Dabur India – 2QFY2011 Result Update : Neutral : Angel Broking

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Dabur posted modest set of numbers for the quarter. While top-line growth was
marginally below our estimates at 15% yoy primarily driven by volume growth,
earnings grew in line with our estimates at 15% yoy though partially aided by
higher other income. At the operating front, Dabur recorded margin expansion by
17bp yoy, despite the 211bp contraction in gross margin cushioned by cut in
ad-spend (down 168bp yoy). At current levels, the stock is trading at fair
valuations. Hence, we maintain Neutral view on the stock.


Volume growth steady in double-digits: Dabur posted a modest growth in top-line
by 15% yoy to `973cr led primarily by volumes. In terms of segmental
performance – CCD registered a growth of 14.2% yoy, CHD grew 14.1% yoy and
IBD posted a growth of 18.7% yoy for the quarter. Earnings registered a modest
growth of 15.4% yoy to `160cr in line with our estimates despite the 122bp rise in
the tax rate partially aided by margin expansion and higher other income. On the
operating front, Dabur delivered margin expansion of 17bp yoy to 20.9%
resulting in a modest growth of 16% yoy in EBITDA to `203cr.

Outlook and Valuation: Over FY2010E-12, we expect Dabur to post a CAGR of
19% in 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 expect Dabur’s OPMs to sustain at ~18.5-19% levels owing to benign input
cost environment, better product mix and higher operating leverage. We have
modeled in a healthy 18% CAGR in earnings aided by robust top-line growth and
consistent margins. At the CMP of `103, the stock is trading at fair valuations of
25.4x FY2012E EPS. Hence, we maintain Neutral view on the stock.