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Cadbury: Steady performer

Apr 29, 2002

Chocolate major Cadbury India's 1QFY03 performance continues to be steady. The company recorded a 9% growth in net profits on the back of a 6.5% growth in topline. The bottomline growth has been consistent at 9-10% in recent quarters, however, the topline growth seems subdued as compared to December quarter (17% growth).

(Rs m)1QFY021QFY03Change
Net Sales1,4991,5976.5%
Other Income192324.1%
Operating Profit (EBDIT)2522727.9%
Operating Profit Margin (%)16.8%17.0%
Interest 64-30.5%
Profit before Tax2072279.3%
Exceptional items1-9-
Profit after Tax/(Loss)1241358.9%
Net profit margin (%)8.3%8.4%
No. of Shares (eoy) (m)35.735.7
Diluted Earnings per share*13.915.1
Current P/e ratio31.8

This is largely because October-December period is considered a peak season owing to festivals like Diwali and Christmas. Demand for chocolates is higher during this period. Also, the company pushes its products to distributors in this quarter. So, on the flip side, distributors de-stock in the January-March quarter. Thus sales growth is lesser in 1QFY03.

(Rs m)1QFY021QFY03Change
Material costs572565-1.2%
Staff costs1491607.5%
Advertising & Marketing17119112.0%
Other expenditure35640814.8%
Total expenditure1,2471,3256.2%

The company has managed to improve its operating margins slightly as expenses have grown at a slower clip compared to sales. Infact, had the company not incurred extraordinary expenses towards VRS (Rs 6.3 m) and refurbishment of the registered office (Rs 2.2 m), the company would have finished the quarter with a significant 16.5% growth in net profit.

The performance seems satisfactory considering the difficult market conditions the FMCG sector has been facing. At Rs 481 the stock trades at 32x its annualised 1QFY03 earnings. The stock has been range bound ever since the parent company's open offer at Rs 500 per share. The offer was a success and currently the promoters' hold 90.2% stake in Cadbury India. Due to this, liquidity in the stock has dried up. We do not forsee any significant movement in the stock price. There is also a possibility of the management going in for a delisting.

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