3 November 2014
2QFY15 Results Update | Sector:
Consumer
Dabur India
BSE SENSEX
27,860
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
8,324
DABUR IN
1,756.4
404/6.6
235/154
-1/5/-2
CMP: INR230
TP: INR200
Neutral
Financials & Valuation (INR Million)
Y/E MAR
2015E 2016E 2017E
Net Sales
EBITDA
Adj PAT
Adj.EPS(INR)
Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
81,006 93,367107,959
13,189 15,213 17,888
10,616 12,328 14,549
6.1
16.1
18.3
33.3
37.1
37.8
12.6
7.1
16.1
21.8
32.4
38.6
32.5
10.5
8.3
18.0
26.0
32.1
39.5
27.6
8.8
Dabur’s (DABUR) 2QFY15 results
were slightly below estimates, with consolidated
sales growth of 10.4% to INR19.3b (est. INR20.2b). EBITDA margin contracted
60bp YoY to 17.9% (est. 18.7%), while EBITDA grew 6.6% YoY at INR3.5b (est.
INR3.8b). Recurring PAT grew 15.1% to INR2.9b (est. INR2.9b).
Domestic business
volume growth at 8.7% was driven by Foods (up 29%, 11% of
sales), Hair Care (up 13.9%, 14% of sales), Health Supplements (up 10.2%, 10% of
sales) and Home Care (up 10.2%, 5% of sales). Oral Care (9% of sales) continued to
post subdued performance and grew 8.1%. International business registered 6.6%
sales growth (8.3% constant currency growth).
EBITDA margin down 60bp YoY:
Gross margin contracted 60bp YoY to 53%. RM
price correction benefit to reflect in gross margin in 3QFY15, as per management.
Increase in staff costs (up 40bp YoY to 9.5%) and ad spends (up 10bp YoY to
13.2%) completely offset the savings in other expenses (down 50bp YoY to 12.4%).
EBITDA margin contracted 60bp YoY to 17.9% (est. 18.7%), while EBITDA grew
6.6% YoY to INR3.5b (est. INR3.8b). Higher other income (up 58.5% YoY to
INR444m), lower interest expense (down 49% YoY to INR102m) and tax rate
savings (down 120bp YoY to 17.6%) aided recurring PAT growth of 15.1% to
INR2.9b (est. INR2.9b).
Management call highlights:
a) demand recovery in urban India is not as fast as
expected, b) volume growth guidance of 8-10%, c) A&P to be in 13-14% band with
benign margin outlook, d) tax rate for FY15 to be at 1HFY15 run rate.
Valuation and view:
DABUR’s continued and strong volume growth delivery in a
challenging macro backdrop is a reflection of its balanced portfolio and recent
investments behind distribution expansion, in our view. We have largely retained
our estimates as we incorporate management’s guidance of back-ended recovery.
However, valuations at 37.8x FY15E and 32.5x FY16E EPS are rich, in our view. We
maintain a
Neutral
rating with an unchanged target price of INR200.
Gautam Duggad
(Gautam.Duggad@MotilalOswal.com); +91 22 3982 5404
Manish Poddar
(Manish.Poddar@MotilalOswal.com); +91 22 3027 8029
Investors are advised to refer through disclosures made at the end of the Research Report.