Dabur India Result Review by PINC Research
Dabur’s Q3FY11 numbers were in line with our expectations. Net sales growth of 17% was driven by 10% volume growth, ~4%price & currency fluctuations and ~3% on acquisition of Hobi. Spike in RM prices led to gross margins declining 290bps. However, EBITDA margins were flat as SG&A and staff expenses were under control. Higher taxes have restricted the 16% EBITDA growth in 12% PAT growth. We retain our FY12 earnings estimates and maintain BUY with a TP of Rs110.
Strong growth in Foods
Growth of 42% in the food segment during Q3FY11 was on the back of ~44% traction in Real Fruit Juice and 38% growth in Active range. Dabur’s consistent focus and aggressive marketing efforts would sustain this growth momentum.
Lackluster growth in Hair Care and Oral care
Hair care exhibited slower growth in the past 7-8 quarters on stiff competition. De-growth of ~30% in shampoo space resulted in only ~4% growth in the hair care category. A moderate growth (~9%) in oral care was owing to sluggish performance of Meswak and slow off-take in the toothpaste category.
Better traction in consumer health division
Dabur posted 14% growth in consumer health division on aggressive marketing efforts. Its key brands Pudin Hara, Honitus and Shilajit saw 10%, 21% and 17% growth during Q3FY11. International business strong International business surged by ~14% and ~19% in constant currency during Q3FY11. Key geographies that recorded strong growth during 9MFY11 were GCC (+21%), Egypt (+41%), North Africa (+50%) and Nigeria (+34%).
VALUATIONS AND RECOMMENDATION
We believe Dabur’s robust portfolio, coupled with strong presence in the international markets provide good growth visibility. The stock has underperformed the BSE FMCG by 8% over last
6months, implying room for upside. We retain our FY12e target multiple of 25x (on par with the FMCG sector). We maintain ‘BUY’ on Dabur with TP of Rs110.