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Dabur 3QFY2012 performance highlights and results update

Contributed by Angel Broking

Dabur reported an impressive performance for 3QFY2012. Top-line growth was strong at 34.5% yoy, above our estimates, driven by a mix of volume and value growth and recent acquisitions. Earnings grew by 11.9% yoy, below our estimates. We maintain our Accumulate recommendation on the stock.

Key highlights for the quarter: During 3QFY2012, the company’s domestic business growth stood at 16% yoy, while the international business (ex. acquisitions) grew by 38%yoy. The consumer care division grew by 15% yoy, with all categories registering healthy growth. Hobi and Namaste reported healthy top-line growth of 44% yoy and 16% yoy, respectively. The company reported a 416bp yoy decline in OPM due to increased input costs and a rise in ad spends and other expenses.

Outlook and valuation: Post 3QFY2012 results, we maintain our revenue and earnings estimates. We expect the company to grow at a ~20% CAGR over FY2011–13E, backed by its recent acquisitions. We have modeled in flat OPM for FY2012E and FY2013E due to sustained gross margin pressure and upon higher ad spends because of a stronger competitive environment. At the CMP, the stock is trading at 24x FY2013E EPS. We maintain our Accumulate rating on the stock with a target price of Rs.110.