Stock Market: Electronics Mart India Surges 11%: Is It Time to Buy?

Spread love

Electronics Mart India Jumps 11%: Time to Buy Amid Volatility?

By S Jha

New Delhi, April 22, 2025: Electronics Mart India share was trading with gains of almost 11 per cent on Tuesday. Is it the time to buy the stock, which has seen extreme volatility in recent months?

The Electronics Mart India stock saw the day’s high of ₹152.25 on Tuesday. The stock is seen erasing losses of almost a year.

It closed at ₹121.40 on March 21, 2025, reflecting a year-to-date decline of approximately 26.13 per cent and a six-month drop of 42.05 per cent. The 52-week high was ₹262.00, while the low was ₹112.60, indicating a sharp correction from its peak.

The market capitalization stands at ₹4,670.85 crore, positioning EMIL as a small-cap company in the retail sector. The stock’s price-to-earnings (P/E) ratio is currently 33, inching towards the trailing 12-month (TTM) P/E of 37.42. Analysts claim the stock has a potential undervaluation relative to recent earnings.

Financial Performance

EMIL reported a consolidated revenue of ₹6,770.10 crore on a trailing 12-month basis, with a 15 per cent annual revenue growth, which is robust for the retail sector. However, the pre-tax margin of four per cent and a return on equity (ROE) of 14.4 per cent suggest room for improvement in profitability.

For the quarter ended December 2024, the company posted a net profit of ₹31.55 crore, down 31.05 per cent year-on-year from ₹45.77 crore, with a significant quarter-on-quarter revenue decline of 29.77 per cent. This drop raises concerns about seasonal or operational challenges, though the company maintains a reasonable debt-to-equity ratio of seven per cent, indicating a stable balance sheet.

Analysts note that EMIL’s EBITDA margin contracted by 130 basis points year-on-year to 6.1per cent in Q2 FY25, reflecting pressure on profitability despite revenue growth in prior quarters. The company’s focus on large appliances (50 per cent of revenue) and its dominance in Telangana and Andhra Pradesh (88 per cent of revenue) provide stability but also expose it to regional and brand concentration risks.

As per Refinitiv, three analysts recommend a Strong Buy, with four analysts (three Strong Buy, one Buy) initiating coverage and none issuing a sell rating. This optimism is tempered by recent downgrades or reduced price targets, as noted by Trendlyne, where brokers adjusted expectations due to profit declines.

The Economic Times in December last year highlighted EMIL’s leadership in South India’s consumer electronics retail, noting its scale-driven pricing power as a key advantage. However, it flagged a 29.77 per cent QoQ revenue drop as the lowest in three years, urging investors to monitor operational recovery.

LiveMint in January 2025 emphasized the stock’s high TTM P/E (37.42) compared to the sector’s 20.74, suggesting potential overvaluation unless earnings rebound. It also noted a decline in mutual fund holding to 17.41 per cent in December 2024, possibly signaling reduced institutional confidence.

Moneycontrol this month described the stock as “Very Bullish” based on technical trends, but this contrasts with fundamental concerns like profit declines. The promoter holding remained stable at 65.17 per cent, reflecting insider confidence despite market corrections.

Value Research in the past has praised EMIL’s rapid store expansion (21 per cent store count growth from 2020-2022) and long-standing brand relationships but cautioned about revenue concentration and a trademark lawsuit with Bajaj Electricals, which could impact brand recognition if lost.

Opportunities and Risks

Opportunities:

Market Position: EMIL is the fourth-largest consumer electronics retailer in India and the largest in South India, with 127 stores and a strong brand in Telangana and Andhra Pradesh. Its partnerships with over 70 brands and 6,000+ SKUs provide a competitive edge.
Expansion: The company continues to open new stores (e.g., Bajaj Electronics in Kurmannapalem, Shapur) and has ventured into specialized formats like “The Charcoal Project.” Its e-commerce tie-ups with Amazon and Paytm enhance reach.
Sector Tailwinds: India’s consumer electronics market is growing, driven by rising disposable incomes and demand for appliances, which aligns with EMIL’s focus on high-margin large appliances.

Risks:

Revenue Concentration: 88% of revenue from Telangana and Andhra Pradesh and 62% from the top five brands (37% from the top two) expose EMIL to regional economic downturns or brand-specific risks.
Profitability Pressure: A 31.05% year-on-year profit decline in Q3 2024 and a 130-basis-point EBITDA margin contraction signal operational or competitive challenges.
Trademark Lawsuit: The ongoing dispute with Bajaj Electricals over the “Bajaj Electronics” brand could force a costly rebranding, impacting visibility in key markets.
Online Competition: E-commerce giants like Amazon and Flipkart pose a threat, potentially eroding margins and market share.
Market Sentiment: The stock’s 44.4% one-year decline and high P/E relative to the sector could deter investors unless earnings stabilize.

The establishment narrative —bullish analyst ratings and media focus on expansion — may downplay competitive pressures from e-commerce and the impact of wage hikes (noted as a 38% increase in some states).

EMIL’s stable promoter holding (65.17%) and low debt are positives, but the lack of dividends despite profits suggests a reinvestment strategy that may not align with income-focused investors.

Electronics Mart India Ltd. presents a compelling yet cautious investment case. Its leadership in South India, store expansion, and robust revenue growth support analyst optimism, but profit declines, regional concentration, and competitive risks warrant scrutiny.

Disclaimer: This analysis is for informational purposes only and not a buy/sell recommendation. Stock investments carry risks, and investors should consult financial advisors.

Follow The Raisina Hills on WhatsApp, Instagram, YouTube, Facebook, and LinkedIn