Hold Dabur India; target Rs 174: Sushil Finance

Sushil Finance's research report on Dabur India

"For FY14, the management expects domestic volume growth in the band of 8-12 percent & price growth of ~4-5 percent instead of ~2-3 percent guided earlier due to increasing commodity prices & rupee depreciation. It expects to maintain A&P as  percent of sales at ~13-14 percent and improve the EBITDA margins by 100 bps for FY14 on consol basis. Dabur highlighted that they are not worried about the demand from rural India in FY14 as stimuli will happen at the rural end due to elections and good monsoon. In Q1FY14, rural growth (14.2 percent) was higher than urban growth (9.6 percent) and rural India contributed ~47 percent to the overall domestic sales with ~46 percent gross margins. For FY14, Dabur guided for capex of Rs.150-175 Cr."

OUTLOOK & VALUATION: "Considering strong performance in FY13, strong brand portfolio, favourable domestic & International sales mix, favourable Rural & Urban sales mix, introduction of new products/variants, Namaste biz revival in Q1FY14, we expect Dabur’s Revenues & APAT to grow at a CAGR of 14.1 percent & 18.6 percent resp. during FY13- FY15E. We believe the current pressure on discretionary staples in India will not impact Dabur as it contributes only 10 percent to its domestic sales. At the CMP of Rs.170, the stock trades at a valuation of 27.4x its FY15E EPS of Rs. 6.2. We maintain our "Hold" rating with revised TP of Rs. 174 (28.0x FY15E EPS)," says Sushil Finance research report.

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