Dabur posted a below-expected Q2 with net sales/EBITDA/adj. PAT up 8.7%/ 15.9%/18.7% YoY as domestic volumes grew at a slower than expected pace (5% YoY vs. RCMLe 6-7%) due to supply disruptions. EBITDA margins however were largely in line on lower input and stable A&P costs. We slightly pare estimates to factor in weak consumer demand and supply issues, given Dabur’s ability to churn out high single-digit volume growth on a consistent basis.
Consol.net sales grew 8.7% YoY to R2,090 crore with domestic/international FMCG revenues up 8.8%/6.4% YoY. Domestic volume growth came in at 5% YoY (RCMLe 6-7%) on account of a festive season shift to Q3 and supply disruptions from Nepal as political disturbances hit the beverage segment. Excluding the beverage segment, volume growth was in line at 7% YoY. Consumer care business grew 9.6% YoY with segment EBIT margins also improving 185bps to 24.2%. Hair Care segment posted 9.4% YoY growth with double-digit volume-led growth in hair oils, whereas shampoos reported slower growth amid heightened competition.
We pare our FY16/FY17/FY18 earnings estimates by ~1.9%/2.9%/3.9% to build in the slower-than-expected recovery in consumer demand. We accordingly revise down our Sep’16 TP to Rs 310 (from Rs 325 earlier).