Dabur (SELL): In-line 1QFY14 results; reiterate SELL - Ambit

Dabur's 1QFY14 results were broadly in line with our estimates and volume growth of 9% was led by strong growth in the home care and fruit juices segment. EBITDA margins, however, remained flat, despite gross margin expansion of ~100bps, due to: (a) stronger growth in employee costs (owing to new hires); (b) higher advertisement spend growth despite a very high base quarter; and (c) strong increase in other expenses. Whilst the management maintained its volume growth guidance of 8-12% for FY14, we expect volume growth of 9% YoY and 14% revenue CAGR over FY13-15. Dabur's domestic product portfolio positioning does not leave much scope for premiumisation or market share gains. In addition, with over Rs10bn of surplus cash available on the balance sheet, capital allocation risks around M&As are a cause for concern. The stock is currently trading at 35x FY14E and 31.0x FY15E EPS. We reiterate our SELL stance.

Source : Equity Bulls

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