MOSL: DABUR INDIA (Neutral)-Weak performance, sharp cut in ad-spends cushions profits

​Dabur India: Weak performance, sharp cut in ad-spends cushions profits

(DABUR IN, Mkt Cap USD7.4b, CMP INR287, TP INR295, 3% Upside, Neutral)

• Dabur’s (DABUR) 4QFY17 results witnessed consolidated sales decline of 4.7% YoY to INR 19.1b (est. 2.2% growth). EBITDA posted 0.6% YoY growth to INR 4.2b (est. 0.5% decline). Adj. PAT grew 0.5% YoY to INR3.3b (est. 2.7% growth).
  
• Domestic FMCG business sales grew 0.7% YoY led by volume growth of 2.4% (est. 4% growth). While lower than estimates, domestic volumes were still not poor given high base of 7% volume growth in 4QFY17. Oral Care, Beverages and Healthcare, (the latter boosted by strong growth in Chyawanprash) reported sales growth of 3.6%, 10% and 5% YoY respectively while hair care sales declined 4.2%, Home Care by 6.5% and OTC by 4% YoY. International business sales declined 4.5% YoY on constant currency.
  
• Consol. EBITDA margin expanded 110bp YoY to 21.8% mainly due to steep 140bp decline in A&P to sales (multi-year low at 6.4%, 21.4% absolute decline) and 100bp decline in staff costs, which offset 160bp YoY lower gross margins.
  
• FY17 highlights: FY17 witnessed another year of poor topline with 2.1% decline in sales to INR77b, while EBITDA was flat at INR15b and PAT grew by 2.1% YoY to INR12.8b. There was 20% YoY decline in receivables YoY.