Dabur India - Record volumes, robust margins - BUY - Religare

Dabur's Q4FY13 net sales/EBITDA/adj. PAT grew 12.3%/20.9%/18.4% YoY, in line with our estimates. Notably, volume growth at 12% was the highest in 11 quarters. FY14 should be another strong year for Dabur with continued double-digit volume growth and margin expansion. We raise our Mar'14 TP to Rs 160 (from Rs 150) given strong volume growth and scope for 150bps margin expansion over FY13-FY15. Valuations are cheap at 27.4x/23.4x FY14/FY15E earnings - BUY.

Net sales growth led by strong 12% volume upswing: Dabur reported net sales growth of 12.3% YoY to Rs 15.3bn, led by 12.3% volume growth in the domestic FMCG business - the strongest volume uptick in 11 quarters. The domestic FMCG business delivered robust 15.1% YoY growth, international business grew 11.6% YoY (organic growth of 19.7%), while Namaste revenues remained under pressure.

- EBITDA up 20.9% YoY: EBITDA grew 20.9% YoY to Rs 2.6bn, with 120bps margin expansion to 17%. Gross margins increased 190bps YoY as A&P expenses were down 90bps YoY to 12.5% (on a high base). Other expenses increased by 60bps YoY and personnel costs were up 90bps. Adj. PAT grew 18.4% YoY to Rs 2.02bn. Other income increased by 27% YoY, whereas interest costs were up 160%. The tax rate also increased by 90bps YoY to 19% for the quarter.

- Dabur remains one of our top picks - BUY: We maintain BUY on Dabur with a new March'14 TP of Rs 160 (from Rs 150). Dabur remains one of our top picks in the mid-cap Consumer space. Key risks to our call are (1) a slowdown in domestic volume growth, (2) gross margin pressure in case input costs start to inch up, (3) high competitive intensity leading to higher A&P costs and lower margins, and (4) pressure in the international business.

Source : Equity Bulls

Keywords