Dabur?s Q1FY14 numbers were in line with expectations with volume growth of 9% y-o-y in the domestic business. Gross margins were up 90 bps y-o-y but Ebitda margins were up only 20 bps y-o-y on account of higher employee costs and A&P expenses.
The company management noted that despite some slowdown in growth rates across the FMCG sector, the company has been able to deliver stable growth. Rural growth was 1.5x urban growth during the quarter.
The management has guided for 8-10% volume growth in FY14F, with ~100-bps y-o-y margin improvement, but we believe there could be some risk to both those numbers. We are reviewing our target price.
Net sales increased 13% y-o-y to R1,650 crore. This was a very marginal negative surprise of 0.1% and 0.5% below Street estimates. Consumer care business revenue increased 14.3% y-o-y while foods remained strong at 18.2% growth. Ebitda came in at R235 crore vs our estimate of R250 crore, a miss of 5%.
Consolidated gross margin expanded 90 bps y-o-y to 51.1% vs Nomura estimate of 100 bps y-o-y expansion.
Ebitda margin of 14.3% was up 20 bps y-o-y vs our expectation of 15% (+90bps y-y). Key negative surprises are employee costs (7.9% vs our estimate of 7.5%) and A&P (15.4% vs our estimate of 15%). PAT came in at R187 crore against our expectation of R186 crore, helped largely by higher other income and lower interest costs.