Neutral on Dabur - Motilal Oswal

DABUR 3QFY11: In-line; Volumes up 10%; margins expand 30bp; Intl business adds 60% of incremental PAT; Neutral

Consolidated sales grew 16.6% YoY to Rs10.8b (est Rs10.8b) helped by 10% volume growth, ~4% realization growth and impact of Hobi consolidation (3%).

Gross margin contracted 300bp YoY to 51.6% due to sharp increase in input costs and delay in taking price increases.

However cut in Ad-spend (210bp), other exp (80bp) and Staff Cost (50bp) enabled EBITDA margin expansion of 30bp to 19.4%. EBITDA grew 18.2% to Rs2b.

Consumer Care division (CCD) sales grew 16.1% (17.6% in 1H), CHD sales increased 13% (12.6% in 1H) while Foods grew 29.8% (19.9% in 1H).

Standalone sales grew 13.3% YoY to Rs9b; gross margin declined 400bp; cost control reduced EBITDA margin decline to 20bp. Adj PAT grew ~6% to Rs1.3b.

We will review our estimates post concall of the company on 1 Feb. On our current estimates the stock trades at 24.2x FY12E of Rs3.9 and 19.7x FY13E EPS of Rs4.8. Maintain Neutral with a target price of Rs95 (20x FY13E).

Source : Equity Bulls

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