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Dabur: The pressure continues - Views on News from Equitymaster
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  • Feb 5, 2002

    Dabur: The pressure continues

    Dabur India Limited, the ayurvedic products major, reported a marginal 1% increase in topline and a mere 2% growth in net profits during the December quarter of FY02.

    (Rs m) 3QFY01 3QFY02 Change 9m FY01 9m FY02 Change
    Net Sales 3,157 3,198 1.3% 8,626 8,820 2.3%
    Other Income 25 17 -32.4% 91 78 -13.8%
    Expenditure 2,801 2,827 0.9% 7,741 7,909 2.2%
    Operating Profit (EBDIT) 356 370 4.0% 885 911 2.9%
    Operating Profit Margin (%) 11.3% 11.6%   10.3% 10.3%  
    Interest 87 67 -22.9% 248 187 -24.7%
    Depreciation 55 52 -5.8% 162 155 -4.3%
    Profit before Tax 239 268 12.3% 565 647 14.4%
    Extraordinary items 0 0   -6 0  
    Tax 20 45 125.0% 47 91 95.9%
    Profit after Tax/(Loss) 219 223 2.0% 513 556 8.4%
    Net profit margin (%) 6.9% 7.0%   5.9% 6.3%  
    No. of Shares 28.5 285.6   28.5 285.6  
    Diluted Earnings per share* 3.1 3.1   2.4 2.6  
    P/E Ratio   20.2     24.3  

    Sales during the nine months period ended December 31, 2001 grew by 2.3% which is not entirely comparable with the corresponding period of the previous year. The growth in sales on like to like basis (excluding some of the businesses such as herbal intermediaries which have been discontinued) for the period has been 4.3%.

    Despite this the company's sluggish topline growth continues to be a concern. Dabur has meanwhile, concentrated on pruning its debt burden as well as restructuring its business operations. The company's interest burden in 9m FY02 has declined 25% YoY and its depreciation provisioning too has declined marginally by 4%.

    Cost break-up
    (Rs m) 3QFY01 3QFY02 Change 9m FY01 9m FY02 Change
    Raw material 738 660 -10.6% 1,796 1,607 -10.5%
    Staff cost 167 191 15.0% 533 569 6.7%
    Finished goods purchased 782 819 4.8% 2,263 2,371 4.8%
    Advertising 353 400 13.4% 996 1,116 12.0%
    Others 762 757 -0.6% 2,154 2,246 4.3%
    Total Expenditure 2,801 2,827 0.9% 7,741 7,909 2.2%

    However, the company has not been able prune its operating expenses significantly. Apart from its raw material expenses, Dabur has not been able to cap its other expenses. Its staff costs were up 7% in 9m FY02. Its advertising expenses during the period were up 12% YoY. Its advertising to sales ratio increased by 120 basis points to 12.7%.

    Dabur's net profit growth would have been far more encouraging had it not been for increased taxes due to the AS-22 provisions. The company's profit before tax grew by 14% during the nine month period.

    At the current price of Rs 63 the stock trades at 24x its 9m FY02 annualised earnings. Dabur has one of the better valuations in the FMCG spectrum. With competition from Zandu, Baidyanath and Himalaya Drugs increasing, Dabur's monopoly in ayurvedic products is under pressure. Also, with HLL considering a foray in this segment, Dabur has to gear up its act.



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