31 January 2017
3QFY17 Results Update | Sector: Consumer
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
485.2 / 7.2
320 / 234
TP: INR300 (+8%)
Domestic volumes disappoint; recovery likely to be gradual
3QFY17 consol. sales declined 6.1% YoY (est. of +2%) to INR18.5b.
declined 12.0% YoY to INR3.3b (est. of -6% to INR3.5b), while adj. PAT fell 7.5%
YoY to INR2.9b (est. of -5.1% to INR3.0b).
Sales of domestic FMCG business fell 6.8% YoY, led by volume decline
(est. of +5%). With a 2.5% volume decline in the base quarter (3QFY16), we
were expecting positive volumes for 3QFY17 despite demonetization. Sales of
consumer care segment declined by 11.2% and those of international business
by 5.2% YoY. Management did point out that domestic sales declined 6.8% YoY
in primary terms, but grew 0.7% YoY in secondary terms.
Consol. EBITDA margin shrunk 120bp YoY to 17.8%,
led by gross margin
contraction of 310bp due to adverse category mix and increased input costs.
Ad spends were down 180bp to 9.6%, staff costs declined 10bp YoY to 10.2%
and other expenses were flat YoY at 11.6%.
a) DABUR witnessed double-digit sales growth in October.
November was bad. While December witnessed recovery, sales were still down
YoY. b) Management expects domestic margins to be stable going forward.
However, currency depreciation could affect international business margins.
Valuation and view:
While new launches in the science-based Ayurveda space,
potential recovery in rural consumption and recent investments in distribution
expansion should aid growth over medium term, we reduce our EPS for
FY18E/FY19E by around 2% due to delay in earnings growth. The stock is fairly
valued at 33.3x FY18E EPS. Maintain
with a target price of INR300
(valued at 32x Dec-2018 EPS, 10% discount to three-year average P/E).
Financials & Valuations (INR b)
2016 2017E 2018E
EPS Gr. (%)
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 6129 1545
(Vishal.Punmiya@MotilalOswal.com); +91 22 6129 1547
Investors are advised to refer through important disclosures made at the last page of the Research Report.
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