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ACCUMULATE
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CMP: Rs371 | Target Price: Rs385
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■ Dabur recorded a comparable revenue growth of 11% (reported growth of 6%) in line with our expectations. EBITDA and PAT grew 16% and 19% respectively which were 4-5% ahead of expectations. Margin expansion of 210bps was higher driven by lower ad spends and control on other overheads.
■ India business grew 10% whereas International business grew 17% in constant currency led by strong recovery in GCC and Egypt.
■ Management expects domestic business to deliver double-digit growth in revenues with stable margins. International business is expected to grow faster with margin expansion
■ We roll forward to June 20 earnings and increase our target price to Rs385 (from Rs372) based on 35xJune 20 earnings. Maintain Accumulate.
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BUY
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CMP: Rs314 | Target Price: Rs488
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■ Chemical segment revenue jumped by 30% yoy to Rs5.9bn, led by higher volume (+18% yoy) and firm realization (+67% yoy) as chlorine prices stood at breakeven. The company reported the highest ever quarterly EBIT margin at 43% (+1800bps yoy and +110bps qoq).
■ Due to falling sugar prices, the company took inventory write-down of Rs1.63bn (inventory valued at Rs28.5/MT) in Q4FY18 and Rs1.85bn in FY18. Consequently, Sugar segment posted EBIT loss of Rs1.8bn for Q4FY18. We expect losses to continue in FY19 and FY20.
■ However, chemical segment which is the cash cow for the company will continue to post robust performance on the back of higher capacity and steady realization supported by positive chlorine prices.
■ We believe that recent correction in stock price has more than factored the sugar losses and softening caustic prices. Our TP based on SOTP stands at Rs488 (earlier Rs697). We upgrade the stock to BUY from ACCUMULATE.
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BUY
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CMP: Rs3648 | Target Price: Rs4660
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■ Revenue grew by 24% yoy to Rs85.6bn (Emkay Estimate: Rs85.8bn; Consensus Est: Rs85.3bn), driven by 24% yoy volume growth. Management expects the momentum to persist in FY19 with high single-digit growth, led by new products and strong rural demand. Several launches have been planned to support volume in premium motorcycles and scooters.
■ EBITDA margin increased by 20bps qoq to 16% (Emkay Est: 15.7%; Consensus Est: 16.2%) despite commodity inflation and higher marketing spends, owing to lower employee expenses.
■ We marginally trim our FY19/20E EPS estimates by 1% each to Rs203.2/Rs232.8 owing to ~20bps reduction in EBITDA margin.
■ We have built in a revenues/earnings CAGR of 11%/12% for FY18-FY20E with ROE of ~32% and average free cash flow generation of ~Rs38bn. Recommend BUY with TP of Rs4,660 (earlier Rs4,710), valuing it at 20x FY20E EPS.
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BUY
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CMP: Rs1134 | Target Price: Rs1425
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■ Siemens (SIEM) reported better-than-expected operational performance. Revenue increased by 12% yoy, driven by 21% yoy growth in Energy Management (EM) and 18% yoy growth in Digital Factory (DF). EBITDA margin increased by 32bps to 9.8% and APAT increased by 23% yoy.
■ While order intake declined by 4% yoy to Rs29bn, order backlog was marginally up by 1% yoy at Rs129bn (~1x FY18E revenue). SIEM would need to report strong order flows in the next 3-4 quarters to maintain its revenue and profitability growth trajectory in FY19E and FY20E.
■ We downgrade FY18E/19E/20E EPS estimates by 8%/11%9% to factor in lower revenue and profitability assumptions. SIEM trades at 32x FY20E earnings. We maintain BUY with a TP of Rs1,425 based on 40x FY20E earnings.
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Recommendation History
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