Dabur India Limited - Sustaining in challenging times - 1QFY14 Results Review - ANTIQUE

Dabur's consolidated net sales grew by 13% to INR16.5bn while EBITDA and PAT grew by 15% and 21% respectively to INR2.35bn and INR1.87bn respectively. EBITDA margin improved by 28bps to 14.3% during the quarter largely due to 114bps drop in raw material cost to 48.9% of net sales.

Standalone net sales grew by 10.8% to INR11.2bn while EBITDA and PAT grew by 10.8% and 10% respectively to INR1.58bn and INR1.31bn.

Outlook and Valuation

We are maintaining our earnings estimates for FY14 despite the higher than expected growth in earnings during the quarter in view of the uncertain environment during the year. However, we believe that Dabur's international operations would increasingly witness better profitability during FY15 backed by revival in operations of Namaste and better performance in the high margin GCC markets. This in turn would aid overall profitability of the company during FY15. Nevertheless, it would lead to a better sales growth for the company during FY15. We therefore increase our EPS estimates for FY15 by 4% to INR6.3. At the CMP of INR175, the stock is trading at a PE of 32.9x FY14e and at 27.8x FY15e. The stock has traded at an average one year forward PE of 27x during the last three years (FY11-FY13), the period of outperformance and re-rating of the FMCG sector as a whole. In our view, given Dabur's consistent performance, it will trade at a premium over its historic multiples in the current uncertain scenario. We therefore value the stock at a PE of 28x FY15e earnings arriving at a target price of INR176. We maintain our HOLD recommendation on the stock at the current levels.

Source : Equity Bulls

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