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Dabur: Robust sales but margins dip
Jul 23, 2012

Dabur India Limited has announced its first quarter results for financial year 2012-2013 (1QFY13). The company has reported a 21% YoY and 17% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Backed by strong growth in key categories like health supplements, shampoos and foods Dabur's consolidated sales for 1QFY13 increased by 21% YoY.
  • However, operating margin dipped by 50 basis points during the quarter due to a steep rise in advertisement spends.
  • Dabur's net margin contracted marginally. The benefit of 62% jump in other income was offset by an extra-ordinary loss of Rs 49 m on overseas subsidiary sale booked during the quarter.

Consolidated picture
(Rs m) 1QFY12 1QFY13 % Change
Revenues 12,111 14,717 21.5%
Expenditure 10,267 12,559 22.3%
Operating profit (EBDITA) 1,844 2,158 17.1%
EBDITA margin (%) 15.2% 14.7% -0.6%
Other income 151 245 61.7%
Interest 145 213 46.6%
Depreciation 248 267 7.5%
Profit before tax 1,602 1,923 20.1%
Minority Interest 2 2  
Extraordinary Items - (49)  
Tax 323 378 17.1%
Profit after tax/(loss) 1,277 1,494 17.0%
Net profit margin (%) 10.5% 10.2%  
No. of shares (m)   1,743  
Diluted earnings per share (Rs)*   3.8  
Price to earnings ratio (x)*   31.1  
* On a trailing 12-months basis

What has driven performance in 1QFY13?
  • Backed by 16% growth in domestic FMCG sales and 24% jump in international business, Dabur reported a 21.5% rise in revenues. In domestic FMCG business, the largest segment consumer care reported robust growth of 12.5% led by 8.5% volume growth. Most of the product categories in this segment registered double-digit growth during the quarter. In hair oils, Amla hair oil saw double-digit growth. However moderate growth in Vatika hair oil due to higher price differential with coconut oil led to a muted 8.4% overall rise in hair oil revenues during the quarter. Even in oral care, competitive pressures on the mass-market Babool brand led to a modest 8% growth in oral care sales. Foods, the second largest domestic FMCG segment, posted a 34.5% surge in sales driven by strong volume growth and new variant launches in juices. Dabur's international business grew robustly on the back of double-digit growth in markets of Gulf Cooperation Council, Nigeria, Egypt and Nepal. The integration of Hobi and Namaste were completed during the quarter.

    1QFY13 division performance (domestic)
    Segment Growth
    Hair oil 8.40%
    Shampoo 23.00%
    Oral care 8.10%
    Health Supplements 18.00%
    Skin care 13.30%
    Foods 34.50%
    Home care 14.40%
    Digestives 9.80%
    OTC 13.50%
    Ethicals 11.30%

  • Dabur benefitted from waning commodity inflation during the quarter. As a result, its cost of goods sold to sales ratio dropped by 220 basis points to 49.7%. However, the impact was entirely offset by a 51% jump in adspends. As a proportion of sales, adspends to sales ratio rose to 15.6% from 12.5% in the year-ago quarter. Expenditure incurred on revamping the Namaste brand architecture in the US market and widening reach in modern trade in the Middle East have pushed up adspends for the quarter. Consequently, the company's operating margin contracted by 50 basis points to 14.7%. The EBIT margins of consumer care and food businesses declined by 50 basis points and 423 basis points, respectively

    All round picture
      %contribution to sales Revenue growth PBIT growth PBIT margin (%) PBIT margin gain/(decline) basis points
    Consumer Care 80% 16% 13% 20% -50.78
    Foods 14% 36% 34% 12% -423.19
    Retail 1% 58% -9% -20%  
    Others 4% 158% 1886% 7% 609.71

  • Despite a 62% jump in other income, Dabur has just managed to maintain net margin at 10.2%. The company recorded a loss of Rs 49 m after it divested stake in the non-core, loss making subsidiary, Weikfield International UAE. Even the interest outgo increased by 47% during the quarter.

What to expect?
At the current price of Rs 118, the stock is trading at 15 times its FY15 forecasted earnings. On the back of a strong traction in domestic consumer business and robust growth in overseas business, we continue to have a BUY on this stock.

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