Sell Dabur India; target of Rs 292: Dolat Capital

Dolat Capital's research report onDabur India

Dabur’s 4QFY17 revenues came below our expectation, albeit, APAT was in-line. The domestic business posted below estimated revenue performance primarily due to lower than estimated volume growth. Mere 2.4% volume growth in the domestic business implies that there’s still pinch of the demonetization. GM contracted 160bps, but the reduction in other operating expenses helped the operating margin expand.

Outlook

We believe that the operating margins have peaked out and would start tapering off with an increase in commodity price and increasing competition. We are not optimistic on the performance of the stock until assurance of better monsoon for the coming season. Valuing at 34x FY19E EPS to arrive at a TP of Rs 292. Downgrade to SELL.

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