Q2FY19 result highlights
Key positives: Strong growth in Hair care, Health supplements & Dabur red
Key negatives: Lower margins & Weak subsidiary performance
Impact on financials: We have cut our FY19-21E earnings by 3% each.
Valuations & view
After a strong start to FY19, Dabur 2Q performance was below par considering the miss on volume and margins. With focus on driving volumes & protecting share, we expect domestic FMCG volume growth to come back to double digit in 2HFY19 which coupled with price/mix improvement will drive the revenue growth. We believe near term margin expansion is unlikely due to input cost inflation & challenging environment in International business. We are factoring 14% revenue CAGR & a more gradual margin expansion resulting in 18% earnings CAGR over FY19-21E. We have cut our target multiple & valuing Dabur at a 20% discount to HUL. We continue to like Dabur’s diverse & naturals oriented portfolio and its initiatives in terms of innovations, distribution expansion & aggressively defending market share. The stock has corrected ~20% from the recent peaks & valuations at 37x/32x FY20/21E capture the modest performance expected over the next two quarters. Maintain Outperformer.
Dabur India is engaged in manufacturing, marketing and distributing consumer goods and its related products. Co.'s products include hair care, oral care, health supplements, digestives and candies, baby and skin care, fruit juices, cooking pastes and sauces. Co.'s brand names include Dabur, Asavs, Classicals, Dabur Shilajit, Naturecare, Shankhpushpi, Honitus and Ring Ring. Co. operates three business divisions: Consumer Care Division, Consumer Healthcare Division and the wholly owned subsidiary, Dabur Foods Limited.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.