Dabur India’s Q4FY17 revenue came in line, while Ebitda and PAT surpassed estimates led by better than expected margin. Despite strong base of 7% y-o-y, domestic volumes jumped 2.4% y-o-y. Gross margin dipped by 163 bps y-o-y, but Ebitda margin surged 115 bps y-o-y led by 136 bps y-o-y savings in ad spends and 100 bps and 42 bps y-o-y savings in staff and other expenses, respectively. Dabur gaining market shares in key categories— oral care, hair care, home care, skin, foods—is a positive and we envisage it to be key beneficiary of increasing herbal trend. Maintain Buy.
Domestic business on recovery road; international operations tepid: Dabur’s domestic business clocked overall growth of 0.1% y-o-y versus dip of 6.5% y-o-y in Q3FY17. While toothpaste, foods and health supplements jumped 9%, 7.9% and 5% y-o-y, respectively, growth in hair care, home care and OTC & ethicals dipped 4%, 6.5% and 4% y-o-y, respectively. However, market share gains sustained—garnered 30 bps in hair oil, 100 bps in toothpaste, 70 bps in air fresheners, 100 bps in mosquito repellent creams and 300 bps y-o-y in juices. International business was impacted by currency devaluation in Egypt, Turkey & Nigeria and economic slowdown in MENA region —reported 4.5% y-o-y dip in constant currency growth.
Q4FY17 conference call — Key takeaways: GST will lead to destocking in Q1FY18 — Dabur and distributors are largely ready, but lower down the chain preparedness is weak. The company’s rural growth surpassed overall growth in Q4FY17. Dabur has started regaining some of the lost share in honey. Shampoo portfolio continued to remain under pressure due to impact on wholesale channel.
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ong>Outlook and valuations: Positive; maintain Buy — We expect recovery in volumes and premiumisation on back of new launches and ayurvedic focus. Uptick in rural spending and government’s stimulus remain key triggers. The stock is trading at 29.8x FY19e EPS. We maintain ‘BUY/SO’ with a target price of Rs 327.