Nava Bharat Ventures' Q3FY20 results (Outperformer) - Tariff hike to improvecash flow of Zambia power plant
Q3FY20 result highlights
- Consolidated revenues were up 7% yoy to Rs23.5bn (est: Rs23bn), EBITDA was up 10.7% yoy to Rs4.93bn (est: Rs4.92bn) and reported PAT was up 8.6% to Rs4bn but adj. for Rs200m exceptional loss (impairment of investments gone bad) PAT was up 14% yoy at Rs4.2bn (est: Rs4bn).
- Cons. gross margins were up 80bp yoy led by benign raw materials. Staff cost was up by 3% yoy while A&P increased sharply by 14.3% yoy (disproportionate investment behind power brands). Resultant EBITDA margin improved by 70bps yoy to 20.9% (exp of 21.4%).
- Domestic FMCG volume growth stood at 5.6% yoy (exp: 5% yoy). Growth was led by Health supplements (+12.2% yoy), Digestives (+15.9% yoy), Oral care (+8.5% yoy) and shampoos (+5.1% yoy). OTC grew by 5.5% yoy, Ethicals by 2.7% yoy, Hair Oils was flat while Food segment dragged overall performance as it fell by 1.7% yoy.
- International Business sales grew 12% yoy in CC terms with MENA growing 10.1%, Egypt at 17% and Nepal at 20.6% amongst other geographies also posting robust growth.
- Rural continues to grow ahead of Urban for Dabur and most of the growth was led by market-share gains.
Key positives: Strong performance in healthcare segment.
Key negatives: Weak performance in foods & hair oil segment.
Impact on financials: FY20E maintained, FY21E EPS cut by 2.7%. Introduce FY22E estimates.
Valuations & view
Dabur’s earnings print was marginally ahead of our estimates and is a welcome surprise in the current poor macro environment. However, December has seen sharp deceleration in growth for the industry and management sounded cautiously optimistic for the very short-term. We believe Dabur’s strong presence in healthcare segment (which is pretty unique amongst listed plays) as well as its strategy of driving growth through penetration and innovations is playing out well, as indicative from market share gains across categories, thereby helping it to outperform industry growth in a challenging environment. This coupled with recovery in International business (visible in this quarter) should aid overall consolidated earnings for the company. Given better execution and earnings visibility, we maintain our OP on Dabur (roll-forward PT to ‘Sep 21 EPS valuing at 48x), it is amongst our top picks in the space.
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.
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