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Dabur: Topline concerns - Views on News from Equitymaster
 
 
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  • Jul 26, 2001

    Dabur: Topline concerns

    Dabur India has posted a 23% growth in 1QFY02 net profit to Rs 88 m. This growth in bottomline has come despite a negligible topline growth. Reduction of interest cost by 8% and an 11% jump in other income contributed to the company's bottomline growth.

    (Rs m) 1QFY01 1QFY02 Change
    Net Sales 2,479 2,489 0.4%
    Other Income 14 16 11.1%
    Expenditure 2,302 2,304 0.1%
    Operating Profit (EBDIT) 177 185 4.2%
    Operating Profit Margin (%) 7.2% 7.4%  
    Interest 57 53 -8.0%
    Depreciation 53 53 -0.4%
    Profit before Tax 82 95 16.9%
    Tax 10 7 -27.0%
    Profit after Tax 71.5 88 23.1%
    Net profit margin (%) 2.9% 3.5%  
    Effective tax rate (%) 12.3% 7.7%  
    No. of Shares (eoy) (m) 28.5 285.2  
    Diluted earnings per share 0.3 1.2  
    P/E ratio (excl. extraordinary items)   47.8  

    Dabur is a 115 year old FMCG ‘ayurvedic’ company operating in the niche (natural/ayurvedic) segment with a portfolio of over 500 products. Its core competence lies in its ability to conceive, develop and market products based on herbs and other natural resources. Its products include leading brands like Dabur Chyawanprash, Hajmola, Pudin Hara, Lal Dant Manjan, Amla, Vatika hair oils, Dabur Honey and Real fruit juices.

    Dabur has clarified that its FMCG business (which accounts for approximately 70% of the total) grew by 5.6% during the quarter. It was a slowdown in its ethical business that really affected the overall topline growth. By ethical we mean over the counter (OTC) products like Hajmola and Pudin Hara.

    This performance pales in comparision to the company's performance in the previous quarter (4QFY01) where the company recorded over 16% growth in turnover and a significant 52% growth in bottomline. But the encouraging fact is that Dabur has improved its margins, though only marginally.

    Dabur has made no provision towards diminution in the value of some of its investments, which relate to group/subsidiary companies. The management believes that the total market/break up value of all quoted /unquoted investments exceeds cost.

    At the current price of Rs 59 the stock trades at a P/e of 48 times its annualised 1QFY02 earnings, which seems high especially in these difficult market conditions. Ultimately, Dabur is an FMCG company and so the valuation norms of FMCG companies should apply to it also.

     

     

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    Aug 22, 2017 (Close)

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