DIL Q1FY19 results were below our estimates due to below expected revenue in domestic markets and decline in exports.
- DIL reported below expected revenue growth of 3.6% yoy due to decline in exports, lower revenue growth across brands due to weakness in overall volume offtake. and company adopting corrective measures for distribution of various brands.
- EBITDA margin improved by 60 bps to 11.6% was inline with our estimates led by better product mix. PAT for the quarter grew by 10.3% yoy to Rs 138 mn Vs estimates of Rs 153 mn.
- DIL management has maintained guidance for 12% growth in revenue in FY19E with improvement in EBITDA margins at ~13%.
Valuation & outlook
- The company is positive on its business in the longer run and is focusing on strengthening of its internal systems and improving distribution of high value brands. We have cut our EPS estimates for FY19E & FY20E by 7% and 10.2% respectively factoring lower growth in volume and EBITDA margins as the transformation in business may take longer time.
- The stock is trading at PE of 24.2x and 20x on FY19E and FY20E revised EPS of Rs 13 and 15.6, respectively. We maintain our Buy rating on the stock with revised target price of Rs 437 (Vs Rs 505 earlier).