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Cadbury: 2QFY02 beats expectations - Views on News from Equitymaster
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  • Jul 12, 2001

    Cadbury: 2QFY02 beats expectations

    Cadbury India has posted a net profit growth of 23% in the quarter ended June 17, 2001 to Rs 88 m. Net Sales grew by 11% to Rs 1,185 m during the same period. Other income also saw a significant rise to Rs 22 m during 2QFY02.

    (Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
    Net Sales 1,071 1,185 10.7% 2,464 2,684 8.9%
    Other Income 4 22 434.1% 21 41 90.6%
    Expenditure 909 1,010 11.2% 2,099 2,258 7.5%
    Operating Profit (EBDIT) 162 175 7.7% 365 426 16.9%
    Operating Profit Margin (%) 15.1% 14.7%   14.8% 15.9%  
    Interest 7 4 -36.8% 15 10 -32.5%
    Depreciation 45 51 14.0% 95 109 14.8%
    Profit before Tax 114 141 23.2% 276 348 26.0%
    Exceptional items 15 7 -51.0% 13 7 -43.5%
    Tax 43 53 23.3% 98 137 39.3%
    Profit after Tax/(Loss) 86 95 10.5% 191 219 14.3%
    Net profit margin (%) 8.0% 8.0%   7.8% 8.1%  
    No. of Shares (eoy) (m) 23.8 35.7   23.8 35.7  
    Earnings per share* 14.5 10.7   16.1 12.2  
    Diluted Earnings per share* 9.6 10.7   10.7 12.2  
    Current P/e ratio   39.0     33.9  

    The results have beaten market expectations. The company's turnover growth at 11% is good considering the difficult market conditions the FMCG sector has been facing. However, a huge growth in the company's other income was also responsible for the improved profit margins.

    Cadbury accrued exceptional income as tax adjustments. Considering the extraordinary income, the growth in profits gets pruned to 11%, as the tax adjustments last year were almost double of what has been written back this quarter. The company has also got hit because of higher taxes. The company's staff costs have also gone up by 20% during the quarter.

    On a consolidated half yearly basis, Cadbury India net sales have gone up by 8%. Excluding the effect of the extraordinary income, the company's net profit has gone up 19% YoY in 1HFY02.

    Cost break-up
    (Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
    Raw material 491 481 -2.0% 1,043 1,038 -0.5%
    Staff 110 132 20.1% 241 281 17.0%
    Advertising/marketing 110 125 13.8% 254 295 16.3%
    Others 318 358 12.6% 648 714 10.2%

    Cadbury's advertising costs have gone up by 16% in the first half of FY02, but its advertising to sales ratio has increased by only 70 basis points. Considering, the difficult market environment, the growth in advertising expenditure has not really shot up.

    The company continues to endevaour to reduce its raw material costs. Raw material costs have declined marginally, but as a percentage of sales raw material costs went down by 360 basis points to 38.7% in the first half of FY02.

    At the current market price of Rs 415 the stock trades at a P/E multiple of 34 times its FY02 earnings. Cadbury looks set to beat our FY02E forecasts, given the fact that economists are hopeful of a recovery backed by agricultural growth in the remaining part of FY02.



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