MOSL: DABUR (Neutral)-Beat on estimates-Cautious commentary going ahead
DABUR: Beat on estimates; Cautious commentary going ahead
(DABUR IN, Mkt Cap USD10.8b, CMP INR421, TP INR425, 1% Upside, Neutral)
- Consolidated sales grew 9.3% YoY to INR22.7b (v/s est. of INR22.2b). EBITDA grew 18.5% YoY to INR4.6b (v/s est. of INR4b). Adj. PAT increased 14.2% YoY to INR3.8b (v/s est. of INR3.4b). The domestic FMCG business grew 10.5% with underlying volume growth of 9.6% (v/s est. of +2%).
- Gross margin contracted 10bp YoY to 49.5%; this along with lower staff cost as % of sales (down 60bp YoY to 10.2%), ad spends as a % of sales (down 70bp YoY to 8.9%) and low other expenses as % of sales (down 40bp YoY to 10.3%) meant that Consol. EBITDA margin expanded 160bp YoY to 20.1%.
- Standalone Sales, EBITDA and Adj. PAT grew 10.5%, 23.3% and 17.5%, respectively. EBITDA margins expanded 200bp YoY to 19.4%.
- Concall highlights: (a) Despite good sales growth in the domestic business in 1QFY20 (+10.5%) YoY, management has cautiously refrained from giving double-digit sales growth guidance for the full year, given the sequential slowdown, channel liquidity crunch and competitive intensity in some categories, (b) Raw material costs remained benign, we do not expect it to rise in the near term, (c) Target of maintaining full-year ~20% EBITDA margin.
- Valuation and View: Results for the quarter were ahead of our estimate. But cautious commentary on the demand environment has led to minor changes in our full-year estimates. We have increased FY20/FY21 EPS forecasts by ~1%/0.4%. Valuations are fair at 41x FY21, particularly for a business with moderate earnings growth prospects (~10.2% CAGR over FY19-21) and ROCEs in mid-20's that are inferior to peers. Earnings trajectory could be better than expected if rural growth surprises positively and from potential sharpening of focus under a new CEO (higher investments behind Power Brands and a revamp of the Supply Chain infrastructure). We maintain Neutral rating on the stock with a target price of INR425 (targeting 40x Jun'21 EPS).
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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.