MOSL: DABUR (Neutral)-In-line revenue performance-International remains under pressure

​Dabur: In-line revenue performance; International remains under pressure

(DABUR IN, Mkt Cap USD8.5b, CMP INR308, TP INR315, 2% Upside, Neutral)

• Dabur’s (DABUR) 1QFY18 consol. sales declined 8.3% YoY to INR17.9b (est. of -6.0%). EBITDA fell by 11.4% YoY to INR 3.1b (est. -13.9%) and adj. PAT by 4.8% YoY to INR2.8b (est. -12.3%).
• Domestic FMCG business’ primary sales declined 5% YoY (secondary sales +2%), led by volumes decline of 4.4% YoY (est. of -5%). Hair care, Foods and Health supplements declined 11.1%, 8.3% and 7.2% YoY, respectively, while Oral care, Digestives, Home care and Skin care grew 1.4%, 3.8%, 6.1% and 4% YoY, respectively. In Oral care, Toothpaste grew 10.4% YoY, but Toothpowder dragged the performance. International sales fell 14.9% YoY (-2% on CC basis) due to continued economic slowdown in MENA and currency devaluation.
• Consol. EBITDA margin shrunk 60bp YoY to 17.3%, mainly on lower gross margin (-180bp YoY to 48.9%) and higher staff cost (+50bp to 11.4%), partially offset by lower adspend (-170bp to 8.4%) and other expenses (-10bp).
• Concall highlights: a) Maintained full-year volume growth target. b) May not see reduction in full-year margins if competitors are not too disruptive on promotions. Expect promotions in beverages, though. c) Price hikes likely in 2H.