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India Equity Research Reports, IPO and Stock News
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Margin pressure
Dabur’s 1Q Ebitda came broadly in line with estimates; higher other
income and lower interest helped as net earnings came 7% ahead of
estimates at Rs1.3bn (+20% YoY). The management indicated input cost
pressures as the key concern on the post result concall; A&P expenses
are also like to inch up which would negatively impact margins in the
coming quarters. We cut our earning estimates by 5% for FY12-13CL to
factor in lower 1Q and as we raise our cost estimates. Downgrade to Upf.
1Q operating performance broadly in-line
Dabur’s consol. Ebitda rose 25% YoY to Rs1.7bn, broadly in-line with
estimates. Reported gross margins contracted 480bps YoY while a lower A&P
expenses helped as decline in Ebitda margins was arrested to 75bps. Lower
than expected depreciation and interest helped in addition to higher other
income on the back of which net earnings rose 20% YoY to Rs1.3bn, 7%
ahead of our estimates. Standalone (mainly domestic) topline grow by 13%
YoY while net earnings rose by a meagre 2%.
Organic volume growth moderated in 1Q
Dabur’s net revenues grew by 32% YoY with acquisitions (Namaste, Hobi)
contributing ~18ppt; volume growth at 8.6% was lowest in the last many
quarters. While hair oils (+16%), toothpaste (+14%), home care (+25%),
foods (+32%) reported strong growth, pressures continued in shampoos (-
19%); health supplements (+8%), healthcare (+11%), international business
(+13%) too reported moderate growth.
… margin pressure would continue for , though
The management highlighted input cost pressures as a key worry in post 1Q
concall with limited pricing power in categories like shampoos, oral. While the
company plans to take up product prices, this would be calibrated and would
now be implemented only by Sep-11 (3.5% in 1Q). A&P expenses too would
rise from 1Q levels of 12.5%; in this context, it is useful to note that the
quarter benefitted from high A&P base of 16.5% in 1QFY11 cf. 12.2% in the
next three quarters implying the company may not be able to use this as a
lever for maintaining margins in the coming quarters.
Cutting estimates by 5% over FY12-13CL; downgrade to Upf
We cut our earning estimates by 5% over FY12-13 as we factor in lower 1Q
and factor in higher input costs. We downgrade the stock to Upf as we see
valuations rich at 26x one year forward earnings in the context of 17%
earnings growth. Steep correction in input cost prices is key risk to our reco.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Margin pressure
Dabur’s 1Q Ebitda came broadly in line with estimates; higher other
income and lower interest helped as net earnings came 7% ahead of
estimates at Rs1.3bn (+20% YoY). The management indicated input cost
pressures as the key concern on the post result concall; A&P expenses
are also like to inch up which would negatively impact margins in the
coming quarters. We cut our earning estimates by 5% for FY12-13CL to
factor in lower 1Q and as we raise our cost estimates. Downgrade to Upf.
1Q operating performance broadly in-line
Dabur’s consol. Ebitda rose 25% YoY to Rs1.7bn, broadly in-line with
estimates. Reported gross margins contracted 480bps YoY while a lower A&P
expenses helped as decline in Ebitda margins was arrested to 75bps. Lower
than expected depreciation and interest helped in addition to higher other
income on the back of which net earnings rose 20% YoY to Rs1.3bn, 7%
ahead of our estimates. Standalone (mainly domestic) topline grow by 13%
YoY while net earnings rose by a meagre 2%.
Organic volume growth moderated in 1Q
Dabur’s net revenues grew by 32% YoY with acquisitions (Namaste, Hobi)
contributing ~18ppt; volume growth at 8.6% was lowest in the last many
quarters. While hair oils (+16%), toothpaste (+14%), home care (+25%),
foods (+32%) reported strong growth, pressures continued in shampoos (-
19%); health supplements (+8%), healthcare (+11%), international business
(+13%) too reported moderate growth.
… margin pressure would continue for , though
The management highlighted input cost pressures as a key worry in post 1Q
concall with limited pricing power in categories like shampoos, oral. While the
company plans to take up product prices, this would be calibrated and would
now be implemented only by Sep-11 (3.5% in 1Q). A&P expenses too would
rise from 1Q levels of 12.5%; in this context, it is useful to note that the
quarter benefitted from high A&P base of 16.5% in 1QFY11 cf. 12.2% in the
next three quarters implying the company may not be able to use this as a
lever for maintaining margins in the coming quarters.
Cutting estimates by 5% over FY12-13CL; downgrade to Upf
We cut our earning estimates by 5% over FY12-13 as we factor in lower 1Q
and factor in higher input costs. We downgrade the stock to Upf as we see
valuations rich at 26x one year forward earnings in the context of 17%
earnings growth. Steep correction in input cost prices is key risk to our reco.
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