Dabur posted a mixed set of numbers for the quarter. Top-line growth was above estimates at 30.6% yoy, primarily driven by volume growth, while earnings grew below our estimates by 8.5% yoy, affected by higher interest, depreciation expenses and tax rate. At the operating front, Dabur recorded a margin contraction of 53bp yoy, despite gross margin expansion and cut in ad spends (down 213bp yoy). We recommend Accumulate on the stock.
Volume growth steady in double digits: Dabur posted strong top-line growth of 30.6% yoy to `1,108cr, primarily led by volumes. In terms of segmental performance – CCD registered growth of 36.6% yoy, CHD grew by 12.1% yoy and IBD posted growth of 9.5% yoy for the quarter. Earnings registered disappointing growth of 8.5% yoy to `147cr, below our estimates, due to a sharp spike in interest, depreciation expenses and tax rate. On the operating front, Dabur delivered a margin contraction of 53bp yoy to 18.6%, resulting in 27% yoy growth in EBITDA to `205.6cr. Gross sales also include income from Hobi and Namaste entities.
Outlook and valuation: During FY2011–13E, we expect Dabur to post a CAGR of 21.6% in its top line, aided by steady volume growth in its core CCD categories of hair care, skin care and foods coupled with robust growth in its international business. We model in 20% yoy growth from the international business, contributing `1,030cr to revenue in FY2013E. We expect Dabur’s OPM to sustain at ~18% levels, after factoring in the loss on account of Egypt crisis, higher input cost and lower operating leverage. We have modeled in a healthy 20% CAGR in earnings, aided by robust top-line growth and consistent margins. At the CMP of `99, the stock is trading at attractive valuations of 20.5x FY2013E revised EPS of `4.8. Hence, we recommend Accumulate on the stock with a revised target price of `115.
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