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Dabur: Healthy year! - Views on News from Equitymaster
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Dabur: Healthy year!
Apr 30, 2008

Performance summary
  • Reports a topline growth of 16% YoY on consolidated basis led by growth in key categories.
  • Operating margins on consolidated basis remain stable at 17.3%.

  • The bottomline grows by 18% YoY in FY08.

  • Dabur also started its retail venture this year. It opened its first retail ‘New U Store’ in New Delhi during March 08

Consolidated performance
Rs(m) 4QFY07 4QFY08 (%) Change FY07 FY08 (%) Change
Net sales 5,307 6,065 14.3% 20,431 23,611 15.6%
Expenditure 4,426 5,087 14.9% 16,934 19,518 15.3%
Operating profit (EBDITA) 881 978 10.9% 3,497 4,093 17.0%
EBDITA margin (%) 16.6% 16.1%   17.1% 17.3%  
Other income 71 138 94.2% 259 340 31.3%
Interest 28 35 27.8% 154 168 9.2%
Depreciation 90 117 30.0% 408 421 3.2%
Profit before tax 834 963 15.4% 3,195 3,844 20.3%
Extraordinary item - -   - -  
Minority interest -11 -28.5 - 9 1 -85.1%
Tax 54 138.6 155.7% 387 516 33.6%
Profit after tax/(loss) 769 796 3.4% 2,817 3,329 18.2%
Net profit margin (%) 14.5% 13.1%   13.8% 14.1%  
No. of shares (m) 864.0 864.0   864.0 864.0  
Diluted earnings per share (Rs)*         3.9  
Price to earnings ratio (x)*         27.5  
* 12 month trailing earnings

What has driven performance in FY08?
  • Dabur reported a topline growth of 16% YoY on consolidated basis for FY08. Standalone sales grew by 30% YoY for the same period. Continued momentum in the key categories led to the overall good performance. New product and packaging initiatives were undertaken to revamp entire portfolio. The company merged its wholly owned Subsidiary Dabur Foods with consumer care division (CCD) and also incorporated the " H&B Store Ltd" a wholly owned subsidiary of the company to the consolidated entity. Hence the results are not comparable in that sense. While CCD grew by 15% YoY, foods division grew by 21% YoY and consumer health care 6 % YoY.

    Consolidated Segment Revenue
    (Rs m) 4QFY07 4QFY08 (%) Change FY07 FY08 (%) Change
    Consumer care 4,227 4,738 12.1% 16,362 18,827 15.1%
    % of total revenue 78.1% 77.1%   78.7% 78.6%  
    Consumer health 367 444 21.0% 1,508 1,604 6.4%
    % of total revenue 6.8% 7.2%   7.2% 6.7%  
    Foods 696 820 17.8% 2,493 3,028 21.4%
    % of total revenue 12.9% 13.3%   12.0% 12.6%  
    Others (incl retail) 121 144 19.0% 440 504 14.6%
    % of total revenue 2.2% 2.3%   2.1% 2.1%  
    Total 5,411 6,146 13.6% 20,803 23,962 15.2%

  • The growth in its CCD division was led by all its core segments. Food is now a part of CCD and contributed 13% of the CCD. As evident from the table below, the main brands continued their double-digit growth during the year. The company introduced new products and variants under the ‘Vatika’ brand and also entered the conditioner market. Dabur outperformed the toothpaste category with a value growth of 35% (AC Neilsen-Apr-Mar 07) as against category growth of 14%. It also marked an entry into new product categories like surface cleaners (Dazzl) and malted food drinks (Chyawan Junior).

    Division performance
    Segment Growth Key performers
    Hair oil 13% Dabur Amla (18%), Anmol Coconut (17%) Anmol Mustard (13%)
    Shampoo 25.0% Vatika (Smooth & Silky) (21%), Vatika Anti Dandruff (9%)
    Health Supplements 15% Chyawanprash (6% YoY), Glucose (32% YoY) and Dabur Honey (26% YoY)
    Baby and Skin care 4.1% Gulabari (26.4%)
    Digestives 11% PudinHara (16 %), HajmolaCandies( 21%), Hajmola tablets (8.5%)
    Oral care 15% Red toothpaste (23%), Babool (30%), Meswak (40%)
    Home care 10% Odonil(17.8%), sanifresh (13.5%)
    Foods 19% Real Fruit juice(20%), no juice portfolio (25%)

  • The consumer health care division showed a turnaround, led by ‘Honitus’ portfolio, (Cough syrup & Throat drops) growing impressively by 36%YoY. Aggressive ad campaign and promotions aided the growth. International Business Division recorded a growth of 25.5%YoY with Egypt, GCC and African markets performing well. Dabur Egypt grew by a robust 49% YoY, while sales in GCC region increased by 32.8% YoY led by new product launches. Dabur also started its retail venture this year. It opened its first retail New U store in New Delhi during March 08. Four more stores were opened in Bangalore, Hyderabad and Faridabad. Retail venture posted a loss of Rs 76 m for FY08.

  • The consolidated margins have remained stable at 17% for FY08. While raw material prices as percentage of sales have reduced, other expenses and labour costs have increased. On a standalone basis, margins declined marginally by 70 basis points. On segmental PBIT basis, while the PBIT margins of consumer health care reduced by 190 basis points, that of the foods division improved to 16% from 13% in FY07. Dabur started its retail ventures in the last quarter of the year. This division is still in losses and hence the margins are lower to that extent. The margins are higher than our expectations.

  • On a consolidated basis, the bottomline grew by 18% YoY in FY08. Higher other income and lower depreciation costs aided the performance. The standalone profits grew by 25% YoY for FY08 indicating that the domestic segment continues to grow at a faster rate. It now contributes 95% to the total profits (89% in FY97).

What to expect?
At the current price of Rs 106, the stock is trading at a price to earnings multiple of 18.9 times our FY10 estimates. The company has out performed our estimates for FY08. Strong growth in its key categories coupled with stringent cost-saving initiatives helped Dabur to report good performance. With entry into new segments and introduction of new variants, the company is expanding its product portfolio. Its ability to create new categories and sub-categories and a strong product pipeline makes it best placed to capture lifestyle changes led growth in the FMCG space. However, its retail venture is still in the initial stage and would take time to breakeven.

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