RESULT UPDATE DABURbsmedia.business-standard.com/_media/bs/data/... · International business grew 19.7% YoY organically (10-11% volume led). Outlook and valuations: Positive; maintain

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Edelweiss Securities Limited

Dabur’s Q4FY13 numbers were exactly in line with our estimates. Key

positives were (1) 12% YoY domestic volume growth on a base of 9.5%

(highest in the past 11 quarters), (2) second consecutive quarter of

EBITDA margin expansion; (3) strong growth of ~30% YoY each in

shampoos and home care; (4) healthy growth in foods (22.6% YoY); and

(5) pick up in CSD demand (largely due to base effect). Key negatives

were: (1) sustained pressure in digestives (grew at 1.3% YoY; was down

5.4% YoY in Q3FY13); and (2) continued slowdown in Namaste business

(corrective steps taken and may revive in FY14E). Fruit juice

manufacturing facility in Sri Lanka will begin commercial production from

May 03, 2013. We believe Dabur is in a sweet spot with volume growth

ahead of most peers and its aggressive distribution drive (as highlighted

in our previous notes). Maintain ‘BUY’.

This report also contains Q4FY13 conference call highlights.

EBITDA margin expands after six quarters

Domestic business saw a robust growth of 15.1% YoY led by 12.3% YoY strong volume

growth. At the consolidated level, gross margin expanded 199bps YoY, leading to 77bps

YoY EBITDA margin expansion despite higher staff costs (up 86bps YoY) and other

expenses (up 120bps YoY); ad spends declined 84bps YoY to 12.4% of sales. Core PAT

grew 18.4% YoY as finance cost surged 162% YoY. Rural growth continued to be ahead

of rural aided by ‘Project Double’; modern trade grew at 28% YoY.

Healthy growth in foods, home care and shampoos

Hair care grew 9.6% YoY, home care surged 33.3% YoY, oral care continued its slow

growth at 12.3% YoY, health supplements surged 22.6% YoY, skin care grew 11.1% YoY

and OTC & ethicals grew 13.7% YoY. International business grew 19.7% YoY organically

(10-11% volume led).

Outlook and valuations: Positive; maintain ‘BUY’

At CMP it is trading at P/E of 28.4x and 23.6x for FY14E and FY15E, respectively. We like

Dabur’s aggression in product innovation, investments in existing product range and in

distribution expansion. Hence, we maintain ‘BUY’ and rate it ‘SO’ with TP of INR176.

RESULT UPDATE

DABUR Domestic volumes, margins surge

EDELWEISS 4D RATINGS

Absolute Rating BUY

Rating Relative to Sector Outperformer

Risk Rating Relative to Sector Medium

Sector Relative to Market Overweight

MARKET DATA (R: DABU.BO, B: DABUR IN)

CMP : INR 148

Target Price : INR 176

52-week range (INR) : 156 / 101

Share in issue (mn) : 1,742.9

M cap (INR bn/USD mn) : 258 / 4,785

Avg. Daily Vol.BSE/NSE(‘000) : 1,230.1

SHARE HOLDING PATTERN (%)

Current Q3FY13 Q2FY13

Promoters *

68.7 68.7 68.7

MF's, FI's & BK’s 4.3 5.1 5.4

FII's 20.2 19.6 19.2

Others 6.8 6.6 6.7

* Promoters pledged shares

(% of share in issue)

: 0.1

PRICE PERFORMANCE (%)

Stock Nifty

EW Consumer

Goods Index

1 month 7.9 4.4 2.4

3 months 11.4 (1.7) 5.1

12 months 32.1 13.0 26.2

Abneesh Roy

+91 22 6620 3141

[email protected]

Hemang Gandhi

+91 22 6620 3148

[email protected]

Pooja Lath

+91 22 6620 3075

[email protected]

India Equity Research| Consumer Goods

April 30, 2013

Financials (INR mn)

Year to March Q4FY13 Q4FY12 % change Q3FY13 % change FY13E FY14E FY15E

Net sales 15,311 13,636 12.3 16,307 (6.1) 61,464 71,462 84,096

EBITDA 2,729 2,320 17.6 2,745 (0.6) 10,298 12,254 14,596

Net profit 2,006 1,705 17.6 2,111 (5.0) 7,634 9,127 10,976

Dil. EPS (INR) 1.2 1.0 18.3 1.2 (4.0) 4.4 5.2 6.3

Diluted P/E (x) 33.6 28.4 23.6

EV/EBITDA (x) 24.9 20.5 16.8

ROAE (%) 39.7 37.3 36.0

Consumer Goods

2 Edelweiss Securities Limited

Table 1: Segment-wise snapshot

Source: Company, Edelweiss research

Q4FY13 Conference call | Key Takeaways

• Volume growth: Dabur posted 12.3% YoY volume growth in domestic business in

Q3FY13 (highest in past 11 quarters; 9.5%, 9.0%, 11.6% and 9.5% YoY for Q3FY13,

Q2FY13, Q1FY13 and Q4FY12, respectively) on a high base of 9% YoY growth in Q4FY12.

The company has guided for a volume growth of 8-12% and likely price hike of 2-3% for

FY14.

• Rural growth: Roll out of ‘Project Double’ (in the ten states of Uttar Pradesh,

Maharashtra, Madhya Pradesh, Bihar, West Bengal, Assam, Karnataka, Rajasthan,

Orissa and Punjab) helped increase direct coverage 14,865 villages in March 2011 to

Segment

Growth

Y-o-Y(%)

Domestic business

Hair Care � Hair oil posted 7% YoY growth and has maintained market share

� Perfumed hair oils grew 13% YoY driven by double digit volume growth; Dabur Amla Hair Oil saw

good performance� Coconut based oil faced pressure because of high price differential from competing products after the

decline of coconut prices� Shampoos grew at strong 29.4% YoY after the rebranding of the brand as Vatika Premium Naturals

Health supplement 22.6 � Dabur Honey saw a strong growth on the back of strong promotions support

� Differentiated proposition of Cooling Energy and focus on flavours working well for glucose

Food 22.6 � Real and Real Activ reported strong growth; new variants and demand driving growth in the category� Ethnic flavour – Kokam launched under Real Burrst in select states� Activ coconut water has been test launched in select markets� Culinary portfolio was steady in Q4FY13

Oral Care 12.3 � Toothpaste grew by 15.8% YoY with Dabur Red Toothpaste and Meswak performing well; premium

offering saw market share increase� The discount brand (Babool) was flattish; launched Super Babool + Salt Powder Toothpaste � Toothpowder grew 3% YoY

Digestive 1.3 � Small growth is largely due to the large base of 19.4% in Q4FY12� New variant, Hajmola Anardana was launched during the quarter� Pudin Hara reported double digit growth during the quarter

Skin Care 11.1 � Fem portfolio grew 11.6% YoY with Fem bleaches crossing the INR1bn mark in FY13� Fem Liquid Handwash re-launched on natural skin care platform� Dabur Gulabari witnessed good growth due to new variants and promotions

Home Care 33.3 � Odonil witnessed a robust growth � Odonil Gel (air freshener) has been nationally rolled out (initially launched in South)� Odomos reported good growth and gained market share

� Sanifresh has gained market share and has now become the second biggest brand in the Toilet

cleaners category

OTC & Ethicals 13.7 � OTC portfolio grew by 16.7% YoY; Lal Tail saw strong double digit growth

� Ethicals portfolio grew by 9% YoY

11.6 � Organic business grew 19.7% YoY with 12.9% constant currency growth; 10-11% YoY organic volume

growth� In FY13 GCC grew 20% YoY, Levant grew 30% YoY, Bangladesh grew 57% YoY and Egypt grew 15% YoY� Hobi business performed well; brand introduced in Turkey to leverage Hobi’s

distribution network � Namaste business performance under pressure in FY13; rebranding completed with Organic Root

Stimulator rebranded as ‘ORS’� Distribution networks streamlined in African markets along with addition of resources

Key takeaways Q4FY13

9.6

International

division

Dabur


30,091 villages; retail outlets reach has increased from 5.3mn in FY11 to 5.8mn in FY13;

however, the main benefit of the project has been the quality of distribution with

smaller brands seeing good growth.

• Modern trade: Modern trade grew 28% YoY and contributed 9% to total sales.

• Domestic performance: Domestic business contributed 70% to overall sales, up 15.1%

YoY, led by 12.3% YoY volume growth. CCB and foods contributed 81% and 16%,

respectively, to domestic revenue. Others consisting of commodity exports registered

some decline due to softening of international prices; collapse in prices of guar led to

sales dip to half of that last year.

• Health supplements: Health supplements grew at a robust growth rate of 22.6% YoY

led by strong growth in Dabur Honey (supported by ad spends) and Glucose

(differentiated proposition of Cooling Energy and focus on flavours working well).

• Digestives: This business grew 1.3% YoY due to high base (19.4% YoY growth in

Q4FY13). Pudin Hara reported strong double digit growth during the quarter. A new

variant ‘Hajmola Anardana’ was launched during Q4FY13.

• OTC and ethicals: This business grew 13.7% YoY. OTC portfolio posted 16.7% YoY

growth with Lal Tail posting strong double digit growth. Ethicals grew 9% YoY. Dabur

entered the digital space with the launch of two portals - www.daburmediclub.com

aimed at medical professionals and www.liveveda.com to enable better connects with

consumers.

• Hair oils: This segment posted 7% YoY growth and maintained market shares. Perfumed

hair oil category grew 13% with double digit volume growth and 14% YoY growth in

Dabur Amla Hair Oil. Vatika (coconut oil) sales continued to be under pressure due to

high price differential to competitors’ consequent to decline in raw material costs.

• Shampoos: Shampoos continued on revival track, clocking growth of 29.4% YoY led by

Vatika Premium Naturals range.

• Home care: Home care surged 33% YoY with Odomos gaining market share. Odonil

posted strong growth despite being a discretionary product; Odonil Gel which was

introduced in a few Southern markets in Q3FY13 has been launched pan India.

Sanifresh has become the second biggest brand in toilet cleaners category on the back

of strong growth and gains in market shares.

• Skin care: Skin care grew 11.1% YoY. Dabur Gulabari (largely winter product) posted

good growth driven by new variants and focused activations and promotions. Fem

portfolio grew by 11.6% YoY; Fem Liquid Handwash was re-launched on natural skin

care platform. Fem Bleaches crossed INR1bn sales mark in FY13. Turmeric Herbal bleach

was launched during the quarter.

• Oral care: Oral care grew 12.3% YoY. Premium products Dabur Red Toothpaste and

Meswak performed well and posted market share gains, with overall toothpaste

portfolio growing at 15.8% YoY led by volume growth. However, Babool growth was

flattish YoY. In line with the company’s strategy of improving profitability from this

product it launched the value added variant ‘Super Babool + Salt Power Toothpaste’.

Toothpowder grew at a mere 3% YoY.

Consumer Goods


• Foods: Foods business posted good growth of 22.6% YoY with both Real and Activ

reporting healthy growth. The company introduced ethnic flavor Kokam under Real

Burrst in select states. Culinary portfolio growth was flattish YoY. Higher growth in

foods as compared to the consumer products business has put some pressure on

margins as foods EBIT margin (at 11-13%) is lower than that of CBP (at 22%).

• International business: International business (IB) grew 11.6% YoY. Ex-Namaste, the

organic business grew 19.7% YoY. Organic volume growth stood at 10-11% YoY.

Namaste business remained under pressure (declined 10% YoY) due to distribution

restructuring in Africa along with addition of resources. Re-branding exercise in the US

is complete with Organic Root Stimulator rebranded as ‘ORS’. Growth is expected to

revive from the next quarter. South Africa is back on track.

Hobi business performed well with 42% YoY growth led by investment in brands and

geographical expansion.

Fruit juice manufacturing facility in Sri Lanka will commence commercial production

from 3rd

May 2013.

• A&P: In line with its earlier guidance of 50-100bps reduction in ad spends Q4FY13 saw

84bps YoY decline in the same. Dabur is looking at its ad spends to stabilize at 13% of

sales.

• CSD: CSD business has seen uptick in demand though not normalized, it is seeing

benefit of base impact (base to be favorable till Q3FY14). CSD contribution to sales

which was earlier at 5-6% dropped to 4.7% in FY13 and is likely to come back to earlier

levels in FY14. Pep up CSD volumes has a bearing on margins.

• Tax rate: Tax rate is likely to be ~20% for FY14E. The company will follow MAT for the

next 4-5 years.

Other key developments

• Himalaya’s re-entry in toothpaste segment - Himalaya had toothpaste Dental Cream

(launched 15 years ago) in the oral care space, which it is planning to phase out. It has

instead launched four new toothpastes (1) Complete Care – regular segment, (2)

Sparkling White – whitening segment, (3) Active Fresh Gel – freshness segment and (4)

Sensitive – sensitivity segment. The new products are targeted at urban consumers and

will be rolled out pan-India later. We believe Himalaya’s ayurvedic offerings can be a

potential threat to Dabur’s oral care business.

• Actor Irffan Khan has been roped in as the brand face of Dabur Super Babool + Salt

Powder.

• Dabur has not entered the fast growing sensitive toothpaste category. Competitors

have been very aggressive and have been launching new products. GSK Consumer

launched new toothpaste from its global portfolio, Parodontax, in the gum care

segment priced at INR100 for 80gms. Colgate launched a gum health variant, Colgate

Total Pro Gum Health, priced at priced at INR93 for 150gms, a discount of ~50% to

Parodontax. GSK launched a new variant of Sensodyne – Repair & Protect that repairs

teeth enamel damaged due to sensitivity.

• Dabur has signed South Indian actor Kajal Agarwal as the brand ambassador for its

brand Dabur Amla Nelli for endorsement in South Indian markets.

Dabur


• Dabur International has developed a new line of skin care, shampoo, deodorant and

hair colour to be launched this year in the Middle Eastern region. These launches are

driven by expansion plans and growth strategy. Hair styling, skin care, depilatories and

oral care were the best performing product categories in Middle East in past. Hobi

Kozmetik, a leading personal care company of Turkey, was Dabur’s first overseas

acquisition and the second being Namaste Laboratories a hair care leader in African

American market. Acquisitions were targeted to gain entry into virgin categories and to

access advanced technologies in the highly developed consumer markets of Turkey and

US.

• Bajaj Corp took a weighted average price hike of 6%. We expect competitors like Dabur

Almond and Marico’s Hair & Care to follow.

• Pepsico launched ‘Tropicana fruit powders’ in INR10 single serve sachets which we

believe is a direct threat to Dabur’s Real. In our view needs to be more proactive in

innovation in existing categories as competition is heating up with ITC also hinting at

entry into the juice space.

Outlook and valuations: Positive; Maintain ‘BUY’

We believe Dabur is in a sweet spot with volume growth ahead of most peers and its

aggressive distribution drive (as highlighted in our previous notes). We expect both gross

margin and EBITDA margin to expand for Dabur as raw material price are benign and ad

spends, seen lower than FY13. Dabur has historically traded at 23-25x EPS; with significant

re-rating across the consumer goods space, we expect Dabur to continue to witness re-

rating as well. As we roll over to FY15, we assign 28x multiple arriving at target price of

INR176. The stock is trading at P/E of 28.4x and 23.6x on FY14E and FY15E, respectively. We

maintain ‘BUY’ and rate the stock ‘Sector Outperformer’ on relative return basis.

Consumer Goods


Table 2: Consolidated segmental performance


Table 3: Standalone segmental performance


Year to March - Revenues (INR mn) Q4FY13 Q4FY12 % growth Y-o-Y Q3FY13 % growth Q-o-Q

Consumer care business 12,897 11,400 13.1 14,136 (8.8)

Foods business 1,927 1,613 19.4 1,649 16.8

Retail business 158 123 29.2 168 (5.5)

Others 329 500 (34.2) 354 (7.1)

Gross income (Excl other income) 15,311 13,636 12.3 16,307 (6.1)

Year to March - PBIT (INR mn)


Foods business 302 313 (3.5) 181 66.5

Retail business (14) (29) NM (27) NM

Others 20 5 284.6 1 1,438.5

PBIT 3,258 2,775 17.4 3,391 (3.9)

Year to March - Margin

Consumer care business 22.9 21.8 106 22.9 (2)

Foods business 15.7 19.4 (371) 11.0 467

Retail business (8.8) (23.9) 1,514 (16.4) 758

Others 6.1 1.0 504 0.4 571

Margin 21.3 20.4 93 20.8 48

Year to March - Revenues (INR mn) Q4FY13 Q4FY12 % growth Y-o-Y Q3FY13 % growth Q-o-Q


Foods business 1,714 1,389 23.4 1,578 8.6

Others 313 489 (36.0) 344 (8.9)

Gross income (Excl other income) 10,940 9,781 11.8 11,889 (8.0)

Year to March - PBIT (INR mn)


Foods business 185 248 (25.6) 163 13.3

Others 15 (23) (164.3) (1) (1,223.1)

PBIT 2,674 2,266 18.0 2,722 (1.8)

Year to March - Margin

Consumer care business 27.8 25.8 195 25.7 208

Foods business 10.8 17.9 (708) 10.3 44

Others 4.7 (4.6) 930 (0.4) 504

Margin 24.4 23.2 128 22.9 155

Dabur


Table 4: Standalone performance


(INR mn) Q4FY13 Q4FY12 YoY % Change Q3FY13 QoQ % Change

Net sales/income from operations 10,940 9,781 11.8 11,889 (8.0)

Other operating income 28 49 (42.7) 37 (25.5)

Total income from operations 10,968 9,830 11.6 11,927 (8.0)

Cost of materials consumed 4,412 4,066 8.5 4,429 (0.4)

Purchased of stock-in-trade 1,418 1,702 (16.7) 1,697 (16.5)

Changes in inventory (106) (507) NM 271 NM

Advertising & publicity 1,157 1,046 10.6 1,516 (23.7)

Employee benefits expenses 723 583 23.9 734 (1.5)

Other expenses 1,309 1,291 1.4 1,276 2.6

Total expenses 8,912 8,182 8.9 9,923 (10.2)

EBITDA 2,057 1,648 24.8 2,003 2.7

Other income 239 174 37.2 194 23.5

Depreciation and amortisation expense 189 173 9.1 198 (4.6)

Finance costs 68 (1) NM 10 599.0

PBT 2,039 1,650 23.6 1,989 2.5

Tax expense 443 330 34.0 415 6.6

PAT 1,597 1,320 21.0 1,574 1.4

As % of net sales

COGS 52.2 53.5 53.6

Advertising & publicity 10.5 10.6 12.7

Staff costs 6.6 5.9 6.2

Other expenditure 11.9 13.1 10.7

EBITDA 18.8 16.8 16.8

PBT 18.6 16.8 16.7

Net profit 14.6 13.4 13.2

Tax rate 21.7 20.0 20.9

Consumer Goods


Chart 1: Q4FY13 sales contribution Chart 2: Q4FY13 YoY sales growth rates

Chart 3: Q4FY13 Domestic sales split Chart 4: FY13 Consumer care—Category contribution

Chart 5: Consumer care—Category growth rate Chart 6: FY13 International business growth rate


Domestic

70%

Internation

al

30%

Consumer

care

81%

Foods

16%

Others

3%

0.0

8.0

16.0

24.0

32.0

40.0

Ha

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are

Ora

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re

He

alt

h s

up

p.

Dig

est

ive

s

Sk

in C

are

Ho

me

Ca

re

Fo

od

s

OT

C

Eth

ica

ls

(%)

Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q4FY13

0.0

3.5

7.0

10.5

14.0

17.5

Domestic International

(%)

Hair care

30%

Oral care

17%

Health

supplemen

ts

21%

Digestives

7%

Skin care

6%

Home care

7%

OTC &

Ethicals,

12%

0.0

12.0

24.0

36.0

48.0

60.0

GC

C

Eg

yp

t

Le

va

nt

Ba

ng

lad

esh

Ne

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l

(%)

Dabur


Financial snapshot (INR mn)

Year to March Q4FY13 Q4FY12 % change Q3FY13 % change FY13 FY14E FY15E

Net revenues 15,311 13,636 12.3 16,307 (6.1) 61,464 71,462 84,096

Other operating income 126 83 51.7 53 138.8 297 351 404

Total operating income 15,437 13,719 12.5 16,360 (5.6) 61,761 71,812 84,499

Cost of goods sold 7,399 6,849 8.0 7,954 (7.0) 30,193 35,118 41,143

Gross profit 8,038 6,870 17.0 8,406 (4.4) 31,568 36,694 43,356

Staff costs 1,209 956 26.4 1,230 (1.7) 4,712 5,503 6,475

Advt. sales & promotions 1,919 1,820 5.4 2,351 (18.3) 8,370 9,433 11,101

Other expenses 2,181 1,773 23.0 2,081 4.8 8,188 9,504 11,185

EBITDA 2,729 2,320 17.6 2,745 (0.6) 10,298 12,254 14,596

Depreciation & amortization 282 293 (4.0) 305 (7.7) 1,124 1,399 1,612

EBIT 2,447 2,026 20.8 2,440 0.3 9,174 10,856 12,984

Other income 230 114 102.3 220 4.3 945 1,076 1,230

EBIT including other income 2,677 2,140 25.1 2,660 0.6 10,119 11,932 14,214

Interest 150 57 161.9 78 92.5 589 535 509

Profit before tax 2,527 2,083 21.3 2,582 (2.1) 9,530 11,397 13,704

Provision for taxes 507 377 34.3 478 6.1 1,826 2,279 2,741

Core profit 2,020 1,706 18.4 2,105 (4.0) 7,704 9,117 10,963

PAT 2,020 1,706 18.4 2,105 (4.0) 7,658 9,117 10,963

Minority interest 15 - NM (6) NM 24 (10) (12)

Net profit 2,006 1,705 17.6 2,111 (5.0) 7,634 9,127 10,976

Diluted EPS (INR) 1.2 1.0 18.3 1.2 (4.0) 4.4 5.2 6.3

As % of net revenues

COGS 47.9 49.9 48.6 48.9 48.9 48.7

Employee cost 7.8 7.0 7.5 7.6 7.7 7.7

Other expenses 14.1 12.9 12.7 13.3 13.2 13.2

Adv. & sales promotions 12.4 13.3 14.4 13.6 13.1 13.1

EBITDA 17.7 16.9 16.8 16.7 17.1 17.3

EBIT 15.9 14.8 14.9 14.9 15.1 15.4

PBT 16.4 15.2 15.8 15.4 15.9 16.2

Reported net profit 13.0 12.4 12.9 12.4 12.7 13.0

Tax rate 20.1 18.1 18.5 19.2 20.0 20.0

Consumer Goods


Company Description

Dabur has two divisions in India (post integration of consumer care division and consumer

health division) apart from its international operations. Consumer care division (CCD) offers

a wide range of products in hair care, oral care, health supplements, digestives and candies,

baby and skin care products based on ayurveda, over-the-counter (OTC) products, Asavs,

and branded ethical and classic products. CHD division has been merged with CCD to

leverage distribution. The second division, Dabur Foods Ltd produces fruit juices, cooking

pastes, sauces, and items for institutional food purchases. Dabur is unique among its

Consumer Goods peers because of its positioning as an Indian company whose products are

derived from exotic sources such as ancient ayurvedic texts and natural ingredients such as

herbs.

The company has various brand leaders in different market segments - Dabur

Chyawanprash, a health tonic, and Hajmola - a digestive tablet. Real, launched during 1996-

97, has also successfully carved its niche in the market.

Investment Theme

Dabur’s broad product portfolio provides a good play on Indian Consumer Goods spend by

virtue of its strong presence in less penetrated and high growth categories. Dabur’s

positioning on the ‘health and wellness’ platform, backed by its ANH

(ayurvedic/natural/herbal) image is very progressive. This, combined with its demonstrated

ability to create new categories and sub-categories, makes it well-placed to capture lifestyle

changes-led growth in the Consumer Goods space. Dabur has also demonstrated its ability

to make and integrate smart acquisitions (Balsara) that complement its product portfolio

and thereby drive inorganic growth. Improvement in margins of foods and international

businesses are expected to result in improvement in margins for the consolidated

operations.

Key Risks

A slowdown in rural demand due to lower government spending or monsoon failure could

impact Dabur’s revenues significantly. The company’s products such as Dabur

Chyawanprash and Dabur Lal Tail are prominently sold in rural areas, and hence, depends

upon growth in rural demand.

Further rise in competitive intensity in categories like Shampoo, Oral care, OTC and ethical

may further put pressure on volumes.

Management bandwidth post acquisition in various international geographies is a concern.


Dabur

Financial Statements

Income statement (INR mn)

Year to March FY12 FY13E FY14E FY15E

Net revenue 52,832 61,464 71,462 84,096

Other Operating Income 223 297 351 404

Total operating income 53,054 61,761 71,812 84,499

Materials costs 26,852 30,193 35,118 41,143

Employee costs 3,874 4,712 5,503 6,475

Other Expenses 6,831 8,188 9,504 11,185

Advertisement & sales costs 6,595 8,370 9,433 11,101

EBITDA 8,902 10,298 12,254 14,596

Depreciation & Amortization 1,032 1,124 1,399 1,612

EBIT 7,869 9,174 10,856 12,984

Other income 574 945 1,076 1,230

Interest expenses 538 589 535 509

Profit before tax 7,905 9,530 11,397 13,704

Provision for tax 1,464 1,826 2,279 2,741

Net profit 6,441 7,704 9,117 10,963

Exceptional - (46) - -

Minority interest (8) 24 (10) (12)

Profit after minority interest 6,449 7,634 9,127 10,976

Diluted EPS (INR) 3.7 4.4 5.2 6.3

Dividend per share (INR) 1.3 1.5 1.8 2.2

Dividend payout (%) 35.1 35.1 35.1 35.1

Common size metrics


Materials costs 50.6 48.9 48.9 48.7

Advertising & sales costs 12.4 13.6 13.1 13.1

Interest expenditure 1.0 1.0 0.7 0.6

EBITDA margins 16.8 16.7 17.1 17.3

Net profit margins 12.1 12.5 12.7 13.0

Growth ratios (%)


Revenues 29.3 16.4 16.3 17.7

EBITDA 11.3 15.7 19.0 19.1

Net profit 13.2 19.6 18.4 20.2

EPS 13.0 19.6 18.4 20.2

Key Assumptions


Macro

GDP(Y-o-Y %) 6.5 5.0 6.5 7.0

Inflation (Avg) 8.8 7.8 6.0 6.0

Repo rate (exit rate) 8.5 7.5 6.8 6.0

USD/INR (Avg) 47.9 54.5 55.0 53.0

Company

Revenue growth assumptions (Y-o-Y %)

Hair Oil (Domestic) sales growth 21.0 12.0 14.0 15.5

Chyawanprash (Domestic) sales growth 13.6 16.0 17.0 20.0

Honey (Domestic) sales growth 24.2 11.0 12.0 13.0

Tooth Powder & Paste (Domestic) sales growth 8.7 14.0 12.0 14.0

Hajmola (Domestic) sales growth 19.6 17.9 19.0 22.0

Asava - Arishta (Domestic) sales growth 10.4 23.0 17.0 15.0

Fruits, Nector & Drinks (Domestic) sales growth 57.5 30.0 23.0 25.0

Vegetable Pastes (Domestic) sales growth (11.1) 20.0 15.0 16.0

Export sales growth 28.5 22.0 21.0 23.0

Volume growth (domestic) 9.0 9.8 9.6 9.5

Pricing change (domestic) 5.6 5.8 5.6 7.3

International business growth 91.2 18.9 18.2 19.8

Excise duty as % of domestic sales 1.0 1.0 1.1 1.1

Cost assumptions

COGS as % of sales (Consol) 50.6 48.9 48.9 48.7

COGS as % of sales (standalone) 24.8 24.9 25.1 25.7

Staff costs as % of sales 7.3 7.7 7.7 7.7

A&P as % of sales 12.4 13.6 13.1 13.1

Coconut oil (Domestic) as % of COGS 8.5 8.8 9.0 9.3

Paradichlorobenzene (Domestic) as % of COGS 3.0 2.8 2.8 2.7

Light Liquid Parafin (Domestic) as % of COGS 8.0 8.0 8.4 8.6

Gold (Domestic) as % of COGS 2.3 2.4 2.4 2.3

Sorbitol Solution 70 % IP (Domestic) as % of COGS 2.3 2.4 2.4 2.7

Amla Green (Domestic) as % of COGS 1.2 1.2 1.2 1.2

Financial assumptions

Tax rate (%) 18.5 19.2 20.0 20.0

Capex (INR mn) 1,784 2,332 1,520 1,530

Debtor days 28 28 28 28

Inventory days 53 53 53 53

Payable days 103 114 114 115

Cash conversion cycle (days) (23) (33) (34) (34)

Interest rate on o/standing debt (%) 5.0 5.1 5.1 5.1

Depreciation as % of gross block 5.0 5.3 5.7 6.2

Dividend as % of net profit 35.1 35.1 35.1 35.1

Yield on cash 6.2 9.7 8.8 7.5


Consumer Goods

Peer comparison valuation

Market cap Diluted PE (X) EV/EBITDA (X) ROAE (%)

Name (USD mn) FY14E FY15E FY14E FY15E FY14E FY15E

Dabur 4,785 28.4 23.6 20.5 16.8 37.3 36.0

Colgate 3,717 33.2 28.2 24.3 20.5 112.6 115.0

Emami 1,803 25.7 21.5 21.6 17.8 44.3 45.1

GlaxoSmithKline Consumer Healthcare 3,142 33.1 28.5 23.3 19.9 35.1 33.9

Godrej Consumer 5,220 33.7 29.2 23.7 20.5 21.8 21.7

Hindustan Unilever 23,450 34.8 31.3 25.8 22.4 106.3 88.2

ITC 48,268 29.3 24.9 19.0 16.1 38.6 40.8

Marico 2,700 27.3 22.6 17.5 14.5 30.0 28.6

AVERAGE 32.8 27.5 21.9 18.5 48.9 47.1

Source: Edelweiss research

Cash flow metrics


Operating cash flow 5,343 9,452 10,451 12,160

Investing cash flow (2,305) (2,332) (1,520) (1,530)

Financing cash flow (1,359) (4,205) (4,760) (5,489)

Net cash flow 1,679 2,915 4,171 5,141

Capex (1,784) (2,332) (1,520) (1,530)

Dividends paid (2,632) (3,116) (3,725) (4,480)

Profitability & efficiency ratios


ROAE (%) 41.4 39.7 37.3 36.0

ROACE (%) 35.5 35.4 35.7 36.2

Inventory day 53 53 53 53

Debtors days 28 28 28 28

Payable days 103 114 114 115

Cash conversion cycle (days) (23) (33) (34) (34)

Current ratio 1.4 1.6 1.7 2.0

Debt/EBITDA 1.3 1.0 0.8 0.7

Debt/Equity 0.7 0.5 0.4 0.3

Adjusted debt/equity 0.7 0.5 0.4 0.3

Interest coverage 14.6 15.6 20.3 25.5

Operating ratios


Total asset turnover 2.0 2.0 2.0 2.1

Fixed asset turnover 3.3 3.6 4.0 4.7

Equity turnover 3.4 3.2 2.9 2.8

Valuation parameters


Diluted EPS (INR) 3.7 4.4 5.2 6.3

Y-o-Y growth (%) 13.0 19.6 18.4 20.2

CEPS (INR) 4.3 5.1 6.0 7.2

Diluted PE (x) 40.2 33.6 28.4 23.6

Price/BV (x) 9.0 7.9 6.8 5.9

EV/Sales (x) 4.9 4.1 3.5 2.9

EV/EBITDA (x) 29.2 24.9 20.5 16.8

Dividend yield (%) 0.9 1.0 1.2 1.5

Balance sheet (INR mn)

As on 31st March FY12 FY13E FY14E FY15E

Equity capital 1,742 1,742 1,742 1,742

Reserves & surplus 15,427 19,991 25,393 31,889

Shareholders funds 17,169 21,733 27,135 33,631

Minority interest (BS) 33 57 47 35

Short term debt 3,471 3,317 3,162 3,008

Long term debt 7,272 6,948 6,625 6,301

Current maturity of long term 492 470 448 426

Borrowings 11,235 10,735 10,235 9,735

Deferred tax liability 274 274 274 274

Sources of funds 28,711 32,799 37,691 43,675

Tangible assets 8,423 9,599 9,700 9,588

Intangible assets 7,990 7,990 7,990 7,990

CWIP (incl. intangible) 268 300 320 350

Total net fixed assets 16,680 17,888 18,010 17,928

Investments 4,825 4,825 4,825 4,825

Cash and equivalents 4,484 7,399 11,571 16,712

Inventories 8,239 8,900 10,339 12,177

Sundry debtors 4,617 4,738 5,491 6,482

Loans and advances 5,869 5,869 5,869 5,869

Other current assets 1,509 1,509 1,509 1,509

Total current assets (ex cash) 20,234 21,016 23,208 26,037

Trade payable 8,592 9,410 11,002 12,906

Other current liabilities 8,921 8,921 8,921 8,921

Net current assets (ex cash) 2,721 2,686 3,285 4,210

Uses of funds 28,711 32,799 37,691 43,675

Book value per share (INR) 16.5 18.8 21.6 25.1

Free cash flow (INR mn)


Net profit 6,449 7,634 9,127 10,976

Add : Non cash charge 1,563 1,783 1,923 2,109

Gross cash flow 8,012 9,417 11,051 13,084

Less: Changes in WC 312 (36) 599 925

Operating cash flow 7,700 9,452 10,451 12,160

Less: Capex 1,784 2,332 1,520 1,530

Free cash flow 5,916 7,120 8,931 10,630


Dabur

Top 10 holdings

Perc. Holding Perc. Holding

Genesis Indian Inv Co Ltd 2.32 Matthews International Capital 2.06

Life Insurance Corp Of India 1.83 First State Investments 1.79

Baring India Investments 1.50 Massachusetts Financial Services 0.66

Vanguard Group Inc 0.64 Harding Loevner Lp 0.48

Bank Of New York Mellon Corp 0.28 Hdfc Asset Management Co Ltd 0.26

*as per last available data

Insider Trades Reporting Data Acquired / Seller B/S Qty Traded

04 May 2012 Sunil Duggal Buy 50000

19 Jun 2012 Ambati Sudhakar Buy 44100

27 Jun 2012 Mr. P D Narang Sell 60000

10 Jul 2012 Mr. P D Narang Sell 15000

*in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price

No Data Available

*in last one year

Additional Data

Directors Data

Dr. Anand Burman Non-Executive Chairman Mr. Amit Burman Vice Chairman

Mr. Saket Burman Promoter Director Mr. Mohit Burman Promoter Director

Mr. P. D. Narang Executive Director Mr. Sunil Duggal Executive Director, Chief Executive Officer

Mr. R. C. Bhargava Independent Non-Executive Director Mr. P. N. Vijay Independent Non-Executive Director

Dr. S. Narayan Independent Non-Executive Director Mr. Albert Wiseman Paterson Independent Non-Executive Director

Mr. Analjit Singh Independent Non-Executive Director Dr. Ajay Dua Independent Non-Executive Director

Auditors - M/s G. Basu & Co - Chartered Accountants; Internal Auditors:Price Waterhouse Coopers Pvt. Ltd

*as per last annual report


Company Absolute

reco

Relative

reco

Relative

risk

Company Absolute

reco

Relative

reco

Relative

Risk

Asian Paints BUY SP M Bajaj Corp BUY SP M

Colgate HOLD SP M Dabur BUY SO M

Emami BUY SP H GlaxoSmithKline Consumer

Healthcare

HOLD SP M

Godrej Consumer BUY SO H Hindustan Unilever HOLD SP L

ITC BUY SO L Marico BUY SO M

Nestle Ltd HOLD SP L United Spirits BUY SO H

RATING & INTERPRETATION

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Ratings Criteria

Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe

within the sector

RELATIVE RISK RATING

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria

Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return


Dabur

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.

Board: (91-22) 4009 4400, Email: [email protected]

Vikas Khemani Head Institutional Equities [email protected] +91 22 2286 4206

Nischal Maheshwari Co-Head Institutional Equities & Head Research [email protected] +91 22 4063 5476

Nirav Sheth Head Sales [email protected] +91 22 4040 7499

Coverage group(s) of stocks by primary analyst(s): Consumer Goods

Asian Paints, Bajaj Corp, Colgate, Dabur, Godrej Consumer , Emami, Hindustan Unilever, ITC, Marico, Nestle Ltd, GlaxoSmithKline Consumer Healthcare,

United Spirits

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 120 49 17 186

* - stocks under review

Market Cap (INR) 118 56 12

Date Company Title Price (INR) Recos

Recent Research

30-Apr-13 Hindustan

Unilever

Volumes fair; margins lovely;

Result Update

584 Hold

18-Apr-13 Consumer

Times

Update on Indian Consumer

Sector;

Sector Update

03-Apr-13 Hindustan

Unilever

Volumes trip on competitive

lather;

Visit Note

471 Reduce

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12-month period

Hold appreciate up to 15% over a 12-month period

Reduce depreciate more than 5% over a 12-month period

Rating Expected to


Consumer Goods

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RESULT UPDATE DABURbsmedia.business-standard.com/_media/bs/data/... · International business grew 19.7% YoY organically (10-11% volume led). Outlook and valuations: Positive; maintain