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Dabur: Well being continues - Views on News from Equitymaster

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Dabur: Well being continues
May 5, 2009

Performance summary
  • Driven by 13% YoY growth in volumes and a 6% hike in prices, Dabur reports the highest organic growth of 19% YoY during FY09. The consumer care division (CCD) continues to do well reporting an 18% YoY jump in sales during FY09.
  • Consolidated margins for the full year decline by 0.6% YoY mainly on account of higher operating costs.
  • The net profits for the full year grow by 18% YoY mainly due to a strong performance at the topline level and lower tax provision (deferred tax credits).

Consolidated financials
Rs(m) 4QFY08 4QFY09 (%) Change FY08 FY09 (%) Change
Net sales 6,163 7,363 19.5% 23,850 28,310 18.7%
Expenditure 5,087 6,022 18.4% 19,517 23,351 19.6%
Operating profit (EBDITA) 1,076 1,341 24.7% 4,333 4,959 14.5%
EBDITA margin (%) 17.5% 18.2% 18.2% 17.5%
Other income 40 43 7.8% 100 213 112.1%
Interest 35 83 135.0% 168 232 38.2%
Depreciation 117 144 22.9% 421 492 17.0%
Profit before tax 964 1,157 20.1% 3,844 4,448 15.7%
Minority interest (29) (10) -66.0% 1 4 215.4%
Tax 139 106 -23.9% 516 540 4.7%
Profit after tax/(loss) 796 1,042 30.9% 3,329 3,911 17.5%
Net profit margin (%) 12.9% 14.2%   14.0% 13.8%
No. of shares (m) 864.0 865.1   864.0 865.1
Diluted earnings per share (Rs)*   4.5
Price to earnings ratio (x)*     23.4
* based on 12 month trailing earnings

What has driven performance in FY09?
  • Driven by 13% YoY growth in volumes and a 6% hike in prices, Dabur reported the highest organic growth of 19% YoY during FY09. Robust consumer spending both in the rural and urban areas aided its performance. The standalone sales witnessed a 15% YoY growth. The company expects to complete the Fem acquisition by June 2009. While the management expects the volume growth to continue, price hikes would be difficult at least till 1HFY10. The company has outperformed our estimates by 4%.

    Consolidated segment Revenue
    4QFY08 4QFY09 (%) Change FY08 FY09 (%) Change
    Consumer Care segment 4,636 5,568 20.1% 18,642 22,071 18.4%
    % of total revenue 75.4% 75.5% 77.8% 77.9%
    Consumer Health segment 582 677 16.3% 1,788 2,123 18.8%
    % of total revenue 9.5% 9.2% 7.5% 7.5%
    Food 757 929 22.8% 2,975 3,351 12.6%
    % of total revenue 12.3% 12.6% 12.4% 11.8%
    Retail Business †0 18 0 60
    % of total revenue 0.0% 0.2% 0.0% 0.2%
    Others 171 179 4.9% 558 736 31.9%
    % of total revenue 2.8% 2.4% 2.3% 2.6%
    Total 6,146 7,371 19.9% 23,962 28,341 18.3%

  • The consumer care division (CCD) continued its robust performance reporting an 18% YoY jump in sales during FY09. The entire segment, except oral care, saw a strong double digit growth. New launches and relaunches, aggressive marketing initiatives aided the performance. While the toothpaste category saw an 11% YoY growth, the toothpowder category, however, did not do well. The food segment witnessed a recovery after facing some tough times during the previous quarters growing by 14% YoY. Dabur entered the fruit based drinks segment under the brand 'Real Burrst'. The consumer health segment (CHD) reported a 19% YoY growth during the year on account of aggressive marketing and media initiatives coupled with new product launches in the OTC portfolio. The Pudin Hara brand has been shifted to CHD for increased focus on distribution through chemists. The company is going to continue investing heavily in this segment.

    Division performance
    Segment Growth Key performers
    Hair oil 20.6% Dabur Amla (20.4%), Anmol Coconut (42.2%) , Vatika (12.2%), Anmol Mustard Oil (22.7%)
    Shampoo 31.5% Vatika brands
    Health Supplements 11.0% Chyawanprash (7.4% YoY), Glucose (21.6%) and Dabur Honey (12.6%)
    Baby and Skin care 23.5% Gulabari (40.6%), Lal Tail (19.6%)
    Oral care 5.0% Red toothpaste (21.4%), Meswak (17.2%)
    Home care 10.0% Odonil (6.5%), Sanifresh (32.1%)
    Foods 14.0% Real Fruit juice(14.9%), culinary range (19.6%)
    Digestives 12.0% Hajmola tablets (13.7%), Hajmola Candy (17.9% )

  • On the retail front, Dabur currently has 9 Newu stores in operations. Contributing 0.2% to the total sales, the company is planning to add another 15 to 20 stores in the current fiscal, albeit after careful assessment. While the footfalls and conversion ratio has remained static, the company is hopeful of better times ahead once the economy recovers.

  • The International business division (IBD) yet again reported a robust performance with a growth of 40% YoY. All the key markets saw a strong double digit growth. Dabur also entered new regions like Lebanon, Algeria, Turkey, Mauritius and some parts of China. IBDís contribution to consolidated sales went up from 16% in FY08 to 18.5% in FY09. The company expects growth to remain strong on account of entry in new regions.

  • The consolidated margins for the full year fell by 0.6% YoY mainly on account of higher operating costs. Raw material costs increased from 47% in FY08 to 49% during the year due to inflationary pressures experienced in first three quarters. The standalone operating margins remained stable at 18.5%. On the EBIT front, while the margins of the consumer health care and food segment remained stable, consumer care segment saw a drop of 1% YoY. The margins of the international segment were lower at 16% on account of higher ad spends. The operating margins are higher than our estimates.

  • The net profits for the full year reported a growth of 18% YoY mainly due to a strong performance at the topline level and lower tax provision (deferred tax credits). PAT growth, excluding the retail venture, stood at 20.1% YoY for FY09. The retail venture reported loss of Rs 179 m.

What to expect?
At the current price of Rs 106, the stock is trading at a price to earnings multiple of 18.3 times our FY11 estimates. Going forward, the topline growth and operating margins are expected to be similar to the last fiscal. The company is expected to continue investing in its brands. It has also lined capex to the tune of Rs 2.25 bn to expand its capacities. We maintain a positive view on the stock from a long term perspective.

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