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Dabur: Good all-round performance - Views on News from Equitymaster
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Dabur: Good all-round performance
Apr 28, 2010

Dabur India Limited has announced its FY10 results. The company has reported a 20% YoY and 29% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Consolidated net sales for 4QFY10 increased by a robust 17% YoY on the back of strong performance by the company’s domestic business and the amalgamation of the financials of Fem Care to the financials of Dabur during the quarter.
  • Operating (EBITDA) margins improved by 1.8% to 20% for 4QFY10. This increase comes on the back of lower raw material costs as well as lower other expenditure as a percentage of sales. However, due to higher advertisement expenditure and higher staff costs as a percentage of sales, growth of operating profit was capped.
  • Net profit for 4QFY10 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 30% YoY due to higher operating profits and lower interest costs. The net profit would have been higher but for higher tax expense incurred during the period.

Consolidated picture
(Rs m) 4QFY09 4QFY10 % Change FY09 FY10 % Change
Net sales 7,363 8,583 16.6% 28,310 33,897 19.7%
Expenditure 6,021 6,868 14.1% 23,350 27,327 17.0%
Operating profit (EBDITA) 1,342 1,714 27.7% 4,960 6,571 32.5%
EBDITA margin (%) 18.2% 20.0%   17.5% 19.4%  
Other income 43 48 11.7% 213 147 -31.1%
Interest 83 25 -70.3% 232 132 -43.3%
Depreciation 144 149 3.5% 492 557 13.2%
Profit before tax 1,158 1,589 37.2% 4,448 6,028 35.5%
Minority Interest (10) -   4 (8)  
Extraordinary Items - -   - -  
Tax 106 236 123.5% 540 985 82.3%
Profit after tax/(loss) 1,043 1,353 29.7% 3,912 5,035 28.7%
Net profit margin (%) 14.2% 15.8%   13.8% 14.9%  
No. of shares (m) 865 866   865 866  
Diluted earnings per share (Rs)*         5.8  
Price to earnings ratio (x)*         30.6  
* On a trailing 12-months basis

What has driven performance in FY10?
  • Sales improved by 19.7% during the year. This growth was primarily driven by volumes as the company was reluctant to increase prices so as to improve market share. The growth was led by consumer care business and supported by the international business. Skin care, shampoo, oral care, and foods were the top performers.

    Division performance
    Segment Growth Key performers
    Hair oil 9.6% Dabar Amla Hair Oil (10.6%), Vatika Hair Oil (6%), Anmol Coconut Oil (15.4%)
    Shampoo 27.0% Vatika Shampoo (40.5%), Vatika Black Shine (23.5%)
    Health Supplements 20.4% Dabur Chywanprash (13%), Dabur Honey (15%), Dabur Glucose (52.1%)
    Skin care 33.2% Gulabari (33.2%)
    Oral care 11.5% Dabur Red Toothpaste (17.4%), Babool (19.4%), Meswark (26.8%), Dabur Red Toothpowder (-2.8%)
    Foods 20.0% Real Fruit Juice (21%), Activ Fruit Juice (6%), Hommade Paste (49%)
    Home care 3.3% Sanifresh (15.2%), Odomos (10.2%), Odonil (1.8%)
    Digestives and baby care 10.8% Hajmola Tablets (11.6%), Hajmola Candy (13.1%), Lal Tail (8%)
    Consumer Health Division 15.0% Pudin Hara (17.7%), Honitus (13%), Shilajit (27%), Dashmularishta (19%)
    FemCare* 16.6% Personal Care (29%), Fem Bleach (28.8%)

  • Sales of International Business Division (IBD) grew by 26.3% during the year with Bangladesh as the top performing market. Sales from Bangladesh grew by 46.7% YoY while the sales from GCC grew by 39.4% YoY. Egypt also put up robust performance with a sales growth of 34.4% YoY. However, Nepal disappointed with a 9% YoY sales growth.

    Cost break-up
    As a % of sales 4QFY09 4QFY10 FY09 FY10
    Total raw material costs 46.5% 44.8% 48.6% 45.4%
    Advertising costs 13.1% 13.5% 12.1% 14.3%
    Staff costs 8.0% 8.8% 8.3% 8.3%
    Other expenditure 14.2% 13.0% 13.5% 12.6%

  • Operating (EBITDA) profit for the year increased by 32.5% while operating margins expanded by 1.9% to 19.4% during the year. Operating profit improved as a result of lower raw material costs and lower other expenditure (as a percentage of sales incurred) during the year. This was a result of aggressive cost cutting measures taken by the company. However, the company spent more aggressively on advertisement as several new products were launched during the year. This capped the company’s operating profit growth.

  • Net profit for the year increased by 28.7% while the net profit margin expanded by 1.1%. Bottom line did not increase in line with the operating profits due to lower other income and higher tax expense.

    Consolidated EBIT margin
      4QFY09 4QFY10 FY09 FY10
    Consumer Care Business 26.5% 29.1% 25.4% 27.4%
    Consumer Health Business 33.8% 27.5% 29.2% 26.3%
    Foods Business 18.6% 17.4% 16.9% 17.4%
    Retail Business -121.7% -92.1% -298.7% -100.9%
    Others 0.7% 0.1% 2.9% 7.1%

What to expect?
At a price of Rs. 178, the stock is trading at 26.8 times our estimated FY12 earnings. The company has performed well on the back of volumes and has taken initiatives to launch new products to drive future growth. While the top line for the year was in line with our estimate, the company grew faster at net profit level due to higher operating profit growth. We will update our financial assumptions shortly.

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