Shares in Emami, which makes personal and healthcare products, slumped 6 per cent on Friday on account of weak volume growth in the September quarter.
Consolidated volume growth for Q2 stood at 11 per cent, but 90 per cent of the growth came from Kesh King, an ayurveda hair oil maker Emami acquired in June. Standalone volume growth was just 1 per cent, said domestic brokerage Religare Securities.
The brokerage said erratic monsoon and weak rural demand affected Emami's volume.
Emami reported a net profit of Rs 61 crore on sales of Rs 575 crore in Q2. Revenue grew 17 per cent year-on-year, but net profit fell by a third because Emami amortised Rs 62 crore towards Kesh King acquisition.
Global brokerage Nomura said Emami's revenues were 3.2 per cent below their estimates while net profit was 16 per cent below estimates.
Emami's Ebitda margin or gross margin expanded by 340 basis points to 26.5 per cent. However, bulk of the margin expansion was due to higher profitability of Kesh King, said Nomura.
Kesh King contributed 10 per cent (Rs 47.7 crore) to domestic sales of Emami against Nomura's expectations of Rs 60 crore.
Nomura maintained "neutral" rating on Emami citing weakness in core business and concerns over the numbers of recently acquired Kesh King. It has a target of Rs 1,200 on the stock.
Religare cut Emami's earnings per share estimates by 5 per cent citing sluggish demand and declining growth. It has a "hold" rating on the stock with a target price of Rs 1,150.
Emami shares closed 2.16 per cent higher at Rs 1,071.60 compared to 0.57 per cent fall in the broader Nifty.
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