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Dabur: Good overall performance - Views on News from Equitymaster

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Dabur: Good overall performance
Jan 27, 2010

Performance summary
  • Consolidated net sales for 3QFY10 increased by a robust 19% YoY on the back of strong consumer spending coupled with the international business.
  • Operating (EBITDA) margins improved by 2% to 19.3% for 3QFY10. This increase comes on the back of fall in raw material costs, partly offset by higher advertisement costs as a percentage of sales.
  • Net profit for 3QFY10 increased by 27% YoY. This increase is on the back of higher operating profits partly offset by increase in tax expenses.
  • Net profit for 9mFY10 increased by 28% YoY due to increase in operating income due to lower raw material costs as a percentage of sales. The net profit would have been higher but for higher tax expense incurred during the period.


(Rs m) 3QFY09 3QFY10 % Change 9mFY09 9mFY10 % Change
Net sales 7,842 9,302 18.6% 20,947 25,315 20.9%
Expenditure 6,488 7,502 15.6% 17,329 20,500 18.3%
Operating profit (EBDITA) 1,354 1,799 32.8% 3,618 4,815 33.1%
EBDITA margin (%) 17.3% 19.3%   17.3% 19.0%  
Other income 59 19 -66.8% 170 99 -41.9%
Interest 69 37 -46.2% 149 107 -28.2%
Depreciation 118 132 11.9% 349 367 5.3%
Profit before tax 1,226 1,650 34.6% 3,290 4,440 34.9%
Minority Interest 11 1   14 (8)  
Extraordinary Items - -   - -  
Tax 152 271 78.5% 435 749 72.2%
Profit after tax/(loss) 1,085 1,379 27.2% 2,869 3,683 28.4%
Net profit margin (%) 13.8% 14.8%   13.7% 14.5%  
No. of shares (m) 865 866   865 866  
Diluted earnings per share (Rs)*         5.5  
Price to earnings ratio (x)*         28.4  
* On a trailing 12-months basis

What has driven performance in 3QFY10?
    Standalone EBIT margin
      3QFY09 3QFY10 9mFY09 9mFY10
    Consumer Care Business 27.1% 28.8% 27.9% 29.6%
    Consumer health Business 25.7% 25.0% 27.4% 25.9%
    Foods Business 19.6% 19.3% 17.2% 17.5%
    Retail Business        
    Others 1.4% 1.1% 2.4% 0.6%

  • Sales for the company increased on the back of strong volume growth across key categories led by consumer care business, consumer health business and supported by the international business. Skin Care, Oral Care and foods were amongst the top performers.

  • The company’s overseas business performed strongly with a sales growth for 3QFY10 recorded at 18.2% lead by strong performance in the GCC, Egypt , Nigeria and Bangladesh markets. Of the overseas markets, Bangladesh was the strongest performer with sales growth of 58%. Sales in GCC were recorded at a robust 34.1% YoY, while Egypt showed a strong performance growing at nearly 30% YoY.

    Division performance
    Segment Growth Key performers
    Hair oil 10.0% Dabur Amla (12.8%), Vatika (3.5%)
    Shampoo 9.0% Non dandruff shampoos (19%)
    Health Supplements 10.2% Chyawanprash (10%), Glucose (100%), Dabur honey (15%)
    Skin care 32.5% Fem Care (25.5%)
    Oral care 25.0% Red Toothpaste (23.3%), Meswak (49%), Babool (30.4%)
    Foods 21.4% Real fruit juice (22.1%), Culinary range (25%)
    Home care 8.7% Odonil (12%)
    Digestives and baby care 12.4%  
    Consumer Health Division 16.8% OTC (20%)

  • Net profit for the quarter grew by 27% YoY supported by operating margin expansion and lower interest costs. However, the net profit growth was capped due to higher tax expense which grew by 79%. This is due to some of the company’s manufacturing hubs coming out of the tax exemption period.

What to expect?
At a price of Rs. 155, the stock is trading at 23.2 times our estimated FY12 earnings. The company has done well on the back of good volume growth and buoyancy in its key categories. Fall in raw material prices also supported growth as the company was able to invest behind brand building. However, with the rise in food prices, the company’s margins are expected to come under pressure. For this reason we would advise investors to practice caution at this juncture.

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