Recommendations » India

Dabur India 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Dabur India (Dabur) posted a 12.3% yoy growth in its consolidated top-line, which was in-line with our estimates. The company’s net profit rose by 22.2% yoy to Rs.211cr aided by strong operational performance.

Key highlights: The domestic consumer business posted a 14.3% yoy growth with volume growth coming in at 9.5%. While the Management maintained that rural markets and modern trade performed well, lower procurement by CSD impacted sales. In terms of category, Foods grew by 22.1% yoy while Home & Personal care grew by 15.7% yoy. The Hair care portfolio grew by 13.9%, while Shampoos grew by 29.6% yoy. The company’s international business posted a growth of 9%, with the organic international business posting a growth of 22.4% yoy. The OPM stood at 16.5%, up 126bp yoy, led by a healthy expansion in gross margins in the international business due to reduction in commodity costs. The company’s advertising and promotion expenditure as a percentage of sales rose by 77bp yoy to 14.4%. Finance costs fell by 57.5% yoy to Rs.7.8cr, due to favorable forex impact on a yoy basis.

Outlook and valuation: We expect Dabur’s top-line to post an ~16.1% CAGR over FY2012–14E. The bottom-line is expected to post a 21.6% CAGR, aided by top-line growth and margin expansion. At the current market price, the stock is trading at 23.7x FY2014E EPS. We recommend Neutral on the stock.