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MOSL: DABUR (Neutral)-Good all-round results-management red flags weak demand

Dabur: Good all-round results; management red flags weak demand

(DABUR IN, Mkt Cap USD11.8b, CMP INR478, TP INR480, Neutral)

 

• Dabur’s 3QFY20 results were met with muted management commentary on the near-term sectoral outlook. None of Dabur’s categories are witnessing green-shoots, indicating lack of substantial revival.
• Valuations are fair at 46.3x FY21 and 40.1x FY22 EPS and prevent us from turning more constructive on the stock. 

Results above est.; 5.6% volume growth in domestic FMCG business

• 3QFY20 consol. sales grew 7% YoY to INR23.5b (v/s est. INR22.8b). EBITDA grew 10.7% YoY to INR4.9b (v/s est. INR4.7b). PBT grew 9.5% YoY to INR5b (v/s est. INR4.8b). Adj. PAT was up 13% YoY to INR4.1b (v/s est. INR3.7b).
• Gross margin expanded 80bp YoY to 50.1% (v/s est. 50.3%). Lower staff cost as % of sales (-40bp YoY to 10.8%), higher ad spends (+50bp YoY to 8.1%) and flat other expenses (+10.1% YoY) meant that EBITDA margin expanded 70bp YoY to 20.9% (v/s est. 20.7%).
• 9MFY20 consol. sales/ EBITDA/ Adj. PAT grew 6.8%/ 12.3%/ 14.5% YoY.
• Standalone sales/EBITDA/adj. PAT grew 5%/7.1%/10.8% YoY. EBITDA margins expanded 40bp YoY to 22.4%. Domestic FMCG business reported an underlying volume growth of 5.6% (v/s est. 3%).
• International business reported CC growth of 12%.
• Segmental: Hair care, Health supplements and Oral care grew 1%, 12.2% and 8.5%, respectively, while Foods declined 1.7% YoY. Other relatively smaller segments, mainly OTC & Ethicals, Digestives, Skin care & Salon and Home care grew 4%, 15.9%, -0.3% and 2.5%, respectively.