Hold Dabur India; target Rs 175: Sushil Finance

Sushil Finance's research report on Dabur India

"Dabur India, for Q2FY14, its Revenue grew 10.4 percent YoY to Rs.11516.9 mn. EBITDA grew 12.7 percent YoY to Rs.2176.0 mn with margins of 18.9 percent which expanded by 38 bps YoY mainly due to softening of raw materials (-158 bps YoY as  percent of sales) & part of this gain is invested in A&P (+86 bps YoY) & staff cost (+38 bps YoY). APAT grew 10.2 percent YoY to Rs.1708.3 mn with margins of 14.8 percent which was flat YoY due to lower other income on account of one-time treasury loss of Rs.90 mn. Reported EPS of Rs.1.0. Consumer Care business contributed 81.0 percent to sales with EBIT margin of 28.9 percent (+44 bps YoY) while Foods & Others businesses contributed 16.1 percent & 2.8 percent to sales with EBIT margin of 14.6 percent (-177 bps YoY) & 9.4 percent (-347 bps) respectively." "For Q2FY14, its Revenue grew 14.8 percent YoY to Rs.17542.1 mn with volume growth of 10.9 percent. EBITDA grew 26.6 percent YoY to Rs.3292.4 mn with margins of 18.8 percent which expanded by 174 bps YoY mainly due to softening of raw materials (-325 bps YoY as  percent of sales) & part of this gain is invested in A&P (+113 bps) & staff cost (+63 bps). APAT grew 23.5 percent YoY to Rs.2498.3 mn with margins of 14.2 percent which improved by 100 bps YoY mainly on account of lower tax rate & part of which was offset by lower other income. Reported EPS of Rs.1.4. Consumer Care business contributed 85.5 percent to sales with EBIT margin of 24.9 percent (+193 bps YoY), retail contributed 0.9 percent to sales with EBIT margin of -8.5 percent (+1275 bps YoY) while Foods & Others contributed 11.6 percent & 1.9 percent to sales with EBIT margin of 16.1 percent (-285 bps YoY) & 9.1 percent (-315 bps) resp." "Considering strong performance in H1FY14, strong brand portfolio, favourable domestic & International sales mix, favourable Rural & Urban sales mix, introduction of new products/variants, healthy Namaste performance, 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 much as it contributes only 10 percent to its domestic sales. At the CMP of Rs.172, the stock trades at a valuation of 27.7x its FY15E EPS of Rs. 6.2. We maintain our "Hold" rating with revised TP of Rs. 175 (28.0x its FY15E EPS)," says Sushil Finance research report. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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