EUR 120.00 For Business Accounts Only

MOSL: DABUR (Buy)-Beat on all fronts; future outlook ‘healthy’

DABUR: Beat on all fronts; future outlook ‘healthy’

(DABUR IN, Mkt Cap USD14.6b, CMP INR614, TP INR715, 16% Upside, Buy)

 

• DABUR’s 1QFY22 result came in above our expectations on all fronts. The management’s confidence on: a) double-digit sales growth prospects for FY22, despite a challenging base for the Healthcare business in the remaining quarters, and b) target of maintaining or growing FY22 EBITDA margin YoY, despite the ongoing rise in material costs, is encouraging.
• The management’s initiatives in the last two years of: a) a spate of new launches, b) sharp increase in advertising spends, c) continued expansion in distribution, d) investment in technology and Analytics, and e) cost saving efforts plowed back into the business for growth has set DABUR on the right path towards a much stronger topline and earnings growth trajectory, commensurate with the inherent potential in its Healthcare, Foods, and HPC businesses.
• DABUR has delivered double-digit topline growth in two of the past three years, unlike most peers, and is likely to do so again in FY22. New products now contribute 5-6% of sales. Earnings growth, after the ongoing investment in these initiatives, will be even stronger than topline growth after completion of the investment phase for the above mentioned initiatives (and a temporary reset on account of a step up in taxation levels to 22% in FY22 from 17.6% in FY21). We maintain our BUY

 Beat on all fronts

• Consolidated sales grew 31.9% YoY to INR26.1b (est. INR23.4b) in 1QFY22. EBITDA/PBT/adjusted PAT grew 32.5%/34%/28% YoY to INR5.5b/INR5.7b/INR4.4b (est. INR4.8b/INR5b/INR3.9b).
• India FMCG volumes grew 34.4% YoY in 1QFY22.
• Gross margin contracted by 130bp YoY to 48.1% (est. 48.9%). As a percentage of sales, lower staff cost/ad spends (-140bp/-10bp YoY to 9.9%/7.2%), and higher other expenses (+10bp to 9.9%) resulted in an EBITDA margin expansion of 10bp to 21.1% (est. 20.5%).