Dabur India With Target Of Rs 107
We attended Dabur’s Q4FY11 conference call and post that reviewed our FY12 estimates and incorporate FY13 numbers. We see input price pressure will remain a concern for near term while expect EBITDA margin decline in long term on higher contribution from the low margin acquisition. Hence, downgrade our FY12 estimates by 4%. We see Hobi and Namaste combined will contribute 13% of sales and 10% of the EBITDA in FY13.
However we believe these recent acquisitions are EPS accretive and would help in growing the profitability. We maintain our positive view on Dabur for its strong presence in the domestic market through its robust portfolio and regular entrance in geographies enable it to maintain its high growth momentum.
We retain our 25x multiple on 12-month forward earnings and maintain our BUY recommendation while reduce our TP to Rs107 from Rs110 earlier.
IBD business excluding Hobi and Namaste acquisition was under pressure due to unrest in most of the geographies. According to the management, timing of sorting out these unrests is difficult but expressed that only ~Rs1bn is exposed. Egypt and Nepal fetched Rs1.2bn and Rs1bn revenues in FY11.
Gross margin declined by 200bps YoY if we exclude the accounting benefits from the Namaste acquisition.
Shampoo category is under pressure through hefty price cut by the competitors. Dabur seems incompetent for this category and we expect pressure to remain going forward. Shampoo category registered 10.5% volume growth during the quarter.
Gross margin for the Shampoo business and Beverage business is close to 70% and 35% respectively.
Hair oil is largely rural driven growth and management expects healthy growth visibility for the near term.
Fem posted Rs320mn revenue during Q4FY11.
Hobi EBITDA margin was lower due to some one off expenses and stood at ~10%.
Management is positive on retail business for the long term and plans to double the outlets to reach at 75 stores by FY12.