Dabur India -Stable performance; Hold:: Anand Rathi

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Dabur India
Stable performance; retain Hold
 Maintain Hold. Dabur’s 2QFY11 performance was healthy, wth
revenue and net profit growing 14.7% and 15.2% respectively.
Though we expect 23% earnings CAGR over FY10-12e, given the
present steep valuation, we retain our Hold rating.
 Volume growth at 12%. The company has reported volume
growth of 12%, with price hikes accounting for 2.7%. The 12%
volume growth is the lowest in the past nine quarters.
 Segmental performance – Mixed bag. Health supplements and
digestives have reported strong revenue growth of 31% and 14%
respectively. Also, Homecare too saw a healthy revenue growth, at
42%. However, the company witnessed subdued performance in
other segments, with haircare and skincare growing only 2% and
8% respectively.
 Steady EBITDA margin. EBITDA margin was steady, at 20.9%.
Although ad spend (as a percentage of net sales) has declined,
higher raw material costs have resulted in the margin improving
just 20bp. As no major launches/re-launches were undertaken in
the quarter, ad spend (as a percentage of net sales) came lower
yoy. Tax rate was up 120bp; and net profit was up 15% yoy.
 Valuation. We value the stock at `110, at a target PE of 25x
FY12e earnings. Our target PE is at a 65% premium to the 12-
month forward Nifty PE. Upside risk: higher raw material prices;
downside risk: lower competitive pressure.