DABUR BUILDS IN long-term earnings growth of 13-14%, which we think is not excessive
Dabur’s Q1 Revenue and PAT grew at c11% and c24% respectively. PAT was marginally ahead of Bloomberg consensus expectations while volumes growth of 8.1% was in line with our estimates of c8%. Domestic FMCG business grew by 11.6%, while International business’ constant growth of 7.4% was relatively slower due to disruption in several markets though Namaste is on the path of recovery.
Dabur expects commodity tailwinds should help in margin expansion and expects at least 100bp Ebitda margin improvement in FY16 2) Dabur believes that Q2 may be challenging due to growing stress in rural aggravated by adverse base affect in foods business (in the sale of gift packs) due to delayed festive season this year. Dabur expects the second half of the year to be better than first half of the year.
We maintain ‘hold’ and increase target price to Rs 310 (from Rs 285). Dabur has run up 49% in the last one year led by both consistent earnings growth and substantial PE multiple expansion. At FY17PE of c34x, Dabur builds in long term earnings growth of c13-14%, which we think is not excessive.