Accumulate Dabur India; target of Rs 125: PLilladher

Prabhudas Lilladher is bullish on Dabur India and has recommended accumulate rating on the stock with a target of Rs 125 in its July 23, 2012 research report.

“Dabur’s Q1FY13 sales, EBITDA and PAT came in at Rs14.62bn (up 21% YoY), Rs2.06bn (up 16% YoY) and Rs1.54bn (up 21% YoY), as against our expectations of Rs14.1bn, Rs2.04bn and Rs1.52bn, respectively. Domestic volumes posted 11.6% YoY growth, third consecutive quarter of double-digit volume growth, aided by lower base and strong performance of Foods. While the headline reported numbers are in line, other income growth of 58% drove 21% PAT growth. Pick-up in volume growth is a function of aggressive ad-spends as well as strategic initiatives on rural as well as distribution front. Foods, Health Supplements outperformed, while Hair Care, Skin Care, Oral Care and Home under-performed. International organic sales delivered 24% growth with GCC, Egypt and Nigeria being outperformers. Standalone profitability improved substantially despite 42% increase in ad-spends, with recurring PAT up 31% YoY.”

“Consolidated gross margins expanded 220bps (up 20bps QoQ) clearly benefitting from the carry over impact of pricing. Savings in gross margins were reinvested in ASP spends (up 51%) which expanded 310bps to 15.7% (base quarter ad-spends were flat). Consequently, operating margins declined 70bps to 14.1%. Standalone operating margins stayed flat at 14.3%. Operating margins in international division is down 180bps for international business, in our estimates, entirely driven by higher ad-pro spends up 66%.”

“We see further pick-up ahead once the benefits from rural distribution initiatives start flowing in. Sluggish performance in cash cow Oral and Hair care categories remain a concern. We retain our estimates and roll forward our model to FY14e. Maintain ‘Accumulate’, with Jun’13 TP of Rs125 (23x FY14e),” says Prabhudas Lilladher research report.  

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