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Dabur: Decent performance - Views on News from Equitymaster

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Dabur: Decent performance
Jan 28, 2009

Performance summary
  • Topline grows by 20% YoY during 3QFY09. Sales for 9mFY09 are higher by 18% YoY.
  • Consolidated margins decline by 1.1% YoY during both the period under consideration.
  • Inspite of higher other income net profits grow by 15% YoY and 13% YoY respectively for both the period.
  • It acquires 72.15% of Fem Care Pharma Ltd (FCPL), a leading player in the women’s skin care products market, for R 2 bn in an all-cash deal. Open offer for 20% additional equity of FCPL is also announced. Takeover process likely to be completed by April 2009


Consolidated financials
Rs(m) 3QFY08 3QFY09 (%) Change 9mFY08 9mFY09 (%) Change
Net sales 6,522 7,842 20.2% 17,688 20,947 18.4%
Expenditure 5,333 6,498 21.8% 14,431 17,330 20.1%
Operating profit (EBDITA) 1,188 1,345 13.2% 3,257 3,617 11.1%
EBDITA margin (%) 18.2% 17.1%   18.4% 17.3%  
Other income 24 59 143.8% 61 170 180.5%
Interest 44 69 58.9% 133 149 12.3%
Depreciation 105 109 3.6% 304 349 14.7%
Profit before tax 1,064 1,225 15.2% 2,881 3,290 14.2%
Minority interest 20 11 -48.0% 30 14 -53.7%
Tax 139 152 9.5% 378 435 15.1%
Profit after tax/(loss) 945 1,084 14.7% 2,533 2,869 13.3%
Net profit margin (%) 14.5% 13.8%   14.3% 13.7%  
No. of shares (m) 864.0 865.1   864.0 865.1  
Diluted earnings per share (Rs)*         4.2  
Price to earnings ratio (x)*         20.8  
* based on 12 month trailing earnings

What has driven performance in 3QFY09?
  • Dabur continued with its strong topline growth during both the period under consideration. The consolidated topline jumped 20% YoY and 18% YoY respectively. During the quarter, the consumer care division (CCD) sales were higher by 21% YoY, which is the highest growth witnessed in the last few quarters. Volume growth accounted for 70% of the growth in CCD. The consumer health segment (CHD) reported a 17% YoY growth in revenues. The food segment witnessed a sluggish growth of 6% YoY growth. Retail business earned revenues to the tune of Rs 16 m during the quarter.

    Consolidated segment revenue
      3QFY08 3QFY09 (%) Change 9mFY08 9mFY09 (%) Change
    Consumer Care segment 5,273 6,351 20.5% 14,006 16,504 17.8%
    % of total revenue 80.1% 80.8%   78.6% 78.7%  
    Consumer Health segment 481 561 16.5% 1,206 1,446 19.9%
    % of total revenue 7.3% 7.1%   6.8% 6.9%  
    Food 694 733 5.6% 2,218 2,422 9.2%
    % of total revenue 10.5% 9.3%   12.5% 11.5%  
    Retail Business - 16   - 42  
    % of total revenue 0.0% 0.2%   0.0% 0.2%  
    Others 138 202 46.0% 387 557 43.9%
    % of total revenue 2.1% 2.6%   2.2% 2.7%  
                 
    Total 6,586 7,862 19.4% 17,817 20,971 17.7%

  • The standalone sales were higher at 16% YoY during the quarter, while it saw a jump of 15% YoY during 9mFY09. All the key segments and brands witnessed strong growth in the CCD division. New launches and relaunches and higher brand building activities led to the strong growth. However, oral care saw a poor performance due to higher competition.

  • The company launched new Malted Food Drink (MFD) ‘Chyawan Junior’ in North, East and West Indian markets during the quarter. Food segment, which was merged with CCD division too performed well with key brands growing by strong double digit. In the CHD, OTC portfolio registered growth of 23.6% YoY for 9MFY09 and ethical portfolio grew by 16.4% YoY. Dabur continued with increasing the portfolio of its offerings in this segment.

    Division performance
    Segment Growth Key performers
    Hair oil 19.7% Dabur Amla (19.4%), Anmol Coconut (36.8%) , Vatika (14.9%), Anmol Mustard Oil (19.8%)
    Shampoo 32.2% Vatika brands
    Health Supplements 11.2% Chyawanprash (9.2% YoY), Glucose (14%) and Dabur Honey (14.1%)
    Baby and Skin care 22.5% Gulabari (48.2%), Lal Tail (16%)
    Oral care 3.7% Red toothpaste (18.5%), Meswak (7.5%)
    Home care 11.0% Odonil (6%), Sanifresh (30.4%)
    Foods 11.5% Real Fruit juice(12.9%), culinary range (28.1%)
    Digestives 6.7% Hajmola tablets (7.1%), Hajmola Candy (12% ), Pudin Hara (8.7%)

  • International business division (IBD) saw a strong growth of 43% YoY during 9mFY09 led by robust performance in GCC and North African markets. Egypt grew by 85% YoY, while GCC regions reported a jump of 47% YoY. Bangladesh too saw a 52% YoY increase. New markets opened during the quarter included Turkey, Mauritania, China Algeria and Lebanon. The revenues are in line with our estimates.

  • The consolidated margins during both the period declined by 1.1% YoY. Like its peers, the company faced higher raw material prices. The margins are higher than our estimates. On segmental PBIT front, except for the food segment, the company faced pressure on the other segments. Profitability of the food business improved significantly due to benefits of integration. It continued to face losses in its retail ventures.

  • Inspite of higher other income, the consolidated profits grew at a slower pace than the topline during both the periods under consideration. Consolidated profits in core business (excluding retail) grew by 17.6% YoY during both the periods. Standalone bottomline grew by 16% YoY and 19% YoY respectively for both the periods led by stable margins and higher other income.

What to expect?
    At the current price of Rs 88, the stock is trading at a price to earnings multiple of 15.2 times our FY11 estimates. The company witnessed robust growth in most of its segments. As per the management, in the current slow economic scenario, demand for its everyday use products continues to be strong and has not seen any significant impact on consumer spending. However, while last year price hikes were taken, the same would not be possible this year and volume growth would be the key driver. We continue to be positive on the stock

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