Sell Dabur India; target of Rs 270: Religare

Religare's research report on Dabur India Dabur’s posted Q4FY16 consol. sales/EBITDA/adj. PAT growth of 10.9%/20.2%/16.6% YoY with domestic volume growth of 7% YoY aided by improved performance of the foods business. Saving in input cost & lower ad spend drove EBITDA margins to 19.2% (RCMLe 18.6%). Though Dabur’s sequential volume growth has normalized, we believe it’s near term performance could be marred by weak macros and stiff competition from Patanjali. Valuations at 30x FY18E EPS seems rich, maintain SELL.While Dabur’s QoQ volume growth has normalised, we believe near-term growth could to be marred by weak consumer spends and high competitive intensity. Valuations at 34x FY17E and 30x FY18E EPS do not fully discount the medium-term earnings risks in our view. Maintain SELL with a Mar’17 TP of Rs 270.

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