heavy marketing push for its new and existing brands has, however, resulted in higher adspend. The adspend-to-sales ratio, at 18-21 per cent, is among the highest in the FMCG sector, and is likely to remain so. Relief on the raw material front can, however, mitigate this effect. In the past month, Emami has rallied 15 per cent on the bourses while the BSE FMCG index stayed flat. The surge has pushed the stock’s consolidated trailing price-earnings to 41 times, well over its five-year average multiple of 30 times.

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